2nd Quarter Conference Hilights

[MacRumors]

The 2nd Quarter Financial Conference Call took place today (http://www.macrumors.com/c.php?u=http%3A%2F%2Fwww.apple.com%2Fquicktime%2Fqtv%2Fearningsq204%2F).

In the Question and Answer session, the following information was provided:

- Regarding Best Buy Pilot. It ran its natural course and its performance is undergoing analysis at this time.
- IBM's PowerPC 970 90nm was the sole constrained supply causing the Xserve G5 delays. This supply is expected to ramp up over this quarter.
- HP iPod to start shipments in Summer. Already shipping iTunes on HP computers.
- Some iTunes albums are priced higher than $9.99, but this is due to higher prices charged by record labels.

[Trowaman]

as stated in the other post I found the news of apple store london this year to be interesting, but, whatever.

[goof_ball]

Some good....some bad.

Hopefully IBM can get faster G5s out the door.

[klaus]

- IBM's PowerPC 970 90nm was the sole constrained supply causing the Xserve G5 delays. This supply is expected to ramp up over this quarter.


Well, all the rumors about "production problems" with the 90 mm 970 Fx, can now be buried 10 feet under the ground :)

up to the next rumor about delays!

Ps: congrats apple to great quarter results!

[szark]

Well, all the rumors about "production problems" with the 90 mm 970 Fx, can now be buried 10 feet under the ground :)

The 970FX is the 90 nm 970, so all of those rumors are apparently true.

...and that would also be causing delays in any PowerMac updates.

[captain kirk]

Some good....some bad.

Hopefully IBM can get faster G5s out the door.

I am starting to seriously worry that ibm is turning into crapperola. My guess is that ibm will not be able to meet Steveo's pledge of 3Ghz within 12 months. This doesn't make any sense given ibm's quality production methods etc. However it has now been proven, IBM could not deliver the 90nm G5's in volume on time, sounds like motorola to me. I guess all that remains now is for the next G5 revision to go to a 1.8 Ghz top of the line.

[klaus]

The 970FX is the 90 nm 970, so all of those rumors are apparently true.

...and that would also be causing delays in any PowerMac updates.


I meant problems concerning the processors itself, not supply problems. If I read between the lines correctly, they had trouble supplying sufficient processors, so the delay is caused by bad supply, not troubles with the processor technology itself.

Or am i missing something here :confused:

[klaus]

I guess all that remains now is for the next G5 revision to go to a 1.8 Ghz top of the line.

You mean 2.8 ghz right? They won't be going backwards :-)

[vouder17]

The meeting was mainly Music related!!! Well at least the last half.
I wish someone would have asked something along the lines of why they haven't revamped the computer product line, and if this has affected there sales????

But still good results apple :D

[cuneglasus]

The 970FX is the 90 nm 970, so all of those rumors are apparently true.

...and that would also be causing delays in any PowerMac updates.\

On the other hand that doesnt mean every rumor you hear about 970fx production problems is true.Most are just FUD.

And remember that the xserves were announced long before the 970fx went into production.A delay was to be expected.No one can predict a timetable that close.At this point it wouldnt even be honest to say the powermacs were delayed as they have only been shipping about 6 months.They are due for an upgrade,by Apple standards,only about now.

[Soc7777777]

i dont believe that the constrained supply was just a production issue... i think there was also some type of problem with the technology... i mean how could supply delay you a couple of months???? thats a long time for 'supply' issues... all they would have had to do is start mass producing that chip, and for a company the size of ibm with its resources that wouldnt have been hard... i thing they had a problem coming up with a fully functional supply of the 970FX..

[ajb13]

I meant problems concerning the processors itself, not supply problems. If I read between the lines correctly, they had trouble supplying sufficient processors, so the delay is caused by bad supply, not troubles with the processor technology itself.

Or am i missing something here :confused:

The delay is not as a result of bad processor technology. Problems in supplying 1st gen chips normally revolve around 2 factors. 1) Actual yield of usable chips on a wafer, and 2) reconfiguring the hardware to produce wafers that yield the optimum of usable chips.

