10-QPeriod: Q2 FY2007

Apple Inc. Quarterly Report for Q2 Ended Mar 31, 2007

Filed May 10, 2007For Securities:AAPL

Summary

Apple Inc. reported strong financial results for the quarter ending March 31, 2007, demonstrating significant growth across its key product lines. Net sales increased by 21% year-over-year to $5.26 billion, driven by robust demand for Macintosh computers, particularly portables, and continued strength in iPod sales. Gross margin percentage saw a notable improvement to 35.1% from 29.8% in the prior year's quarter, attributed to favorable component costs and product mix. The company highlighted its strategic focus on innovation and expanding its retail presence, with 180 retail stores open by April 30, 2007. Significant investments in research and development are ongoing, supporting the development of new products like the anticipated iPhone, expected to launch in late June 2007. Apple maintained a strong balance sheet with $12.6 billion in cash, cash equivalents, and short-term investments, indicating a healthy liquidity position to fund future growth and capital expenditures.

Key Highlights

  • 1Net sales grew 21% year-over-year to $5.26 billion, driven by strong Macintosh and iPod sales.
  • 2Gross margin percentage significantly improved to 35.1% from 29.8% in the prior year's quarter.
  • 3Macintosh net sales increased by 44%, with portable MacBooks and MacBook Pros showing particularly strong growth.
  • 4iPod unit sales increased by 24% year-over-year, though net sales saw a slight decrease due to lower average selling prices.
  • 5Apple's cash, cash equivalents, and short-term investments increased to $12.6 billion, providing substantial liquidity.
  • 6The company is preparing for the launch of the iPhone in late June 2007, a significant new product category.
  • 7Retail segment net sales grew 34% year-over-year, supported by the opening of new stores.

Frequently Asked Questions

Revenue growth was primarily driven by strong sales of Macintosh computers, especially portable models like the MacBook and MacBook Pro, and continued demand for iPods. The expansion of the retail segment also contributed significantly to overall net sales.

Apple's profitability improved significantly, with gross margin percentage rising to 35.1% from 29.8% in the same quarter last year. This improvement was attributed to lower component costs, favorable product mix, and increased sales volume, which allowed for better leverage of fixed production costs.

Apple is anticipating the launch of the iPhone in late June 2007, which represents a significant new product category for the company. The filing indicates preparations are underway, and it is expected to be a key growth driver in the near future.

Apple maintained a very strong liquidity position, with cash, cash equivalents, and short-term investments totaling $12.6 billion. This healthy cash balance provides ample resources for ongoing operations, capital expenditures, and strategic initiatives, including new product development and retail expansion.