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Wednesday, April 25, 2007, 05:00 pm PT (08:00 pm ET)

Notes of interest from Apple's Q207 quarterly conference call

Apple, which on Wednesday announced its most profitable March quarter in history, held a financial conference call with analysts and members of the media. In-depth coverage of the topics discussed during that call follow.

Apple's Mac Business

In total, Apple shipped 1.517 million Macs during the quarter, representing 36 percent yearly growth. This included 891,000 notebooks and 626,000 desktop systems.

Demand for MacBooks and MacBook Pros during the quarter was exceptional. Notebook sales grew 79 percent year-over-year and accounted for 59 Percent of Macs sold during the quarter. Notebook sales generated $1.354 billion in revenue.

Desktop sales accounted for about 40 percent of the Macs sold during the quarter, rising only slightly from the year-ago quarter in which Apple sold 614,000 units. Desktops accounted for $914 million of quarterly revenue.

“The Mac is clearly gaining market share, with sales growing 36 percent—more than three times the industry growth rate,” Apple chief executive Steve Jobs said in a statement.

Mac distribution points have grown from 5800 to 8000 on a year-over-year basis.

Apple is still evaluating and plans to make decision on its Circuit City Mac pilot sometime this quarter.

Meanwhile, the company said it plans to partake in some "unique merchandising" as it expands its Best Buy Mac pilot to around 200 stores throughout the year.

Both Mac and iPod margins were quite strong during quarter, benefiting from very favorable commodity environment (particularly memory).

Apple's Music Business

Apple shipped 10,549,000 iPods during the quarter, representing 24 percent growth year-over-year, and accounting for $1.689 billion in revenue.

Apple's "Other Music Related Products and Services" added $653 million in revenue, up 35 percent year-over-year.

iPod shuffle was especially popular during the quarter thanks to the addition of new models in four vibrant colors.

In the United States, iPod commands over a 70 percent share of the digital media player market. It holds over a 60 percent share in Australia and Canada, over a 50 percent share in Japan and Hong Kong, over a 40 percent share in the UK, Switzerland and Denmark, and about a 28 percent share in Germany.

Apple ended the quarterly "comfortably" with iPod channel inventory of 4-6 weeks.

iTunes now has over 5 million songs, 350 TV shows, and 500 movies.

iTunes accounts for over 85 percent of legal music downloads in the United States, according to Nielsen SoundScan.

Both the iPod and Mac were key to Apple achieving its 35.1 percent gross margin.

Apple's Consumer Electronics Business

"We're off to very good start" on Apple TV, the company said. It would provide no further details, likely as sales totals are still low given the device's relatively short time on the market.

Apple did say that it plans to leverage its proven capability in the area of software development to gradually add new software features and applications to both its iPhone and Apple TV products free of charge to customers.

Additional iPhone tidbits are available in a separate report on the aforementioned subject.

Apple's Retail Business

Apple's retail store revenues for the quarter totaled $855 million, up 34 percent from $636 million year-over-year. The stores generated $32 million in profit in addition to $174 million in "manufacturing profit."

The company opened a total of 7 news stores during to quarter to end with 177 stores.

With an average of 172 stores open during the quarter, average store revenue was about $5 million.

Over 21.5 million people visited Apple's retail stores during the quarter, which breaks down to 10,000 customers per store, per week.

The stores sold 275,000 Macs, up more than 75 percent from the year-ago quarter.

Apple maintained that it is on target to launch new international retail stores in Glasgow, Scotland and Sydney, Australia sometime later this year.

In a surprise and much-welcomed announcement, Apple said it will be opening its third Manhattan retail store at 14th Street and 9th Avenue in the meatpacking district. No date was given.

Apple's Business and Mac Sales by Region

Apple Americas accounted for $2.447 billion in revenues, up 15 percent year-over-year. This included the sale of 605,000 Macs, up 22 percent year-over-year.

Apple Europe accounted for $1.249 billion in revenues, up 29 percent year-over-year. This included the sale of 433,000 Macs, up 37 percent year-over-year.

Apple Japan continued to "frustrate" Apple, accounting for just $283 million in revenues, down 8 percent year-over-year. This included the sale of 79,000 Macs, down 4 percent year-over-year.

Apple Asia-Pacific (plus FileMaker Inc.) accounted for $430 million in revenues, up 32 percent year-over-year. This included the sale of 125,000 Macs, up 89 percent year-over-year.

Direct sales — retail, online, direct to education and enterprise, and the iTunes music store — accounted for 50 percent of Apple's sales during the quarter.

Other notes

Apple capitalized about $27 million related to software development during quarter.

Capital expenditures for the quarter were $105 million.

Apple's cash stockpile rose over $700 million during the quarter to $12.6 billion.

Apple should be doing something with all that cash, but it isn't — yet. Although it continues to discusses options such as share buybacks internally, it has "nothing to announce at this time."

The tax rate for the quarter was 32 percent.