So, the delay could be because they are curretly unable to get enough good chips out of a 300mm wafer, or that they are producing so many different chips ate the moment, that they do not have the resources to throw at generating G5's and need to reconfigure some hardware to handle the extra load.

Definitely one of the above.

[geerlingguy]

Gee whiz. IBM needs to fix their problems asap and ship a few thousand chips to Apple! I want faster G5s... they won't begin full-scale production on faster chips until they have a steady line of 970FXs out the door.

[eroyce]

The meeting was mainly Music related!!! Well at least the last half.
I wish someone would have asked something along the lines of why they haven't revamped the computer product line, and if this has affected there sales????

But still good results apple :D


It is not surprising that Apple did not discuss future products; every analyst call, someone asks about future products, and every time, Fred Anderson says the same thing "we do not comment on future product development". You were incorrect, one analyst did ask the question during they call, and as expected they answered "no comment". Were you really expecting anything else?
Also a correction on it being mostly music related. Things were decidedly mostly supply and gross margin related. Sure there was talk about music, but they also rebuffed those with similar "no comment on songs sold".

[tex210]

I was hoping they weren't going to do that. :(
Now they will raise singles next. :mad:

[klaus]

1) Actual yield of usable chips on a wafer

Those wafers you talk about must be those circle shaped flashy boards they show at the g5 ibm movie right? So am I right to assume they can theoretically get 100 processors from one wafer (not a corrrect number). And it's possible that only 70% of the ones they can poor out of it, are 'working' ones.

Correct? Cause I don't follow the manufacturing of processors very closely to know all this **** :)

[bankshot]

- Some iTunes albums are priced higher than $9.99, but this is due to higher prices charged by record labels.

And I can't imagine why the record companies are doing this. For example, Joe Satriani's Is There Love In Space? (http://phobos.apple.com/WebObjects/MZStore.woa/wa/viewAlbum?playlistId=6397170), which just came out yesterday, is priced at $13.99. Yet for 7 cents more (including sales tax) I got a physical copy of the CD, liner notes, and a wristband to go see Joe play to 200 people at Tower Records tomorrow night, followed by an autograph session. Where's the value in buying it from iTunes? Hmm, I guess I could have had it at 2am after release instead of waiting til the store opened at 9am. Big whoop.

It's almost as if the record companies are deliberately doing this to make legal downloads fail. Are they still that afraid of having to adapt their business model to the new distribution method? It's insane. I almost think Apple should have stipulated that iTunes albums couldn't cost more than $9.99 per equivalent physical disc, rather than simply recommending it. But then they would have had more trouble convincing the record companies to sign on.

It'll be interesting how this all pans out over the next several years.

[Spagolli94]

And I can't imagine why the record companies are doing this. For example, Joe Satriani's Is There Love In Space? (http://phobos.apple.com/WebObjects/MZStore.woa/wa/viewAlbum?playlistId=6397170), which just came out yesterday, is priced at $13.99. Yet for 7 cents more (including sales tax) I got a physical copy of the CD, liner notes, and a wristband to go see Joe play to 200 people at Tower Records tomorrow night, followed by an autograph session. Where's the value in buying it from iTunes? Hmm, I guess I could have had it at 2am after release instead of waiting til the store opened at 9am. Big whoop.

It's almost as if the record companies are deliberately doing this to make legal downloads fail. Are they still that afraid of having to adapt their business model to the new distribution method? It's insane. I almost think Apple should have stipulated that iTunes albums couldn't cost more than $9.99 per equivalent physical disc, rather than simply recommending it. But then they would have had more trouble convincing the record companies to sign on.

It'll be interesting how this all pans out over the next several years.

I throw the jacket and liner notes away anyway.

I don't like to buy songs I don't like. iTunes I can preview and buy only the ones I want.

Then, whether I buy songs or the whole album, it automatically downloaded and it's on my iPod as soon as I plug it in.

Instant gratification is the main selling point of iTunes. The old fashioned way, you have to go to the store, then wait in line, come home rip the CD to your hard drive, etc. And on top of that, half the album usually sucks anyway.

