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Apple in Q2: Mac Sales Soar, iPod Sales Slow

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Apple just reported its fiscal second-quarter 2008 earnings, and well, the declines from the fiscal first quarter (ended Dec. 29, 2007) are remarkably obvious. From a revenue perspective, the year-over-year comparisons are pretty solid, but in other categories the slowdown is rather stark.

These results compare to quarterly net earnings of $770 million, or 87 cents a diluted share, on revenue of $5.26 billion in the year-ago quarter. Gross margin was 32.9 percent, down from 35.1 percent in the year-ago quarter.

Apple shipped 2,289,000 Macs during the quarter, representing unit growth of 51 percent and 54 percent revenue growth over the year-ago quarter. But it sold 10,644,000 iPods during the quarter — in other words, unit growth of a scant 1 percent and revenue growth of just 8 percent over the comparable three-month period last year. Our friend, Cynthia Brumfield breaks down the iPhone magic, only as she can.

Some interesting observations from Ezra Gottheil, analyst with Technology Business Research (TBR):
* Apple appears unphased by the U.S. economy.
* TBR believes Apple has established itself as a real and often better choice for consumer purchasers of higher-end PCs.
* In the first four quarters of its availability, Apple sold 5.4 million iPhones, versus 1.2 million iPods in that product’s first four quarters.
* The iPod market has matured, and unit sales have flattened. iPod unit sales were up only 1% year-to-year, but iPod revenue increased 8%, thanks to higher priced iTouch.
* TBR believes Apple is looking to develop a variety of “appliances,” self-contained devices with simple interfaces that, in Apple’s favorite phrase, “delight” users. The company’s drive to develop more products is shown in the 49.2% growth of its R&D expense, and in its acquisition of microprocessor design company PA Semi.

9 Responses to “Apple in Q2: Mac Sales Soar, iPod Sales Slow”

  1. Hey Om,

    For what it’s worth, the data point that most grabbed me was the rate of growth of the Mac business relative to the rest of the industry – 51% this year compared to last – a rate of growth 3.5X better than the PC industry.

    I see this growth rate as indicative of a halo effect starting to play out that touches so many aspects of Apple’s business.

    Given that, I took a swag at articulating the strategic pieces at play for Apple in a post lovingly called, ‘Holy Shit! Apple’s Halo Effect.’


    Check it out if interested.



  2. Mac sales up 51%! Mac is quickly taking market share from Windows. Today iMac is clearly the most stylish computer for home, and MacBook is the most desired laptop for personal use. In any Starbucks one can see the increasing number of MacBooks. Apple was never a threat to Microsoft in the past, but with more and more open standards, and easily portable applications, Apple is quickly gaining ground as the computer for “personal use”. Mac is no longer a niche product but a high-end choice for consumer computers.

    On the iPod side, apart from reaching market maturity, iPods sales might be stalling due to the wait-for-the-iPhone effect, with people delaying their older iPods renovation, waiting for iPhone to be available in their markets, or simply for the 3G iPhone.

  3. @Petabro Easy- if you review Steve Jobs iPhone introduction speech, you will note that his goal is 10m iPhones by 2008, which means that even if they continue @ their current rate, they will easily make their goal. In fact, it is more likely that they will sell 10m IN 2008 as sales ramp up during the rest of the year to more and more countries…