If Piper Jaffray's survey of U.S. Apple store activity holds water, the company's second fiscal quarter might not have been as bad as some had feared.
Apple's new iMacs may have prevented its Mac division from a significant slide in its second quarter.
(Credit: Apple)Apple is getting set to report earnings for its second fiscal quarter next week, and the tech industry is watching closely to see if Apple has managed to diffuse the impact of an economy in recession for the second straight quarter. Few are expecting a blowout from Apple, but Piper Jaffray's Gene Munster is now more confident about Mac and iPhone sales for the quarter than he was in February.
Piper Jaffray watched 25 Apple retail stores around the U.S. last week, and estimated that Apple was selling an average of 22 iPhones a day and 28 Macs a day per store. Based on that data, it appears that Apple will have sold 3.7 million iPhones during the quarter and 2.2 million Macs.
On the iPhone front, 3.7 million units would be significantly less than the 4.4 million units Piper Jaffray had been expecting for the March quarter, but Munster thinks that international sales not counted in this survey could help boost the total, and did not change his estimate of 4.4 million units. The average financial analyst is expecting Apple to have sold just 3.3 million iPhones.
To this point, predicting iPhone sales has been a bit difficult without a lot of history to draw upon. But it seems that Apple watchers are settling into a seasonal pattern in which more is expected from Apple in the second half of the calendar year following the usual summer launch time frame and holiday shopping season.
On the Mac front, it still appears that Mac sales will decline year-over-year for the first time in quite awhile. Earlier this year Piper thought Q2 Mac sales could possibly dip to just 2 million units for the quarter, but based on its store checks now feels that the iMac refresh earlier this month was enough to tighten that estimate to 2.2 million units, compared to 2.3 million units sold in last year's second fiscal quarter.
So what does this mean for Apple? If Piper's estimates are correct, the company's growth is clearly not immune to broader economic trends, but nor does it seem that Apple has been hit as hard as some of its rivals. Still, Piper's estimates do not include online sales of Macs, so it's hard to know how precise they might be.
Next week will tell the real story. Apple told investors last quarter that it expects revenue of about $7.8 billion and earnings per share of about 95 cents, numbers that lots of other companies would love to post in the middle of the worst recession in a generation. That guidance would represent slight revenue growth and slight profit decline, and as just about anyone who follows Apple's financial performance knows, the company routinely lowballs its guidance only to dramatically exceed those figures 90 days later.
Intel CEO Paul Otellini told investors Tuesday that he thought the PC market had reached a bottom and the second half of the year is shaping up well, so Apple's second fiscal quarter could well be a low-water mark that isn't all that low.
Apple's new iMacs will help offset a poor February, but sales are still forecast to decline.
(Credit: CNET)As expected, February was not a good month for Mac sales.
Piper Jaffray has analyzed a month's worth of NPD Group data on Apple's Mac sales during February, and is projecting that Apple will sell between 2 million and 2.2 million Macs during the first calendar quarter of the year, which ends in a couple of weeks. That's the same number it was working with based on January's NPD figures, and the estimates would range from a 13 percent decline to 4 percent decline compared to Mac shipments in Apple's first fiscal quarter of 2008.
Two offsetting events occurred during in February. On the bad side, Mac sales in February were down 16 percent compared to the same month last year, according to NPD. February was a brutal month for consumers as the stock market plunged, and Piper believes Apple also faced a tough comparison in that the MacBook Air began shipping last February.
On the good side, Apple's new iMacs, Mac Minis, and Mac Pros that are now shipping were not included in Piper's earlier analysis, and should help offset February's decline. Apple's desktop group was a source of weakness in an otherwise strong first fiscal quarter, and although desktops aren't strong for anybody these days the new systems appear to have been well-received by consumers.
Piper says the financial community as a whole is expecting Apple to post about 2.2 million Mac shipments in the quarter, which would be a 4 percent decline and the first quarter Mac shipments have declined year-over-year in a long time. So, in their thinking, the situation could be a lot worse: if Apple makes the Wall Street estimates the fallout could be minimal because of the overall poor health of the economy, even though Mac growth has come to a halt.
Mac sales could decline for the first time since 2003 without a boost, according to Piper Jaffray.
(Credit: Apple)Apple's Mac sales for the first month of the year could indicate that the economy is finally catching up with the company.
Piper Jaffray, known as one of the most Apple-positive analyst firms in the financial industry, released a report Tuesday indicating that based on a month's worth of data from NPD Group, Mac sales are on a pace to decline on a year-over-year basis for the first time in six years. Piper is projecting that Apple will sell between 2 million and 2.2 million Macs during the quarter, compared to 2.3 million Macs sold in Apple's second fiscal quarter of 2008.
