Mac, iPod Sales Ripen Apple's Profits

The company attributed its success largely to a ripening interest in Macintosh computers and iPods. Apple shipped 1.3 million Macs and 8.1 million iPods during the quarter, representing a 12 percent growth in Macs and 32 percent growth in iPods over the year-ago quarter.

"This is the smoothest and most successful transition that any of us have ever experienced," said Steve Jobs, Apple's CEO. "We're thrilled with the growth of our Mac business, and especially that over 75 percent of the Macs sold during the quarter used Intel (Nasdaq: INTC) processors."

iPod Makes Noise

The iPod, meanwhile, continued to earn a U.S. market share of roughly 75 percent. Apple is investing "heavily" in iPod and iTunes engineering and is "very enthusiastic about our products in the pipeline," Peter Oppenheimer, senior vice president and chief financial officer for Apple, said. "The iPod ecosystem continues to thrive with innovative new products."

Many analysts and investors have been focusing on the so-called "slowing" growth of iPod sales, but year-over-year comparisons are not a fair measure in the case, Jonathan Hoopes, managing director at Equity Research, told MacNewsWorld. Sales were growing in triple numbers last year, compared to 20 to 30 percent this year, but "that's still a fast growth rate," he said.

The real success story goes far beyond music, however.

"Apple's quarter was great. There's no question about that. More important is the fact that Apple is the best positioned company in the history of the PC to both gain share and improve profitability," Hoopes said. "[Whereas] the mantra at Dell (Nasdaq: DELL) became not first to market but rather first to mass market, Apple for 10 years has spent considerable share of their revenue on developing software. Apple gets to deliver a better experience out of the box and also stands to benefit from recurring high-margin software and services revenues."

Mac Interest Rises

Mac sales represented 55 percent of the total quarterly revenue, with the company seeing increased success from its advertising campaigns, especially among education consumers, Oppenheimer said.

Retail stores are another noteworthy part of Apple's growth story. Apple retail stores generated US$715 million in the third quarter, representing a 29 percent year-over-year profit growth. The company opened 14 new stores, bringing the number to 155, with 17 million customers visiting the stores. One of the highlights was the opening of Manhattan's Fifth Avenue store, which has seen more than 500,000 visitors. The latest retail store survey showed that 50 percent of overall store customers were new Mac users, Oppenheimer said.

Part of the growing interest in Macs may be due to Apple's push for compatibility. In the past, consumers were faced with an either-or decision, having to choose either a PC or Mac. Now they don't have to make that choice.

"Apple's going to continue to make the Mac OS X interoperable with the ubiquitous Windows environment," Hoopes said. "Because of that, you can bring a Mac into your work and still get the benefit of the superior Mac experience."

He also praised the company's iLife products, which come standard on Apple computers. The features are "advanced, yet simple," allowing even the least technology savvy consumers to publish pictures of their children online or experiment with their iPods, he noted. "People used to think that Macs were for the creative professional. Today Macs are for everyone because everyone is a creative professional."