Apple: iPod nano supply fell "far" short of demand in Q4

Apple’s iPod family remains a major driver for Apple’s business growth. The company reported record revenues and profits for the quarter and year with music-related related business accounting for more than 40 percent of the company’s sales. iPod nano demand outpaced supply, but the company was able to ship more than 1 million units during the first 17 days after launch.

Apple is looking into a rosy future with the conclusion of the best financial result in the firm’s history. The company concluded fiscal Q4 with a profit of $430 million on revenues of $3.68 billion. These results compare to revenue of $2.35 billion and a net profit of $106 million in the year-ago quarter. On a yearly basis, revenues were up 68 percent to $13.93 billion and earnings were up 386 percent to $1.34 billion.

The company was able to sell more than 6.4 million iPods during the quarter, 220 percent more than in Q4 of 2004. The iPod nano apparently sold much better than Apple had expected. Company official said that there was "staggering" demand in every major geography and that the company exited the quarter with an "enormous backlog." Still, Apple shipped more than 1 million nanos within the first 17 days after launch. "We can’t project, when supply will meet demand," said John Rubinstein, senior vice president of the firm’s iPod division.

Still, analysts weren’t happy with the iPod sales announced. Apple’s stock dropped nearly 11 percent in after-hours trading, triggered by missed expectations set by the financial community. During a conference call, analysts questioned the growth opportunities for iPod devices, as sales grew only slightly over the prior quarter. Apple’s chief financial officer Peter Oppenheimer responded by explaining that iPod sales met expectations despite the fact that the company decreased production of the iPod mini in preparation of the introduction of the nano during the quarter. According to Apple, the iPod holds a 75 percent market share in the US market.

Besides the iPod, the company also sold 1.236 million Macintosh computers, representing a 48 percent growth year-over-year. Average unit revenue declined slightly, as iMac pricing dropped and Mac mini units increase their share within the Mac business.

Apple’s retail stores continue to be a critical tool to attract new Apple customers. According to Oppenheimer, 45 percent of retail customers are new to Apple. The Apple stores generated traffic of 14.8 million customers and revenues of $663 million. 202,000 Macintosh computers were sold through these locations. The company plans to add between 30 and 35 new stores during the 2006 fiscal year.

Oppenheimer expects a strong Christmas season for Apple. The quarter is expected to bring sales of $4.7 billion.

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