Apple: My Q3 Earnings Estimates

Now that the 3G iPhone hoopla is out of the way, I think it's important for investors to shift their focus on July earnings which will likely be the next big catalyst for shares of the California-Cupertino based Apple, Inc. (Nasdaq: AAPL).

Below, I offer my initial earnings forecast for Apple's Fiscal 3Q ending on June 30, 2008. While this forecast is likely to moderately change in the coming weeks as channel checks and research reports are released to the public, the forecast will probably remain relatively the same.

The major highlight for the true financial analysts this quarter will focus on whether the unexpected drop in Apple's gross margin percentage in fiscal Q2 was an aberration from the norm, or the beginning of a new trend. As I noted in my Q2 post-earnings analysis, Apple's gross margin percentage came in at about 3% lower than expected. Apple reported 33% in gross margins when all of the data indicated that they would come in at around 36%. This lower than expected gross margin percentage amounted to a $0.18 hit in EPS—but for the lower than expected overall gross margin percentage, Apple would have reported $1.34 in EPS.

While Wall Street foolishly focuses on Steve Jobs' health, something I think is complete and utter nonsense, the most genuine concern facing Apple right now is its gross margin percentage. I for one hope that Apple will demonstrate that its Q2's gross margin percentage was just a one-time deviation from the norm. Yet, if the trend does continue, I will likely have to make significant adjustments to my 2009 earnings model where I forecast that Apple will earn close to $8.55 in EPS. In the interest of being conservative, my fiscal Q3 estimates will assume that the trend of continued gross margin pressures will continue. Yet, at the end of this analysis, I will also offer estimates that contemplate 36% in gross margin percentage—what I find to be the norm for Apple during Fiscal Q2 and Q3 over the past few years.

According to analysts polled by Thomson Financial, the street is forecasting an earnings per share gain of $1.07 on $7.33 billion in revenue for Apple's fiscal third quarter (Fiscal Q3 2008) ending on June 30, 2008. The highest estimate on Wall Street is calling for $1.17 in EPS on $7.60 billion in revenue while the lowest current estimate is for $0.99 in EPS on $7.19 billion in revenue. Bullish Cross is making an initial forecast of $1.24 in EPS on $7.995 billion in revenue based on initial data released by the NPD Group on Mac sales for the months of April and May. As noted above, this initial forecast is likely to change as further research findings by NPD, IDC and Gartner are released for the month of June.

Apple, Inc. 2008 Q3 Earnings Estimates by Bullish Cross

Bullish Cross is looking for Apple to sell 2.6 million Macs, 10.5 million iPods and approximately 600,000 iPhones. It expect gross margins to rise to 34%, operating expenses to rise to $1.225 billion, OI&E to be $120 million, COGS to be $5.267 billion and net income to rise to $1.114 billion after provisions for income taxes of $500 million (31%).

In terms of Apple's operating segment information, Bullish Cross is looking for Apple to produce $3.978 billion in revenue from Mac sales (2.6 million Macs at $1,530 ASP), $1.817 billion in iPod sales (10.5 million iPods at $173 ASP), and a total of $2.2 billion derived from its other operating segments (this includes revenue Apple recognizes through its other music related products and services, iPhone and related products & services, peripherals & other hardware, and software, service and other sales). The table below compares Bullish Cross' forecast with Apple's guidance in a pro forma financial statement (In Millions, except per share data).

