Apple reported Record Second Quarter Financials--Revenue up 43 Per Cent and All-Time Portable Sales Record

Apple had a record second quarter (Q2) according to its financial report for the second quarter of its 2008 fiscal year released yesterday. Q2 of 2008 covers the months of January through March. Apple posted a profit of $1.05 billion on revenue of $7.5 billion. The earnings per share of $1.16 beat thee analysts consensus estimate by over 8 per cent.

The record Q2 financial results beat last year's Q2 profit by 36 per cent, revenue by 43 per cent and earnings per share by 33 per cent. Apple's cash balance reached over $19.4 billion. However, the gross margin decreased to 33 per cent from 35 per cent last year. An interesting factoid is that Apple increased its research and development effort by nearly 50 per cent from $183 million to $273 million.

Apple shipped nearly 2.3 million Macs, over 10.6 million iPods and just over 1.7 million iPhones in Q2 of 2008.

Macs increased 51 percent in units and 54 per cent in revenue over Q2 of 2007. Portables (MacBook, MacBook Air, MacBook Pro, iBook and PowerBook) led the way with an increase of 61 per cent in units resulting in an all-time quarterly sales record for portables. Desktop Macs (iMac, Mac Pro, Mac mini, PowerMac and Xserve) did well, too, increasing by 37 percent.

iPods increased only 1 per cent from Q2 of 2007.

iPhones were not for sale in Q2 of 2007 but they decreased by 26 per cent from Q1 of 2008. The downturn from the previous quarter, usually Apple's best by far, is normal as Macs posted a decrease of 1 per cent and iPods decreased 55 per cent when compared with Q1 of 2008.

Apple reported large gains in sales revenue in each operating segment: Americas up 32 per cent, Europe up 43 per cent and Japan up 49 per cent. The revenue from Apple's retail stores increased a huge 74 per cent.

Follow release of the Q2 report, Apple held a web cast conference call with analysts to discuss it. You can replay the web cast using QuickTime. Some salient points are:

• Customers, all sorts of people, love the MacBook Air with low cannibalization of other portables (whew!).
• iTunes music sales peaked as Apple beat Wal-Mart with U.S. MP3 share of 73 per cent and 85 per cent of all legally downloaded music.
• Apple still thinks it will sell over 10 million iPhones in 2008. Version 2.0 software to be out in late June.
• At $210 million so far, Leopard is the best selling OS in Apple's history.
• Unlocking of iPhones remains significant.

Looking ahead to Q3 of 2008 (April-June), Apple CFO Peter Oppenheimer stated, "... we expect revenue of about $7.2 billion and earnings per diluted share of about $1.00." The Q3 forecast is lower than for Q2 when, in fact, Q3 has exceeded Q2 in each of the past three years so it is probably conservative. Being conservative is consistent with all previous forecasts. [Bill Fox]