I'm all for this new music revolution... I just wish Apple would be as enthusiastic about their hardware as they are about their music.

[pkradd]

Fred Anderson, in response to a question, said information on how the iTMS/Pepsi promotion went will be addressed closer to the April 28 anniversary date of iTMS. He did say that iTMS made a small profit in the quarter but would not speculate on how it will do in the next (a usual response). He also said constraints of manufacturing capability of the XServe and iPod mini were not holding back supplies but processor shortfalls on the former and lack of mini drives for the latter were. The static problem he said was isolated and those people should contact Applecare. I did and will be returning my "crackling mini" to Apple Friday when I get the return shipping carton, probably tomorrow. It's under warranty (as are all mini's) at this time.

Predictions. Look for new 4th Gen iPods by the end of the month and announcements of iTMS in other countries.

[neutrino23]

Gee whiz. IBM needs to fix their problems asap and ship a few thousand chips to Apple! I want faster G5s... they won't begin full-scale production on faster chips until they have a steady line of 970FXs out the door.

I share your sentiment but I am not ready to criticize IBM for being lackadaisical. I sometimes work at the edges of semiconductor failure analysis. Bringing out a 90nm process with the various technologies that IBM uses is nothing short of astounding. Waiting is hard but once they have this process nailed down we'll see a good supply of very tasty chips.

[szark]

Those wafers you talk about must be those circle shaped flashy boards they show at the g5 ibm movie right? So am I right to assume they can theoretically get 100 processors from one wafer (not a corrrect number). And it's possible that only 70% of the ones they can poor out of it, are 'working' ones.

Correct? Cause I don't follow the manufacturing of processors very closely to know all this **** :)

Yes, you are correct in your understanding of what ajb13 meant in terms of wafer yields.

(Unlike me, who was incorrect in his understanding of what you said before. ;) )

[bankshot]

I throw the jacket and liner notes away anyway.

I don't like to buy songs I don't like. iTunes I can preview and buy only the ones I want.

Right, I agree that this is a big selling point of iTMS. Apple does enforce a $0.99 price per song that is available for individual download, so I don't really have a problem with that. But I'm talking about whole album pricing. Presumably if you're buying the whole album, then this advantage for iTunes goes away - you get the same music whether you buy it from iTunes or get the CD from a store. Then factors like price, convenience, liner notes, CD quality vs. AAC quality, gaps vs. no gaps in playback, etc do come into play. I'd say that for most people, the CD wins on everything but price and absolute convenience. And in the specific case I mentioned, those weren't nearly enough of an advantage to go with iTunes.


Then, whether I buy songs or the whole album, it automatically downloaded and it's on my iPod as soon as I plug it in.

Instant gratification is the main selling point of iTunes. The old fashioned way, you have to go to the store, then wait in line, come home rip the CD to your hard drive, etc.

I suppose the instant gratification is a selling point for casual music consumers, or for people who are just casual fans of a particular artist. For an artist I don't really care about but I kind of like a few of their songs, that's great. But for anyone whose music I really love, I'm more than likely going to enjoy all of the songs on the album. Then the CD easily beats an iTunes album purchase even when the CD costs more. And when the CD costs the same or less than the iTunes album, that's just nuts. This is what I'm talking about.


And on top of that, half the album usually sucks anyway.

And if half the album sucks, then you buy the songs you want and this whole issue (album prices) doesn't apply.

[Hattig]

I am starting to seriously worry that ibm is turning into crapperola. My guess is that ibm will not be able to meet Steveo's pledge of 3Ghz within 12 months. This doesn't make any sense given ibm's quality production methods etc. However it has now been proven, IBM could not deliver the 90nm G5's in volume on time, sounds like motorola to me. I guess all that remains now is for the next G5 revision to go to a 1.8 Ghz top of the line.

Intel were 6 months late with Prescott and still isn't producing many ... the 90nm switch is proving to be difficult for everyone, not just IBM.