Line Item	Apple's Forecast	Bullish Cross	Difference
Revenue	$7,200	$7,995	$799
Cost of Goods Sold	$4,824	$5,276	$452
Gross Margin	(33%) $2,376	(34%) $2,719	$343
OpEx	$1,185	$1,225	$40
Operating Income	$1,191	$1,494	$303
OI&E	$115	$120	$5
Net, before taxes	$1,306	$1,614	$308
Taxes	(31%) $405	(31%) $500	$95
Net Income	$901	$1,114	$213
Earnings Per Share	$1.00	$1.24	$0.24
Outstanding Shares	N/A	900,000,000	N/A

Segment Information & Product Summary
Macintosh Sales: $3.978 billion
iPods: $1.817 billion
Other Music Related Products & Services: $810 million
iPhone: $390 million
Peripherals: $420 million
Software: $580 million
Total Revenue: $7.995 billion

Supporting Arguments
The basis of my forecast is rooted both in (1) a comparison between how Apple has guided in the past in each of its various line items and what it has actually earned over the past several quarters, and (2) the currently available data regarding each of Apple's operating segments. The analysis on the historical guidance trend should be viewed as merely supportive of the operating segment conclusions and not as leading to the conclusions in and of itself. In other words, the guidance data trends merely provides further evidence in support of the conclusion that Apple will report sales of 2.6 million macs and 10.5 million iPods rather than being conclusory of those results.

The historical data suggests that Apple is ultra-conservative in its guidance on some line items of its income statement and actually a little overly aggressive on others. I will first walk us through the various trends in Apple's guidance compared to its earnings on each line item, and will then discuss how the available research data tends to support my earnings forecast.

Revenue
On average, over the past six quarters, Apple tends to beat its own revenue guidance by 8.90%. Considering the fact that Apple is known to be a very conservative company when it comes to offering guidance, it is likely the case that it has guided even more conservatively for Q3 due to the fact that management has probably built into its guidance, the possibility of a slowdown in consumer spending as a result of rising oil prices and higher unemployment. Due to the fact that economists have forecasted recession for the first half of 2008, Apple's management has likely conservatively calculated this possibility into its guidance even though it might believe that a slowdown in consumer spending will have a marginal impact on its earnings.

Based on the trends below, and the presently available research data for the various segments of its primary operations, Apple should probably see close to $8.0 billion in revenue for the quarter. Apple guided for about $7.2 billion in revenue and the guidance trend suggests a 8.9% beat of the proffered guidance. If the trend of beating its conservative revenue guidance remains intact, Apple will report $7.841 billion in revenue—this figure is based exclusively on the guidance trend and does contemplate the specific circumstances and conditions of the present situation. The figures below compare Apple's revenue guidance with its actual results for the past six quarters (in millions):

Fiscal Quarter	Apple's Forecast	Apple's Actual	Difference
Fiscal Q2, 2008	$6,800	$7,512	$712 (10.5%)
Fiscal Q1, 2008	$9,200	$9,608	$408 (4.40%)
Fiscal Q4, 2007	$5,700	$6,217	$517 (9.00%)
Fiscal Q3, 2007	$5,100	$5,400	$310 (6.00%)
Fiscal Q2, 2007	$4,850	$5,264	$414 (8.50%)
Fiscal Q1, 2007	$6,200	$7,115	$915 (15.0%)
Total	$37,850	$41,116	$3,266 (8.90%)

Gross Margin
Up until last quarter (Q2 2008), Apple's management would general offer gross margin guidance that was 4% lower than what it would actually report. Yet, this trend of offering conservative gross margin guidance, and hence conservative EPS guidance, might have changed in fiscal Q2. Last quarter, Apple's management beat its gross margin guidance by a mere 1%, shocking many of the more prominent analysts on Wall Street. As I discuss extensively in post-earnings analysis, this lower than expected gross margin percentage is quite vexing in that it has gone largely unexplained.

Neither myself, nor the analysts, have given a good reason as to why Apple reported a mere 33% in gross margin percentage. All of the supporting data tended to suggest that Apple should have beaten its gross margin guidance by 4%. Yet, this can be viewed as either a positive or a negative depending on the actual circumstances of the quarter. It can be viewed positively if the unexplained drop in gross margin percentage was due to some large non-recurring charge to the cost of goods sold or negatively if either price reductions or component pricing has unexpectedly eaten into Apple's gross margin percentage. This quarter should give some color to this heretofore unanswered question, and will provide some insights into how Apple's management may or may not have shifted its guidance practices.

