Apple 2008 Annual Report Download - page 46

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Table of Contents
Fiscal Year 2007 versus 2006
Net sales during 2007 increased 24% or $4.7 billion from 2006 even though fiscal year 2007 spanned 52 weeks while fiscal year 2006 spanned
53 weeks. Several factors contributed to these increases including the following:
Segment Operating Performance
The Company manages its business primarily on a geographic basis. The Company’s reportable operating segments consist of the Americas,
Europe, Japan, and Retail. The Americas, Europe, and Japan reportable segments do not include activities related to the Retail segment. The
Americas segment includes both North and South America. The Europe segment includes European countries as well as the Middle East and
Africa. The Retail segment operates Apple-owned retail stores in the U.S. and in international markets. Each reportable geographic operating
segment and the Retail operating segment provide similar hardware and software products and similar services. Further information regarding
the Company’s operating segments may be found in Note 9, “Segment Information and Geographic Data” in Notes to Consolidated Financial
Statements of this Form 10-K.
43
•
Net sales of software, service, and other sales rose $699 million or 46% during 2008 compared to 2007. This growth was due in large
part to increased sales of Apple-branded and third-party developers’ software products and increased net sales of AppleCare Protection
Plan (
“
APP
”
)
extended service and support contracts.
•
Mac net sales increased $3 billion or 40% during 2007 compared to 2006, while Mac unit sales increased by 1.75 million units or 33%.
The 33% Mac unit sales growth rate is significantly greater than the estimated growth rate of the overall personal computer industry
during that timeframe. Unit sales of the Company’s portable products accounted for 62% of the Company’s personal computer
shipments in 2007, up from 54% in 2006. Net sales and unit sales of the Company’s portable products increased 55% and 51%,
respectively, during 2007 compared to 2006. This growth was due to strong demand for the MacBook, which increased in each of the
Company’
s operating segments, as well as the MacBook Pro, which increased in each operating segment except Japan. Mac desktop net
sales and unit sales increased by 21% and 12%, respectively, during 2007 due to stronger sales of the iMac in each of the Company’s
operating segments. The Mac desktop net sales growth was greater than the unit sales growth due primarily to a shift in desktop product
mix away from the lower
-
price Mac Mini and discontinued eMac and toward the iMac.
•
Net sales of iPods increased $629 million or 8% during 2007 compared to 2006. Unit sales of iPods increased 31% compared to 2006.
The iPod growth was driven primarily by increased sales of the iPod shuffle and iPod nano particularly in international markets. iPod
unit sales growth was significantly greater than iPod net sales due to a shift in overall iPod product mix, as well as due to lower selling
prices for the iPod classic, iPod nano and iPod shuffle in 2007 compared to 2006.
•
Net sales of iPhone and related products and services were $123 million in 2007. iPhone net sales include the portion of iPhone handset
revenue recognized in accordance with subscription accounting over the product’s 24-
month estimated economic life, as well as sales of
iPhone accessory products and revenue from carrier agreements. iPhone unit sales were 1.39 million in 2007.
•
Net sales of other music related products and services increased $611 million or 32% during 2007 compared to 2006 due to increased
net sales from the iTunes Store. The Company believes this growth was the result of heightened consumer interest in downloading
digital content and the expansion of third
-
party audio and video content available for sale via the iTunes Store.
•
Net sales of peripherals and other hardware increased $160 million or 15% compared to 2006 due to an increase in wireless networking
products and other hardware accessories, including printers and scanners, which was partially offset by a decrease in net sales of
displays.
•
Net sales of software, service, and other sales rose $229 million or 18% during 2007 compared to 2006. This growth was attributable
primarily to increased net sales of APP extended service and support contracts and increased sales of Apple branded and third-party
developers
’
software products.