Apple's third straight profitable quarter shows how far the company has come during the last year in getting its manufacturing processes up to speed with the rest of the PC industry.
Excluding one-time gains, Apple today posted net income of $75 million for its third fiscal quarter, and behind the positive news is a story not always associated with Apple: improved execution. Not only does the company have a clearly defined business plan, but also it has been able to efficiently turn those plans into products that people can buy.
But Apple's revamped business model hasn't been able to ignite sales growth. For that, the company is counting on next month's release of the low-cost iMac.
According to Fred Anderson, Apple's chief financial officer, there were four key ingredients to this quarter's profits:
Apple said that one result of these efforts was an increase in what are called "inventory turns," to 22 from 13 times a year. This translates into Apple's holding 16 days of finished inventory in its hands. The more inventory turns, the more profit in general.
"The industry leader is Dell, and they turn inventory 50 times a year. Most computer companies turn inventory somewhere between 10 and 20 times a year," noted Charles Smulders, an analyst covering PC distribution issues for Dataquest. "They are making good progress considering how late they recognized they need to do this," he commented.
Despite the improvements, there are lingering questions about how Apple will grow its business. Revenues fell 19.3 percent to $1.4 billion for the third quarter, and shipments decreased year on year.
"They have not started growing again. That's the big problem," said Dataquest's James Staten. Apple still hasn't matched its unit shipment numbers from last year, Staten said, a time when Mac clones were also being sold. In other words, the clone makers don't seem to have been "cannibalizing" Mac sales.
In the next quarter, Apple is looking to consumer sales of its new iMac to steady and then eventually provide revenue growth.
"The biggest challenge facing this us this [next] quarter would be the introduction of the iMacs. Our biggest challenge is to ramp up production as quickly as possible and produce as many iMacs as we can," said Apple's Anderson.