For now, I think it's prudent for the analyst to assume that both the trend in Apple's lower gross margins will continue in the quarter and that Apple's management has shifted its guidance practices by offer more aggressive estimates with regard to gross margin percentage. Last quarter, Apple beat its guidance of 32% in gross margins by a mere 1% when it reported 33% in total gross margins. This quarter, Apple is guiding for 33% in gross margin percentage. Thus, I think it's prudent to assume that Apple's management has guided more aggressively than it has in the past and will report 34% in gross margins on the quarter. Yet, I think it is also important for my readers to understand that Apple has historically beaten its gross margin percentage by an average of between 3-4% and could report gross margins as high as 36% which would result in a significant increase in EPS. As noted in the trends below, Apple tends to beat its own gross margin estimates by an average of 3-4% thus allowing them to regularly demolish EPS expectations:

Fiscal Quarter	Apple's Forecast	Apple's Actual	Difference
Fiscal Q2, 2008	32.00%	32.90%	90 Basis Points
Fiscal Q1, 2008	31.00%	34.68%	368 Basis Points
Fiscal Q4, 2007	29.50%	33.61%	411 Basis Points
Fiscal Q3, 2007	32.00%	36.88%	488 Basis Points
Fiscal Q2, 2007	29.50%	35.13%	563 Basis Points
Fiscal Q1, 2007	28.30%	31.20%	290 Basis Points
Total (Average)	30.38%	34.07%	369 Basis Points

Finally, it's important to notice that Apple is able to regularly destroy its EPS estimates by offering conservative gross margin guidance. This is where Apple has gained its reputation of offering conservative guidance. Each 100 basis point beat in gross margin guidance can amount to as much as $0.10 in EPS depending on the quarter. During last quarter for instance, each 100 basis points amounted to $0.06 in EPS. By missing my gross margin target by 3%, Apple reported $0.18 lower in EPS than I expected.

Moreover, it is also important to notice how Apple tends to produce better margins in Q2 and Q3 over Q1 and Q4. This is due mainly to two factors. First, Apple tends to get better component pricing in the spring and summer quarters due to pricing pressures caused by seasonality in demand for those commodities. Second, Apple gets a better product mix in the spring and summer i.e. a larger portion of its sales are high margin products such as Macs while the winter and fall quarters are met by large quantities of low margin iPods - Christmas gifts in the winter and new generation iPods in the fall. Also, the back to school shopping season causes the margins on Apple's computers to drop in the fall quarter as Apple makes certain price concessions and offers incentives to its student customers to spur higher sales.


Operating Expenses (OpEx)
In terms of operating expenses, Apple is pretty consistent in guiding $40 million less than what it actually reports. It has done this consistently over the past six quarters allowing me to come within $1 million of perfectly forecasting OpEx last quarter. In other words, Apple tends to be on the aggressive side when it provides guidance on OpEx. My forecast is consistent with this trend of under-performing when it comes to OpEx. Apple is guiding for $1.185 billion in operating expenses for its fiscal third quarter. Yet, based on the current trend, Apple should see closer to $1.225 billion in OpEx for the quarter. It remains to be seen whether Apple will break out of its trend of over-promising and under-delivering on OpEx. Until they do, I think it's prudent to be conservative on the estimates. Below is the trend of Apple missing on its operating expense guidance by $40 million (in millions).