Piper tried to paint the development as a good thing for Apple in that the projected numbers would match the consensus expectations of the financial community for Mac sales this quarter. And the firm also noted that one month of data isn't enough to make definitive conclusions, even though it concluded the data merited a report.
"We believe this data will be perceived as a neutral or a slight positive given the uncertainty surrounding the Mar-08 quarter," Gene Munster wrote in the report. He also noted that this quarter would make for a tough comparison given that Apple launched the MacBook Air in the first calendar quarter of 2008, but that assumes that Apple sold enough MacBook Airs to disproportionately boost its results that quarter.
Despite that analysis, the numbers indicate that Apple is finally running into the economic headwinds that it deftly avoided last quarter, especially when coupled with NPD's iPod data that projects a 6 percent to 15 percent decline in iPod sales year-over-year during the current quarter. Disappointing earnings and uncertainty over the federal stimulus plan pushed stocks to a seven-year-low Tuesday, which may have potential customers thinking more about their dwindling 401ks than new MacBooks.
One thing that could boost Apple's quarter would be new iMacs and/or Mac Minis, which have been expected for some time and which were not included in Piper's analysis of the quarter. Desktop Mac sales were down significantly during the holiday quarter, and new products could provide incentive for some potential customers who were otherwise planning to sit out the quarter.
Fewer people are expected to buy iPhones and iPods this quarter, but Mac shipments may hold down the fort for Apple.
(Credit: CNET)Even Apple may not be immune if consumers continue to sit on their wallets this holiday season.
Piper Jaffray, usually able to find the bright side of any Apple news, predicted Monday that iPhone and iPod sales are set to decline in the coming weeks amid what is expected to be the worst holiday season for the PC and consumer electronics industries in quite some time. Mac sales seem healthier thanks to Apple's latest crop of notebooks, but aren't growing as fast as they were last year.
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Piper based its outlook on surveys it performed inside Apple retail stores around the U.S. during a 25-hour period in November, counting the number of Macs and iPhones sold inside each store. It supplemented those expectations with data from market watcher NPD for sales of both the Mac and iPod for the month of October.
With $24 billion in the bank, no debt, and products that still appear popular with the public, Apple is in excellent shape to ride out what is expected to be a rough couple of quarters for companies that depend on consumer spending. The company's several-year run of double-digit percentage increases in revenue and profit may be coming to an end, however, as most such runs eventually do.
Let's take a look at the numbers:
iPhone
Piper's data suggests that Apple will sell 6.4 million iPhones during the September to December quarter--Apple's first fiscal quarter--compared with the last quarter, when the company blew away expectations by selling 6.9 million units. The handset market in general tends to enjoy a 15 percent sequential boost in the holiday quarter compared with the June-September quarter, though this won't go down as a typical holiday season.
Apple retail stores were each selling on average 98 iPhones a day in July, when the iPhone 3G was released. In November they were only selling around 28 per store, which looks like a 71 percent decline and helps explain reports that Apple was cutting iPhone production heading into the current quarter.
However, those numbers don't tell the whole story, according to Piper. There was obviously pent-up demand for the iPhone 3G following a quarter in which Apple was sold out of iPhones for almost six weeks. And Piper also notes that Apple's retail stores are not the only place to find iPhones this quarter. AT&T obviously sells a few, and Apple added Best Buy as a distributor during the quarter.
When you factor in the increased number of countries selling the iPhone this quarter as well, Piper only expects a decline of 8 percent. Not that that's good news for Apple, of course, given how important the iPhone has become to its finances.
Mac
Apple can take comfort in the fact that the Mac numbers don't appear to be cratering, according to Piper's numbers. Piper is predicting that 2.6 million Macs will be sold during the quarter, which would be flat compared with last quarter's totals.
Last year in a healthier economy, Mac shipments increased by 7 percent in the first fiscal quarter compared with the fourth, so this year's totals are a bit off but still growing at a solid pace year-over-year. If Apple sells 2.6 million Macs during the holiday quarter, that would be a 13 percent improvement over the 2.3 million Macs shipped during the year-ago period.
On the last Apple earnings call, COO Tim Cook said he thought Mac sales were a little weaker than expected during the July to September quarter because potential buyers delayed their purchases of new notebooks, knowing that new models were around the corner. NPD's data seems to suggest that theory was on track following the launch of the redesigned MacBooks, recording a 28 percent jump in Mac sales in October compared with October 2007.