[pizzafunghi]

the french site http://croquer.free.fr/ comes up with the rumor the delays happened because of problems concerning the glue, used to connect two parts of somthing they call "daughter cards".
So far what I understand of it.
Any French speaking People around? ;)

* Plus grave. Apple a été obligé de démonter toutes les cartes filles des G5 et de les renvoyer en usine.

IBM a découvert très tardivement un problème sur les PPC 970FX. Dans le processus de fabrication, une colle est utilisée pour assembler deux couches. C'est une nouveauté du process SSDOI. La colle utilisée depuis le début de la fabrication des processeurs se détériore rapidement à la chaleur provoquant la casse du CPU. Depuis ils ont modifié la formule et relancé la fabrication des processeurs. Mais Apple devra tous les changer sur ses cartes filles.

[Hattig]

i dont believe that the constrained supply was just a production issue... i think there was also some type of problem with the technology... i mean how could supply delay you a couple of months???? thats a long time for 'supply' issues... all they would have had to do is start mass producing that chip, and for a company the size of ibm with its resources that wouldnt have been hard... i thing they had a problem coming up with a fully functional supply of the 970FX..

It takes AMD 100 days to go from wafer to packaged processor. AMD aren't that small a fab! In fact it is rumoured that the IBM fab shares a lot in common with the AMD fab for 90nm.

Making a processor isn't a case of popping the wafer in and a few dozen processors coming out the other side a few minutes later!

[ajb13]

Correct? Cause I don't follow the manufacturing of processors very closely to know all this **** :)

Correct. Not every wafer yields the same number of chips. Of course they tweak and tweak and tweak until they get everything setup so they get optimum usable chips. Then, they get new raw material, so they tweak and tweak, and so the process continues.

Even if they do produce good chips, that is, the circuits are whole; nothing broken, these chips still have to be tested. There are normally failures here too. So, hypothetically speaking, after all the tweaking, they get say 85% yield, and then anywhere from 5-10% failures. That's why IBM uses such a large wafer. Makes it more cost effective. It makes processors too damn expensive when you are producing smaller yields on smaller wafers (150-200mm)

[macridah]

I'm glad that apple is profitable. It's just going to get better when more and new G5 come out. In due time ...

[fpnc]

It takes AMD 100 days to go from wafer to packaged processor. AMD aren't that small a fab! In fact it is rumoured that the IBM fab shares a lot in common with the AMD fab for 90nm.

Making a processor isn't a case of popping the wafer in and a few dozen processors coming out the other side a few minutes later!

I used to work as an engineer in the semiconductor industry and to be completely accurate it should be noted that it takes no where near 100 days to produce an IC. The wafer/IC fab time is a few weeks. However, getting an order placed, scheduling material and equipment, packaging, testing, and shipping and receiving can add significantly to the overall time.

[x86isslow]

the french site http://croquer.free.fr/ comes up with the rumor the delays happened because of problems concerning the glue, used to connect two parts of somthing they call "daughter cards".
So far what I understand of it.
Any French speaking People around? ;)

* Plus grave. Apple a été obligé de démonter toutes les cartes filles des G5 et de les renvoyer en usine.

IBM a découvert très tardivement un problème sur les PPC 970FX. Dans le processus de fabrication, une colle est utilisée pour assembler deux couches. C'est une nouveauté du process SSDOI. La colle utilisée depuis le début de la fabrication des processeurs se détériore rapidement à la chaleur provoquant la casse du CPU. Depuis ils ont modifié la formule et relancé la fabrication des processeurs. Mais Apple devra tous les changer sur ses cartes filles.

Sherlock seems to do a good job with the translation:
More serious. APPLE was obliged to dismount all the cards girls of G5
and to return them in factory.

IBM discovered very tardily a problem on PPC 970FX. In the
manufacturing process, an adhesive is used to assemble two layers. It
is an innovation of process SSDOI. The adhesive used since the
beginning of the manufacture of the processors worsens quickly with
heat causing the break-in of the CPU. Since they modified the formula
and started again the manufacture of the processors. But APPLE will
have all to change them on its cards girls.