Fiscal Quarter	Apple's Forecast	Apple's Actual	Difference
Fiscal Q2, 2008	$1,120	$1,159	$39
Fiscal Q1, 2008	$1,165	$1,206	$41
Fiscal Q4, 2007	$990	$1,030	$40
Fiscal Q3, 2007	$915	$954	$39
Fiscal Q2, 2007	$800	$863	$63
Fiscal Q1, 2007	$920	$898	-$22
Total (Average)	$985	$1019	$34

OI&E and Taxes
With the exception of last quarter, OI&E has been a relatively easy line item to predict as Apple has consistently beaten its OI&E guidance by $5-10 million each quarter. Yet, Apple explained last quarter's miss in OI&E guidance as being due to lower than expected interest rates. Last quarter, Apple guided for $190 million in OI&E and reported a lower than expected $162 million. Yet, I think this past quarter was anomaly due to the dramatic shift in interest rates and Apple's management has likely gotten a handle on the situation. For this reason, I am basing my estimates on Apple's guidance trend after backing out last quarter as an outlier of the trend. In terms of taxes, Apple consistently records between a 31-32% tax rate with the occasional favorable quarter helping earnings to the upside. Apple is guiding for 31% in income taxes on the quarter and my estimates reflect Apple's guidance on the issue. The data below marks the trend in Apple's consistent conservative guidance in OI&E to the tune of $5-10 million (in millions):

Fiscal Quarter	Apple's Forecast	Apple's Actual	Difference
Fiscal Q2, 2008	$190	$162	-$28
Fiscal Q1, 2008	$190	$200	$10
Fiscal Q4, 2007	$165	$170	$5
Fiscal Q3, 2007	$150	$155	$5
Fiscal Q2, 2007	$143	$148	$5
Fiscal Q1, 2007	$120	$126	$6

Earning Per Share [EPS]
With the exception of Q1 and Q2, Apple has historically beaten its EPS guidance by a margin of 50% each quarter. Yet, this trend has likely changed quite significantly due in large part to Apple's shift in managing expectations and guiding more aggressively on the gross margin front. In Q1 and Q2, Apple beat its EPS guidance by a margin of 23.9% and 23.4% respectively. Yet, before these past two quarter, Apple would regularly beat its EPS guidance by a staggering average of 52.2%.

Yet, I think the past two quarters reflects a shift in Apple's earnings strategy from offering ultra-conservative guidance to offering just conservative guidance. This is likely due to the fact that Apple's EPS growth rate is slowing somewhat modestly thus necessitating a practice of both managing expectations and solidifying an income smoothing plan. By using the subscription method of accounting with the iPhone and Apple TV, Apple's management is effectively "smoothing" its income growth rate so as to show consistent solid-growth rather than short-term explosive growth. In other words, Apple's management moderates its income with smoothing tactics while managing expectations by offering more aggressive guidance. In my opinion, by using these tools to effectively manage earnings expectations, Apple's management demonstrates its astute ability to act in the best interest of the shareholders in the long term. This new guidance trend suggests that Apple should earn about $1.24 in EPS which is directly consistent with my EPS forecast. The table below exhibits the trend of Apple's shift in guidance strategy with regards to EPS:

Fiscal Quarter	Apple's Forecast	Apple's Actual	Percentage Beat
Fiscal Q2, 2008	$0.94	$1.16	23.4%
Fiscal Q1, 2008	$1.42	$1.76	23.9%
Fiscal Q4, 2007	$0.65	$1.01	55.4%
Fiscal Q3, 2007	$0.66	$0.92	39.4%
Fiscal Q2, 2007	$0.55	$0.87	58.0%
Fiscal Q1, 2007	$0.73	$1.14	56.0%

iPod Estimates
As noted above, I am looking for Apple to sell 10.5 million iPods at an average selling price of $173. The basis of my forecast is routed in tracking the accuracy of Piper Jaffray senior analyst Gene Munster's iPod predictions based on his analysis of NPD data. Gene Munster has been unusually accurate and has the uncanny ability of being able to predict the number of iPods Apple will sell in any given quarter. He is able to analyze NPD data better than most which results in his ability to predict iPod sales within the few thousands of sales.

