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Wednesday, July 25, 2007

"A Blowout Quarter" for APPLE (AAPL)

Observations from today's Apple, Inc. Quarterly Conference Call.

(Note: As of 1800 EDT shares of Apple, Inc. were up more than $15)

- Quarterly profit leaped more than 73%, fueled mostly by non-iPhone products.
- Profits of $818 million, including about $5 million sales at each retail store.
- They now have thousands of AT&T stores (including former Cingular outlets) pushing their fastest selling product; iPhone.

- Strong sales of MacBooks and MacBook Pro in a usually slow quarter. They were actually unable to meet demand for the new MacBook Pro models released in June.
- Best education sales quarter ever.
- Professional sales of Adobe Creative Suite and Final Cut Studio exceeded expectations.
- 8G iPhone model sold more than the 4G iPhone

- No delays in shipping iPhones ordered from apple.com
- iPhone is in stock at most retail Apple and AT&T stores
- Over a quarter of a million iPhones sold in the first 36 hours (270k)
- Quiet about payments from AT&T and other vendors of services displayed on iPhone screen. But there are "hidden" revenue streams coming from iPhone screen choices.

- European sales of iPhone to begin in Q4 in selected countries
"We are on track to begin selling the iPhone in Europe during the fourth calendar quarter of this year starting with a few major countries, and expanding the number of countries throughout 2008," said Apple CFO Pete Oppenheimer.

- Beat own guidance by nearly 30 cents.
- Beat analyst's expectations by an average of 20 cents
- Quarter of a million iPhones sold in the first 36 hours.

Forward Guidance

- Worried about component pricing going forward.
- Commodity prices expected to have an impact.
- DRAM prices may increase
- NAND prices expected to go up. Use of Flash memory increasing in all products.
- Expecting to open 10 stores before the end of 2007 for a total of 197 stores
- Again Apple is playing it very safe with extremely conservative estimates of less than 70 cents EPS in the the next quarter.

Between The Lines
There is a Leopard coming at them fast and they know that will drive revenue going into the traditionally very strong holiday season.

There is a new product just about to be released. The lemon yellow Beatles iPod filled with every Beatles song is likely to be a big hit with buyers in older age groups.

When the legal and technical hurdles to selling the Beatles catalog are crossed Apple will release those songs, no matter what time of year. Sales of iPod and iTune products for 2007 holiday season would be significantly impacted with such market timing.

Apple TV may well get more marketing attention.

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