Apple’s Q2 Numbers: A Closer Look

The reaction of investors to Apple’s quarterly reports is confounding. After the dot com bubble burst Apple would regularly best analyst’s estimates and the stock would take a pounding in after-hours trading. Yesterday, Apple beat the earnings estimates but sold fewer iPods than expected, and the stock rose faster than a person who replies to a [email protected]@ spam e-mail (the stock rose $2.70 to $68.35 for those interested in double digit precision).

Investor reactions are interesting in terms of psychology, but not the best indicator of the true health of a company. Apple’s statements, which are uniformly rosy when the quarterly reports come due, are also not the most objective picture of the companies future. Fortunately, amid all the spin and stock trading, there are actual numbers released. Numbers are, of course, nice because you can slap them in a graph, take a screen shot and call the effort an article um, because they are objective.

Since Apple is all about the iPod, the sales of the digital audio player seems like the logical place to start. People were widely expecting a drop off in iPod sales from the first quarter of 2006 (which includes the Christmas buying season). Those folks were unsurprised. What is interesting was that this was the first quarter since the iPod really became huge that sales actually suffered a decline, in the past the iPod had always sustained the momentum from the holiday quarter.

Blame the sharp fall off in sales on the lack of a new model. The iPods amazing sales in the past after Christmas were largely fueled by new models (mini, shuffle) introduced at MacWorld. This quarter, most will recall, featured no ground breaking iPod revelations. Couple that with a widely anticipated true video iPod and a certain level of market saturation and the drop off in iPod sales is understandable. The iPod also saw a modest decline in revenue per unit ($5.91) which sat at $201.03 for Q2, 2006.

With iPod sales discussed, noted, and dismissed, it is time to turn our attention to the sales of Macs. Since last June when the transition to Intel was announced, buying a Mac has been an uncertain proposition. The folks that worried mightily that buying a PowerPC based machine would doom them to quick obsolescence got their chance to buy an Intel based Mac this quarter. Unfortunately, supplies were constrained so the number of Macs sold may not be an accurate reflection of demand. The graph tells all, well, the graph says something:

The slight slip in sales is likely good news for Apple. There are still no consumer-oriented laptops featuring the Intel chip and the mini came along too late in the quarter to have a significant impact on the number of Macs sold. On the bright side, the average revenue per Mac jumped almost $40 from the previous quarter to $1,413.

In the end, you’d have to call the quarter mixed. Computer sales held up well amidst the uncertainty surrounding the Intel transition, which is promising for the future. iPod sales were strong, but Apple couldn’t quite keep the ever increasing quarters going. The biggest, and certainly most surprising downside is that the Apple iPod leather case, that $99 dollar marvel of fine Italian leather, wasn’t a big enough seller to be broken out into its own category.