For example, this past quarter (Q2 2008), when other analysts were expecting Apple to sell between 8.5 to 10 million iPods due to a supposed slowdown in consumer spending, Munster had the clear voyance to analyze the NPD data correctly and arrive at a 10.5 million iPod estimate – which was the closest on Wall Street. In Q1 2008, when other analysts were expecting 25-26 million iPods, Munster forecasted 23.5 million iPods - just 5% above what Apple actually reported. In Q4 2007, Munster accurately forecasted that Apple would sell exactly 10.2 million iPods. Apple reported exactly 10.2 million iPods on the dot. For Q3 2007, Munster forecasted that Apple would see 9.5-10 million iPods on the quarter. Apple reported exactly 9.8 million iPods. Thus, Munster has obviously proven his ability to accurately predict iPod sales far better than Wall Street – where most analysts are deluded by mislead recession fears.

The current consensus estimates for iPods falls between 9.8-10.2 million. Munster's estimates are based on NPD data while many of these other estimates are based on pure conjecture and nonsense. Kathy Huberty of Morgan Stanley for instance, foolishly predicted that Apple would only sell 8.5 million iPods without any underlying data, logic or reason in support of her conclusion last quarter. Suffice it say she failed in predicting Apple's fiscal Q2 iPod sales and pretty much failed as an analyst. Gene Munster basis his iPod forecasts on channel checks, and NPD data, while other analysts just guess. Based on estimates from Gene Munster on iPod data, Apple could see sales of 10.5 million iPods at an ASP of $175 and record segment revenue of $1.8375 billion. I am estimating 10.5 million iPods at an ASP of $173 with segment data of $1.817 billion so as to show a slight conservative bias to Munster's estimates.

Mac Estimates
My earnings forecast is based on an estimated sales of 2.6 million Macs. The basis of this forecast is founded on evidence suggesting that Mac sales are up 50% year over year for the months April and May. Moreover, Mac sales generally make significantly new record highs for Q3 due to increased computer sales resulting from the start of the back to school shopping season, graduation gifts and father's day gifts. The table below demonstrates the trend of the Macintosh making new record highs in Q3 and continuing that trend in Q4 (when the back to school shopping season is in full effect).

Fiscal Quarter	Notebook Sales	Desktop Sales	Total Mac Sales
Fiscal Q2, 2008	1,433,000	856,000	2,289,000
Fiscal Q1, 2008	1,342,000	977,000	2,319,000
Fiscal Q4, 2007	1,347,000	817,000	2,164,000
Fiscal Q3, 2007	1,130,000	634,000	1,764,000
Fiscal Q2, 2007	891,000	626,000	1,517,000
Fiscal Q1, 2007	969,000	637,000	1,606,000
Fiscal Q4, 2006	986,000	624,000	1,610,000
Fiscal Q3, 2006	798,000	529,000	1,327,000
Fiscal Q2, 2006	498,000	614,000	1,112,000
Fiscal Q1, 2006	587,000	667,000	1,254,000

iPhone Estimates
iPhone estimates are relatively easy and straight forward and easy to calculate this quarter. As of the end of fiscal Q2 2008, Apple sold approximately 5,407,000 iPhones as indicated by Apple's financial statements. On June 9, 2008, approximately 21 days before the end of the quarter, Apple's own Steve Jobs announced at WWDC 2008 that Apple has sold 6 million iPhones as of that date. Simple math indicates that Apple will sell approximately 600,000 iPhones for Q3 — 5.4 million Apple already sold as of the end of Q2 minus the 6 million iPhones announced at WWDC amounts to 600,000 iPhones. Since Apple has discontinued the current model, and announced the new 3G model, I doubt the EDGE iPhone will be making significant inroads between June 9 and June 30 which marks the end of the fiscal quarter. As easy as this calculation sounds, you'll be surprised to see how many analysts will get this wrong.

