Apple's Big Mac

Record-breaking quarterly sales of the Mac are putting Apple into the running for a top computer-maker spot

by Arik Hesseldahl

Sure, Apple Computer (AAPL) sold a lot of iPods in the September quarter. But unlike in past periods, when surging sales of the iconic digital-music player grabbed headlines, this time around, the Mac was the belle of the earnings ball.

In fact, Apple sold more of its Macintosh computers—1.61 million—than in any other quarter. Mac sales were clearly the high point of the quarter and the year, accounting for $2.2 billion, or 45%, of revenue. Apple had made a point to emphasize the Mac following the transition to using chips from Intel (INTC) from using chips made by IBM (IBM) and Freescale Semiconductor (FSL). Apple completed the switch when it released the MacPro earlier this month.

Niche Player No More

"They delivered in spades," Piper Jaffray analyst Gene Munster says of Apple's Mac sales. "It's a sign that Apple has turned the corner from being a niche player to being a player that is starting to make a run at bigger players."

Indeed, Apple came within spitting distance of overtaking Gateway (GTW) as the third-biggest U.S. computer maker, according to Gartner figures released on Oct. 18, the same day as Apple's results. Last quarter, Apple sold a mere 38,000 fewer units than Gateway, which trails Hewlett-Packard (HPQ) and Dell (DELL).

And within Mac sales, portables were far and away the favored product of Mac buyers. Apple sold 986,000 of its MacBook and MacBook Pro notebook computers, which accounted for $1.3 billion, or 27%, of revenue at an average price of $1,363 per unit during the period. Desktop sales, at 624,000 units, were slower, in part because the Mac Pro was the last Mac in Apple's lineup to include an Intel chip, accounting for $869 million, or just less than 18%, of revenue. Desktop prices sold for an average price of $1,392.

Stock Jump

Not that the iPod played the shrinking violet by any means. Apple sold 8.7 million units, more than 2 million more than a year earlier. That was welcome news, considering some recent analyst reports pointing to the prospect of worse-than-expected iPod sales. Indeed, the iPod showed its continued importance to Apple's bottom line, making up $1.5 billion, or nearly one-third, of sales.

In all, the company turned in a 62-cent per share profit, beating a consensus estimate of 51 cents. Apple's profit was $546 million, compared with $430 million a year ago, on sales of $4.8 billion compared with $3.6 billion a year earlier. It also finished the year with more than $10 billion in cash and short-term investments, nearly $2 billion more than a year ago. Apple's stock jumped $3.37, or 4.5%, to $77.90 in extended trading on Oct. 18.

Retail Strength

The retail division also pulled its share of the weight, turning in sales of $936 million and clocking more than 20 million visitors to its 165 stores around the world. Chief Operating Officer Tim Cook said internal surveys found that 50% of those who bought Macs in the retail stores described themselves as "new to the Mac."

Also aiding Apple's retail efforts is a trial with Best Buy (BBY), which by the end of the quarter was selling Macs in 50 stores, up from 7 at the beginning of the period.