Apple Comments On Slowing iPod Demand (AAPL)

Apr.20.06 | About: Apple Inc. (AAPL)

From Apple’s F2Q06 conference call transcript:

Ben Reitzes - UBS

Could you just characterize what’s going on with iPod demand? Obviously 8.5 [million sold this quarter] is a big drop-off from the 14.1 [million sold last quarter], and obviously there’s seasonality, there were some things with the extra week. Maybe you could go back in time as well and talk about what the extra week might have, in hindsight, now given you in iPods, and then how iPods are going out of the quarter.

And then, to make this question longer, it seems that based on the ASP there was a drop-off in Nanos, a little more than expected, so could you just characterize the state of iPod demand?

Tim Cook, COO Apple Computer

Overall, Ben, we’re very pleased with the quarter. We shipped 8.5 million iPods and it was up over 60% year over year.

The December quarter included a 14th week, and that week fell between Christmas and New Year’s, and was one of the better shopping weeks of the year. And so that week sell-through was certainly better than the average of the quarter.

And as we discussed in January, we also increased the channel inventory by about 550,000 iPods. So when you take these factors into account, the sequential iPod sales were down much less than 40% which, according to NPD Techworld, has been the typical sequential CE unit decline that you’ve seen from December to March.

So I think the state of the iPods, we’re very, very happy with it, with the results that we had this quarter, and are excited about what we have in the product pipeline.

Ben Reitzes - UBS

What is in your guidance for iPods, and maybe more on guidance? You’re basically flattish in revenue, but yet you should do better in Mac’s because you may have more units. If you could just characterize some of the puts and takes between iPods and Mac’s that went into that guidance.

Peter Oppenheimer

Okay, well, as you know, we don’t give product level guidance, but as I indicated in my prepared remarks, we are factoring into the guidance a continued pause in demand from the transition to Intel, and included in that is our thinking that some customers may wait for unannounced products and certain applications becoming universal.

And we’ve also factored the lower ASP’s into the guidance, both for the Mac and iPod, as we enter the education buying season, and incur the fourth quarter impact of the shuffle price decrease and the introduction of the 1GB Nano.