I get the feeling though, that the last line got screwed up- cards girls?

[fpnc]

I'd say that if IBM can't produce enough 970FX G5s at 2GHz to supply even the Xserves then any hope of a 3GHz Power Mac by this July is completely gone. I think it even places into doubt a 3GHz G5 by the end of this summer. IMO, this looks like the first confirmation that there has been a real slip in the G5 schedule.

[jade]

Sherlock seems to do a good job with the translation:


Retouched by humans

More serious. APPLE was obliged to dismount all the daughter cards of G5 and to return them in factory.

Late in the process, IBM discovered a problem on PPC 970FX. In the
manufacturing process, an adhesive is used to assemble two layers. It
is an innovation of process SSDOI. The adhesive used since the
beginning of manufacturing worsens quickly with
heat causing the break-in of the CPU. Currently IBM modifieied the formula and resumed manufacturing. Apple will have to modify the daughter cards to to this change.

cards girls = daughter cards. Makes more sense?

[centauratlas]

...IBM's PowerPC 970 90nm was the sole constrained supply causing the Xserve G5 delays. This supply is expected to ramp up over this quarter.
....

I said that in mid-Feb (http://forums.macrumors.com/showthread.php?t=61633&page=1&pp=25) and several people poo-poo'd that. :) I think some others did too, but I will be happy when IBM is not constrained by supply and (if the rumors this week are true) are producing > 2.0GHZ. ;-)

I want a new PM G5 and a new PB G5...I can wait, but I don't *want* to!

[PowerMacMan]

hearing all this stuff about the processors having problems... makes me depressed... Then I hear that they have been fixed and are resuming production and manufacturing... I'm happy again!

I guess this stuff is making me bi-polar :o

[ClimbingTheLog]

And if half the album sucks, then you buy the songs you want and this whole issue (album prices) doesn't apply.

Yeah, I wish. I tried to buy "Buck, Buck" from Bill Cosby's "Revenge" the other night. No "Buck, Buck". Revenge is listed as a "Partial Album" which means it has every sketch but "Buck, Buck". But the one almost everybody wants to hear is "Buck, Buck". So it's the RIAA's way of saying, F U, go buy the CD.

(for those who don't know, "Buck, Buck" is the skit where Fat Albert is introduced, and you're likely to pee yourself if you're hearing it for the first time).

[asif3]

It's great to hear Apple officially announce the London Store. Now I can sleep at night :)

[displaced]

It takes AMD 100 days to go from wafer to packaged processor. AMD aren't that small a fab! In fact it is rumoured that the IBM fab shares a lot in common with the AMD fab for 90nm.

Making a processor isn't a case of popping the wafer in and a few dozen processors coming out the other side a few minutes later!

IIRC, both AMD and IBM develop 90nm (and future) processes at the very same fab -- the East Fishkill plant -- see here (http://www.amd.com/us-en/Corporate/VirtualPressRoom/0,,51_104_543~65496,00.html)

Also in that press release (dated Jan 2003), note that they planned 90nm production at Q4 2003. We're only in early Q2 2004, and 90nm xserves are in production. Kinda puts these 'delays' in perspective.

I think we all need to appreciate how close to the edge we are with these processors. These machines are most likely the first production computers using these technologies (or at least, IBM's version of them).

With any new process, the yield on a wafer is low. Over time, as tweaks to the manufactuing procedure are made, yeilds increase. These delays are because Apple are right in there at the start, designing machines that use emerging technologies.

Give 'em a break. IBM are not a Motorola. Motorola's delays weren't due to the fact that they were pushing the boundaries of microprocessor technology, it was because their CPU division was not the core ('scuse the pun) focus of the company. CPU design and production is bread and butter to IBM, and I'm sure there's no foot-dragging.

Am I the only one that's still amazed that mankind can even make these things in the first place? It's not like they build 'em out of lego...

[iChan]

It's great to hear Apple officially announce the London Store. Now I can sleep at night :)

you gonna be there for the opening? i am...

