Apple Announced Financial Results for Q2 of 2002,

which ended March 30, 2002, including a net profit of $40 million, or $.11 per diluted share. These results compare to a net profit of $43 million, or $.12 per diluted share, in the year ago quarter. Revenues for the quarter were $1.5 billion, up 4 percent from the year ago quarter, and gross margins were 27.4 percent, compared to 26.9 percent in the year ago quarter. International sales accounted for 45 percent of the quarter’s revenues.

Apple shipped 813 thousand Macintosh units during the quarter, up 8% from the year ago quarter. Sales of iMacs and iBooks were up from the last quarter but Power Macs and PowerBooks were down. Pro sales are off, attributed in large part to the economy causing businesses to hold on new expenditures. Fred Anderson, Apple's CFO, cited the release of Photoshop 7 as likely to stimulate Pro sales in Q3. Also, 75 VARs have been added in Q2 which is considered helpful.

"We've experienced incredible demand for the new flat screen iMac and shipped 220,000 this quarter." Said Anderson.

While profits are down slightly, revenues, gross margins and sales were up. This is very good performance under the current economic climate in the technology sector. Apple still has $4.3 billion in cash.

According to Dana Baggett's report, "In response to a question about cost-cutting as a means to increase profit, Anderson indicated that Apple was trimming costs whereever possible and thought that it would have caught up with back orders so as to permit shipping desktops by boat by FY Q4 instead of air freight, saving about $30 per unit and thus adding to profit. (Portables ship routinely by air freight as their light weight makes the cost about the same as boat freight.) He said that Apple would soon benefit from its $100 price increase as it completes fulfillment of orders placed at the lower price. When asked what components were driving costs up, Anderson cited flat panel LCD costs and DRAM which cost tripled in FY Q2. He noted that the latter has now leveled off and may be dropping.

"He emphasized that Apple was spending more on R&D, however. Also, to make up for the loss of Circuit City, it was opening 70 more CompUSA Apple Stores within-a-store with Apple-badged employees. Anderson said that these stores have been very successful.

"He also indicated that Apple had increased gross sales for the quarter from $40 to $70 million at its own Apple Stores and cut operating losses in half - from $8 to $4 million for the quarter. About 40% of Apple Stores sales are to customers new to the Apple platform. These stores also are considered very successful. Apple stores opening in Q3 and Q4 will have some "refinements" based on experience to date - no details. He said that the service orientation of these stores (versus hard selling) has been well-received and has generated lots of word-of-mouth referrals. He indicated that Apple was increasing its presence within elementary & secondary school markets as the third and fourth FY quarters are prime for educational purchases.

"When asked about CRT iMacs Anderson said that Apple sold about 175,000 of them in the quarter and they filled a very important niche in the "Under $1,000" and education markets - but he said he wasn't going to comment on future products."

Apple will be opening about 20 new retail stores in 2002.