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Apple Q3 conference call: mystery product hinted

Guiding margins down for the next quarter, Apple obfuscates "future product …

Good news for Apple fans may be bad news for AAPL fans, at least in the short term. In discussing guidance for the current quarter, Apple executives repeatedly referred to a "future product transition" that will impact the company's cherished margins in the current quarter. Despite repeated attempts by six-figure analysts to draw speculative water from the stony lips of company executives, nothing was forthcoming about the xMac iTablet product. Besides that, there were a few less interesting comments during the call.

  • Gross margins dropped to 34.8 percent, down from 36.9 percent, and are guided down near 30 percent because of the flying car mystery product, hence AAPL is getting hammered in trading after hours. 
  • Apple sold just under 2.5 million Macs in the quarter, the highest total ever, and Mac sales were about half the revenue for the quarter. Apple retail outlets sold 476,000 Macs, half of those new to the
    platform, as usual. The stores saw more than 30 million visitors for
    the quarter. Apple also had the best education quarter ever. Mac desktop sales growth actually outpaced laptop growth, 49 percent to 37 percent, respectively. Who knew.
  • While Mac sales were up everywhere, regions outside the US continue to outperform the larger
    PC market big time: Europe 4X, Japan 4-5X, Asia Pacific
    2-3X. This is important because the US economy is hurting, though Apple takes the US economy "into account."
  • Apple sold a mere 717,000 iPhones during the quarter due to the still-unexplained shortages. Apple expects to sell more iPhones this quarter "than ever before." The
    previous record high was 2,315,000 sold during the holiday quarter of
    2007. The company is also "very confident" in achieving the goal of
    selling 10 million iPhones in 2008.
  • There was a hilarious explanation given regarding shortages of the iPhone 3G. While Apple is "confident" in the ability create supply, it apparently is "difficult to predict demand." Nonetheless, Apple is preparing a roll out in 20 more countries on August 22nd, and will be selling the iPhone 3G in more than 70 countries by year's end.
  • The App Store is doing phenomenally, more than 900 apps available so far, and more than 25 million
    downloaded. Regarding revenue, the company sees the App Store as a source
    of "small profits," the goal being to make the iPhone and iPod touch
    more attractive.
  • Apple sold just over 11 million iPods in the quarter. While iPod sales are up 10 percent in the US and 15 percent abroad,
    ASP is down due to a higher mix of shuffles and the current promo, and
    possibly cannibalization by the iPhone. However, company executives
    reiterated the stance that if there is to be cannibalization, they want
    to eat themselves.
  • The
    iTunes Store has more than 8,000,000 songs, 20,000 TV shows, and 2,200 movies, 450 being HD.
  • For the end of the fiscal year, Apple has 242 retail outlets, up 45 from 2008. While refusing to comment upon numbers for 2009, there will be more, and the Apple Store in Beijing "is off to a good start."
  • The store-in-store program with Best Buy is going well, with the company having added 170 more stores for at total of 570, and with more than 600 expected by the end of summer.
  • Someone finally asked about the product whose picture should be on a milk carton, the Apple TV. The response was that Apple has been pleased with sales—but not pleased enough to release numbers—but that the Apple TV remains a "hobby." However, the company is continuing to invest in development—Take 3 with Blu-ray, anyone?
  • A terse reply was given to a question about the health of Steve Jobs.
    "Steve loves Apple, serves at the pleasure of the board, has no plans
    to leave Apple. Steve Jobs health is a private matter."

Overall, the quarter was a great one for Apple. Even better, Apple fans have been given a rumor product by the company itself. Let the speculation begin!

Channel Ars Technica