Still, Piper expects Mac demand to slow down in November and December. No new models are expected between now and Macworld in January, and the rush of buyers who upgraded in October are likely done buying Macs for a while.
iPod
Apple's best-selling product looks set to take a hit during the quarter, which is traditionally a blowout quarter for the iPod division. Shipments are expected to decline about 15 percent compared with last year's holiday quarter, coming in between 18.5 million units and 19 million units this time around.
There's no way to know at this point whether that is a reaction to Apple's latest crop of iPods unveiled in September or another symptom of an economic slowdown. A key number to watch will be the revenue growth or decline associated with the iPod group: Apple has been heavily advertising the iPod Touch as the "funnest ever" (and currently most expensive) iPod, and if revenue growth comes in slightly down or even flat against a 15 percent decline in unit shipments, the upselling strategy is probably working.
Competitive outlook
Apple's competitors aren't expected to fare much better during the quarter. Intel may not be a bellwether for tech anymore, but it is most certainly a bellwether for PC demand, and the $1 billion shortfall between Intel's previously expected fourth-quarter revenue and what it now expects indicates that the HPs and Dells of the world aren't expecting a stellar quarter.
On the handset side, Research In Motion could capitalize if iPhone shipments do decline, with the Storm and Bold making their way onto the stage. But it's unlikely that RIM will have a standout quarter itself, given the epic slowdown in business tech spending that usually accompanies one of these recession things.
And seven years on, there still doesn't seem to be a major competitor to the iPod. Apple is pushing the iPod into new territory as well, taking on portable gaming systems from the likes of Nintendo and Sony.
Apple's ability to post consistently strong growth figures quarter after quarter looks like it's coming to an end. If it's any consolation to fanboys and investors, however, at least it wasn't the company's fault.
Teenagers like fun, and they continue to see Apple as the best source of music-related fun.
(Credit: James Martin/CNET News)Apple continues to do well among some of the most fickle and influential consumers of technology: teenagers.
Piper Jaffray does a biannual survey on the purchasing habits of 769 teenagers as they related to devices like cell phones and music players, and released the results of the latest survey Tuesday. Not surprisingly, the market leader in portable digital music players is the market leader among high school students: 84 percent of those surveyed own an iPod, up from 82 percent last year.
The iPhone is also gaining ground, perhaps as a result of the new $199 entry fee to iPhoneland this year. Just 8 percent of teenagers surveyed own an iPhone, but that's up from 6 percent from the last survey in the spring of this year, before the iPhone 3G was released. And 22 percent of those surveyed said they planned on buying an iPhone in the next six months, while 33 percent said they wanted one.
However, as Larry Dignan notes over at ZDNet, those plans and wishes may be very much dependent on the health of their parents' wallet. Even at $199, the monthly fees associated with the iPhone--or really any data-enabled phone--might be considered a luxury in times of economic crisis.
What wasn't noted in the study was the mindshare of the Mac among the high school set. Macs are very popular with college students, but Piper did not release any data on how the Mac is doing among younger students.
The iPhone will soon be faster. We'll define 'soon' as between four and six weeks.
(Credit: CNET Networks)Widespread iPhone shortages, combined with an explosion in carrier deals, point to the launch of the next-generation iPhone as right around the corner, according to Piper Jaffray.
I know, I know: this isn't the first time you've heard that theory. But you have to admit that signs are piling up that a 3G iPhone is in Apple's short-term plans. Let's recap the evidence so far.
The iPhone is currently unavailable at half the Apple retail stores surveyed by Piper Jaffray over the weekend. Both the 8GB and 16GB models are unavailable from Apple's online store. Shortages have also been reported in recent weeks in the U.K. following a price cut.
Also, Apple is adding wireless carriers at a frantic pace. Canada, Mexico, Australia, much of Latin America, four new countries in Asia, and almost half of Europe are now on track to start officially selling iPhones in short fashion. The big Asian prizes, China and Japan, remain outsiders for the moment, but unlocked iPhones are selling briskly in China under the table.
Piper Jaffray expects Apple to announce the 3G iPhone at the Worldwide Developer's Conference in June (where, believe it or not, Apple CEO Steve Jobs will deliver a keynote address). The iPhone 2.0 software is expected to arrive by the end of June, which will mark the one-year anniversary of the iPhone's debut.
So, those of you who were wondering if you should wait to purchase an iPhone until the 3G model comes out, rest easy. You simply can't buy one now even if you wanted to--or at least, you're going to have trouble finding one.
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