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Apple Riding a 51% Jump in Mac Sales - NY Times

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  • John Rethorst
    New York Times, April 24, 2008 http://www.nytimes.com/2008/04/24/technology/24apple.html By JOHN MARKOFF SAN FRANCISCO — Signs of a consumer slowdown abound
    Message 1 of 1 , Apr 23, 2008
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      New York Times, April 24, 2008

      http://www.nytimes.com/2008/04/24/technology/24apple.html

      By JOHN MARKOFF

      SAN FRANCISCO — Signs of a consumer slowdown abound in the
      United States, but Apple customers appear not to have
      noticed.

      Buoyed by unusually strong Macintosh sales, the company
      grew notably faster than the rest of the computer market
      worldwide in the first three months of the year. Revenue
      increased 43 percent from the same period a year ago, the
      company reported. Steven P. Jobs, Apple's chief executive,
      characterized the quarter as the strongest in Apple's
      history.

      He attributed the growth to higher traffic in the company's
      181 stores in the United States. The company reported that
      it had 33.7 million visitors to its stores in the United
      States, up 57 percent from the same quarter a year ago. Mr.
      Jobs said that belied the gloom that was being expressed
      about the American economy.

      "We're not economists, so we don't have any more insight
      than everyone else, but there were sure a lot of people in
      our stores last quarter," Mr. Jobs said in an
      interview.

      Despite new products like the iPhone, variations of the
      iPod and the Apple TV set-top box, this was a Macintosh
      quarter. Apple shipped 2.3 million Mac computers in the
      quarter, 51 percent more than in the quarter a year ago.
      Revenue on those computers increased 54 percent.

      But it also said it sold 10.6 million iPods during the
      quarter, flat with the year-ago quarter. Analysts said iPod
      sales were within their expectations and that it was a sign
      that the product category was maturing,

      "The big question was, would Apple really feel the pinch
      from a weakening U.S. consumer? And the somewhat
      unequivocal answer was, no, not yet," said A. M. Saggonaghi
      Jr., a senior analyst at Bernstein Research

      Apple said that net income in its second quarter rose 36
      percent from the year-ago quarter, to $1.05 billion or
      $1.16 a share, on revenue of $7.51 billion.

      The results far exceeded the expectations of Wall Street
      analysts. They had expected $1.07 cents a share and revenue
      of $6.96 billion, according to a survey of analysts by
      Bloomberg.The company, based in Cupertino, Calif., also
      forecast strong sales in the coming months. Peter
      Oppenheimer, Apple's chief financial officer, said the
      company expected third-quarter revenue of about $7.2
      billion and earnings of about $1 a share.

      Apple's stock has declined 17.9 percent since the beginning
      of January when it peaked near $200 a share. After drifting
      below $120 a share, the stock has begun to recover since
      March. Shares on Wednesday closed up, rising $2.69 to
      $162.89, but then declined 26 cents, to $162.63 in
      after-hours trading over concerns that Apple's profit
      margins were weaker than analysts expected.

      If there is a weak spot in the company's battle plan, it
      may be the iPhone smartphone, which has had stellar sales
      in the United States, but has showed weakness in Europe.
      Apple said it sold 1.7 million iPhones for the quarter. "In
      my mind iPhone sales were soft," said Charles Wolf, a
      financial analyst at Needham & Company. "It's a question of
      the distribution model and of the price. The price clearly
      has to come down."

      Apple's executives said the sales of iPhones exceeded
      internal company projections during the quarter.

      Analysts and the industry are expecting Apple to introduce
      a higher performing version of the iPhone within the next
      two months, made for faster 3G data-oriented cellular
      networks. Mr. Jobs is under pressure to meet his 10 million
      iPhone sales forecast by the end of 2008. To meet that goal
      the company needs a second-generation iPhone, and it may
      also need to push the price of the existing $399 iPhone
      down significantly or introduce a stripped-down
      model.

      Analysts have said that as the second quarter progressed,
      demand for Apple's iPhone increased and that the computer
      maker was unable to keep up with demand. The supply issue
      could have been affected by the limited availability of
      16-gigabyte flash memory chips, Mr. Wolf
      speculated.

      He said that the more interesting story for the quarter may
      be the gains that Apple is making in PC market share,
      predominantly in the laptop computer segment.

      International Data Corporation's survey this month showed
      Apple with a 6 percent share of the American market in the
      first quarter, compared with 4.9 percent a year ago.
      Apple's strong Macintosh growth comes as Microsoft
      struggles with its Windows Vista operating system, which
      was released last year to largely critical reviews. "I
      think people are really noticing the difference between Mac
      OS X and Windows to a greater degree than ever before," Mr.
      Jobs said. "The more people understand that there is an
      alternative, the more people are choosing a Mac."

      On Wednesday, Apple confirmed that it had acquired PA Semi,
      a Silicon Valley chip company with expertise in low-power
      microprocessors, an essential technology for future
      iPhones. Forbes.com first reported the acquisition, which
      it said was for $278 million in cash. Neither company
      disclosed the amount of the deal.

      The chip maker had originally hoped to supply Apple with
      chips intended for a microprocessor used in earlier
      Macintosh computers and by I.B.M. However, when Apple began
      using Intel microprocessors for the Macintosh, PA Semi was
      left without a major customer.

      The decision to buy PA Semi is likely to be a blow to
      Intel, which recently introduced a new low-power chip
      called Atom.
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