In terms of iPhone revenue recognized for the quarter, I am forecasting that Apple will record roughly $390 million in revenue. Apple's management cautioned in its Q2 conference call that it will not be recognizing the revenue for any iPhones sold between March 6 and July 11 until after iPhone 2.0 is released. Peter Oppenheimer, Apple's CFO, notes in Apple's Q2 Conference Call, "Because we announced the specific new features to be included in the iPhone 2.0 release and plan to provide them to iPhone customers as a free upgrade in late June, we will delay the start of revenue recognition for all iPhones sold on or after our March 6th announcement date until the iPhone 2.0 software is delivered [italics added]." Thus, this means that Apple will only be recognizing slightly more revenue than it did in Q2 2008 where Apple recorded $378 million in revenue. It will not be recognizing revenue for any iPhones sold in Q3 which while can be viewed as a negative for this quarter, will be a boon for future quarters to come. I, for one, welcome the delay in revenue recognition because it will help future quarters.

Alternative Estimates based on Higher Gross Margin
As noted above, along with my official estimates, I am offering an alternative earnings forecast based on the theory that the drop in Apple's gross margin percentage last quarter was simply an anomaly or a one-time deviation from the norm and that Apple's trend in offering conservative gross margin guidance has remained intact. As I note in the gross margins section of this article, Apple tends to beat its gross margin guidance by an average of 3-4%. Thus, if one assumes that Apple will beat its gross margin guidance by 300 basis points, Apple will report a gross margin percentage of 36% and EPS of $1.36. The data below is a pro forma financial statement contemplating 36% in gross margin percentage. In this scenario, Apple would beat its EPS guidance by 36% or $0.36 and beat consensus estimates by 27% or $0.29.

Line Item	Apple's Forecast	Bullish Cross	Difference
Revenue	$7,200	$7,995	$799
Cost of Goods Sold	$4,824	$5,116	$452
Gross Margin	(33%) $2,376	(34%) $2,879	$343
OpEx	$1,185	$1,225	$40
Operating Income	$1,191	$1,654	$303
OI&E	$115	$120	$5
Net, before taxes	$1,306	$1,774	$308
Taxes	(31%) $405	(31%) $550	$95
Net Income	$901	$1,224	$213
Earnings Per Share	$1.00	$1.36	$0.24
Outstanding Shares	N/A	900,000,000	N/A

Disclosure: I own long term 2009 and 2010 call options in Apple.

Comments

[jmmx:]

What does thestreet.com have against Apple?
.
You really have to question their motivation when they continually repeat their stupid video "Apple users are snobs" I mean - this is really getting to be offensive!!

They recycle the exact same story day after day after day. Why? Why? Why?
.
This certainly is NOT journalism. They clearly have some motivation other than sound stock advice. Any reasonable person will say that he has some axe to grind.

Now I am a reasonable person and quite open to other opinions. I first saw this video several months ago and found it interesting. But as it repeats almost every day I have come to find it offensive and it really appears to be some kind of smear campaign. I mean, why else would they repeat it continually?
.
They clearly MUST have something going here. They have lost all credibility with me. I mean - their leader ADMITS to having manipulated markets. How can you trust anything he says.

Give them your thoughts here:

Investor Relations
Manager, Investor Relations
14 Wall Street 15th Floor
New York, 10005
Phone: [phone]
Fax: [phone]
E-mail: [e-mail]

2008 Jun 18 11:14 AM

[bobthenoob:]

>>>"What does thestreet.com have against Apple?"

Cramer is a Balmer fan. They were roommates in college and remained buddies. You can even see some similarities here from their bald heads to their meltdowns...

www.youtube.com/watch?...
www.youtube.com/watch?...

2008 Jun 18 12:03 PM

[jcrash:]

I'll guess $1.35

2008 Jun 18 12:39 PM

[jonesy:]

Thanks for your thorough explanations. I'm projecting 7.925M in revenue and 1.217 EPS. I'm a touch lower on Macs (2560M) since the channel checks are heavily US-oriented. I think your ASPs are a bit high - I have 1520 for Mac, 164 for iPod (4% decline). Minor differences on the other items.