[wdlove]

hearing all this stuff about the processors having problems... makes me depressed... Then I hear that they have been fixed and are resuming production and manufacturing... I'm happy again!

I guess this stuff is making me bi-polar :o

I'm just not going to let this depress me just yet. Isn't it entirely possible that these reports are rumors also. They may be trying to keep us all track. The only sure news is when it comes from Apple. :)

[asif3]

you gonna be there for the opening? i am...

Yep - definitely -I live in Holland Park which is like 4 stops away from Oxford Street :cool: - I reckon i'll queue up from about midnight on the night before the opening :)

[displaced]

Yep - definitely -I live in Holland Park which is like 4 stops away from Oxford Street :cool: - I reckon i'll queue up from about midnight on the night before the opening :)

Me too :)

Book a day off work, get the train into London... just got to wait for a date to be announced!

Shame I probably won't be able to afford much if anything... ho hum :)

[mattmack]

I'm glad that apple is profitable. It's just going to get better when more and new G5 come out. In due time ... Their stock was up 10% today to $29 and some change. Reporting a 300%increase over earning the same period last year. Wish I had bought at 12
:(

[iMeowbot]

IIRC, both AMD and IBM develop 90nm (and future) processes at the very same fab -- the East Fishkill plant -- see here (http://www.amd.com/us-en/Corporate/VirtualPressRoom/0,,51_104_543~65496,00.html)

You do RC, and the 90/60/etc. fab AMD are building in Dresden will be using the same IBM processes.

[godrifle]

I'm curious how Xserve and peripherals are selling...

[thatwendigo]

Their stock was up 10% today to $29 and some change. Reporting a 300%increase over earning the same period last year. Wish I had bought at 12
:(

No, no, no... You don't get it. Apple can't have healthy stock prices, because they're dying. Dying, I tell you!

Marketshare is the be-all, end-all of the entire game, and so obviously this is a plot to increase hope so that we can all be crushed. Don't give into it! Resist with every fiber of your being!

Or, you know... Smile, wish you had invested, and thank Steve Jobs for turning the company around and bringing us here. However difficult it might be, at least there is an Apple, which there probably wouldn't have been without Ives and Jobs at the creative and business helms.

I've been using macs a long time, and I can't recall a better value for the money. Ever. Even with the G5 line aging (oh, horror, a year!), I'd take a mac over any PC you offered me. Hell, I'll take my eMac 700 over a top of the line P4 EE... Zealot? Maybe. Comfortable? Definitely.

I know what I like, and Windows just isn't it.

[jeffgarden]

April 14 - 23:20 EDT For the first time, Apple sold more iPods in a quarter than it did Macs--and Apple CEO Steve Jobs is happy about it. "We feel great," Jobs told the New York Times. "We sold a lot of Macs, but we've sold more iPods in the quarter than all the Macs put together." As reported by MacMinute Wednesday, Apple sold a record 807,000 iPods in the quarter, a more than 900 percent increase from the period a year earlier. The company sold 749,000 Macs in the quarter, up 5 percent. Apple's revenue from iPod sales was US$264 million, up from $31 million a year ago. Jobs also noted that the iPod now has a 40 percent share of the MP3 player market and that Apple has sold 2.9 million iPods in two years.

[mattmack]

No, no, no... You don't get it. Apple can't have healthy stock prices, because they're dying. Dying, I tell you!

Marketshare is the be-all, end-all of the entire game, and so obviously this is a plot to increase hope so that we can all be crushed. Don't give into it! Resist with every fiber of your being!

Or, you know... Smile, wish you had invested, and thank Steve Jobs for turning the company around and bringing us here. However difficult it might be, at least there is an Apple, which there probably wouldn't have been without Ives and Jobs at the creative and business helms.

I've been using macs a long time, and I can't recall a better value for the money. Ever. Even with the G5 line aging (oh, horror, a year!), I'd take a mac over any PC you offered me. Hell, I'll take my eMac 700 over a top of the line P4 EE... Zealot? Maybe. Comfortable? Definitely.

I know what I like, and Windows just isn't it.LOL thanks for putting a smile on my face