2008 Jun 18 04:00 PM

[The Bear:]

Down here in Australia, when people could start ordering iphones in preparation for their arrival in July, there was one ordered every 3 seconds and the system crashed. I suspect the iphone sales estimates may be conservative.

2008 Jun 18 04:57 PM

[TanToday:]

What about income from Software Sales?

From iTunes store?

From Apple Care service contracts?

They are just MIA in the above analysis.

2008 Jun 18 09:42 PM

[Andy Zaky:]

To TanToday:

They are in the analysis. Here are the numbers:

Segment Information & Product Summary:
Macintosh Sales: $3.978 billion
iPods: $1.817 billion
Other Music Related Products & Services: $810 million
iPhone: $390 million
Peripherals: $420 million
Software: $580 million
Total Revenue: $7.995 billion

Other Music related products and services: includes iTunes as well as any iPod related accessories.

iPhone: Includes revenue from the iPhone, carrier agreements and Apple TV.

Peripherals: self-explanitory

Software: includes any software the company sells.

Apple care is included throughout the categories. Apple recognizes revenue from Apple Care on a deferred basis. See page 4 of any of Apple's unaudited financial statements or in Apple's 10K's or 10Q's.

2008 Jun 18 09:53 PM

[Andy Zaky:]

To Mark:

ASPs are a tricky thing to calculate. I am using Munster's ASP for iPods and a variation of the ASPs used for Mac sales last quarter. Here are the historical ASPs:

Q2 2008:
Desktop ASP = $1,579.44
Notebook ASP = $1,494.77
Overall Mac ASP = $1,526.43
iPod ASP = $170.80
iPhone = $69.91 (rev. recognized/ total # iPhones)

Q1 2008:
Desktop ASP = $1,550.67
Notebook ASP = $1,517.88
Overall Mac ASP = $1,531.70
iPod ASP = $180.69
iPhone ASP = $65.06 per iPhone

Q4 2007:
Desktop ASP = $1,462.67
Notebook ASP = $1,416.48
Overall Mac ASP = $1,433.92
iPod ASP = $158.73
iPhone ASP = $84.95 per iPhone

Q3 2008:
Desktop ASP = $1,507.89
Notebook ASP = $1,395.58
Overall Mac ASP = $1,435.94
iPod ASP = $159.96

2008 Jun 18 10:01 PM

[jmmx:]

The Air should add to the ASP. Very popular and price definitely above average!

2008 Jun 19 02:18 AM

[TanToday:]

Andy, yes I see them now.

By the way, EXCELLENT job, you are to be commended. Some may quibble { being humans we will } with this or that, but you laid it all out there, and sequentially and methodically touched all the bases.

Frankly, your work here blew 90% of what I've seen passing as "Analysis" right out of the window.

THANK YOU, good work.

2008 Jun 19 07:59 AM

[TanToday:]

Andy, this just in.

Use $4 average for movies, that blends in the rentals and the purchased versions.

Apple announced Thursday that customers on its iTunes Store have purchased and downloaded over five billion songs to date.

The digital download service is the number one music retailer in the US, according to the most recent data from NPD Group's MusicWatch survey, and features the largest music catalog with over eight million songs.

Apple also said that iTunes customers are now renting and purchasing over 50,000 movies every day, making iTunes the world's most popular online movie store as well.

In addition to its industry leading eight million songs, iTunes also sports a catalog of over 20,000 TV episodes and over 2,000 films, including over 350 in high definition video.

iTunes features movies from all of the major movie studios including 20th Century Fox, The Walt Disney Studios, Warner Bros., Paramount, Universal Studios Home Entertainment, Sony Pictures Entertainment, Metro-Goldwyn-Mayer (MGM), Lionsgate and New Line Cinema.

Users can rent movies and watch them on their Macs or PCs, all current generation iPods, iPhone and on a widescreen TV with Apple TV. iTunes Store customers can also purchase new movie releases from major film studios and premier independent studios on the same day as their DVD release.

2008 Jun 19 09:05 AM