The numbers are in: 1.12 million iPhones sold in Apple's fiscal Q4 & $1.01 per share earnings. Analyst estimates were at about $0.82/share and anywhere over 1M iPhones sold, so this is beyond expectations in every respect. Furthermore, 2.164M Macs sold, which is over the Wall Street target of 2 million computers... this is the first 2M+ Mac quarter ever for Apple. 10.2 million iPods sold (not surprising).

From the conference call:

Apple ended the fiscal year with $15.4 billion in cash and no debt," said Peter Oppenheimer, Apple's CFO. "Looking ahead to the first quarter of fiscal 2008, we expect revenue of about $9.2 billion and earnings per diluted share of about $1.42.
Apple Chief Operating Officer Tim Cook said the Mac's performance was led by strong back-to-school and higher education sales, a revamped Mac design that was released in August and new customers who are buying Macs at the company's retail stores.

"Over 50% of the Macs that we've sold in our retail stores were to customers who never owned a Mac before," Cook said, on a conference call. "So we've been very successful at expanding our customer base."

What does all of this mean? For one, more people are using Macs. But who you ask? Weeeeellll, recently there have been reports coming in from various sources that more & more young people(that crucial 18-24 demographic) have been switching to Macs in droves. This coupled with the fact that Apple gets tons of press in general from the "Web 2.0" (I still dislike that term) crowd through Digg/Del.icio.us/Twitter/BoingBoing/Engadget etc etc increases awareness of Apple and its products. On top of this, there is the much lauded iPod/iPhone Halo Effect (Note: that article is from 2005 which shows you how far back the legs on this goes. Here is one from yesterday.) which seems to be true. For those of you unenlightened, which is probably none of you if you read this blog, people purchase iPods & iPhones which work on both Windows & Macs. They realize, hey, this is a pretty nifty device w/ a kickass interface. If they are in a large metro area, this brings them into the Apple Store where they are oohed & aahed by the wonderful customer service(80% of the time according to market surveys) and the in-store displays. Tom Krazit chimed in with much of the same at CNet yesterday with his appropriately titled, "More to Mac sales than a halo".

The significance of all the young people buying Macs? Some of them, like me, are in the working world now(25). Some of them, just starting off in college, are preparing themselves for a solid 4-6 years of using their new shiny Mac on a daily basis doing everything from schoolwork to watching youtube. The gist? In about 4 or 5 years time you'll have an increasing number of people in the workforce familiar with using Macs. These people will have a Mac at home and, I theorize, like myself become frustrated with using a clunky windows machine at work. They will quietly make comments to their bosses. Some will listen. Hell, some of these bosses may be converts themselves. The end result is that the virus, the Mac Bug if you will, will spread through the marketplace. This is assuming, of course, that Apple continues to turn out good products, that work well, and people are satisfied with. If Microsoft keeps up their dismal performance & iPhone sales increase across the board, you could see businesses being more receptive towards apple products in general.

Microsoft should begin to be worried...this goes for Dell & HP too.

Update: As of the time of this posting, AAPL was trading up at +11.37$ a share. This is ~6.5% increase of yesterday's close, or a 10 billion market cap increase.

Update 2: TUAW has a followup article on this topic; a sequel to their Q4 Earnings post from yesterday afternoon. Also, AAPL is now trading at +12.33$ as of this update or ~7% above yesterday. Market CAP increase of 12 billion.

Update 3: John Gruber just posted this at Daring Fireball:

Everything's coming up Milhouse

Tuesday, 23 October 2007

Apple’s Q4 2007 financial statement is just chock full of good news. Profits are up, revenue is up, iPod sales are up, iPhone sales are strong. But the big news is the Mac.

Apple sold 2.2 million Macs in the quarter — 34 percent higher than the year-ago quarter, and 400,000 more than the previous quarterly record (which was just three months ago). During yesterday’s conference call with analysts, Apple stated that half of the customers who bought Macs in Apple’s retail stores were new Mac users.

I don’t think there’s any single explanation for why this is happening now. There are many factors at play, and almost every single one of them is in Apple’s favor.

The key problem Apple has faced for two decades with attempts to gain new Mac users is a strange one: most people buying a new computer never even considered buying a Mac. It’s not that they’d never heard of Apple or didn’t know the Mac existed, it’s that they somehow assumed Macs were for some nebulous group of “others”, when the truth is that many of these people would be delighted with a Mac. This, I think, is how the iPod “halo effect” is helping Apple sell Macs. Don’t over-think it, because it’s not exactly rational or logical; it’s not people thinking to themselves “Well, since I love this iPod music player from Apple, that means I should buy one of their computers, too.” What the iPod has done is made more people just even consider — maybe — buying a Mac.

Consider this: Do you know of anyone — anyone at all — talking today about switching from the Mac to Windows? I don’t. Not even Dvorak/Enderle-style muckraking Apple-tweaking pundits are claiming that anyone is switching from the Mac to Windows, because it’s just so preposterous.

As a long-time Mac nerd, though, this seems crazy. The 1990s, for Mac users, seemed fraught with the very real possibility that the Mac would disappear altogether — or at least disappear from relevance. The Mac lost users to Windows for a variety of reasons. For many, it was a forced migration mandated by IT departments “standardizing” on Wintel — corporate art departments forced to switch. For others, it was voluntary: people who switched because Windows 95 was good enough, people who wanted faster Intel-based CPUs, people who were frustrated by technical limitations in the old Mac OS even though they preferred the Mac UI. Not to mention the fact that many of the Great New Things came out as Windows-only products. (Napster, for example — there were Mac clients eventually, but the Napster phenomenon started on Windows.)

This bottomed out around the beginning of the Mac OS X era; everyone who was going to switch from the Mac had done so. What Apple was left with was a very solid, very loyal user base.

Today, there are a lot of really good reasons to switch to Mac, above and beyond the same old reasons that the Mac offered a superior overall user interface and user experience, which was really all the Mac was left with in the 1990s (that, and the third-party Mac developer community that was drawn to the fact that, even at the nadir of the Mac’s market share, the Mac remained the platform for producing software that emphasized the user experience above all else — “The Show”, as Brent Simmons described it back in 2002).

To wit:

The web is really coming of age, and is the biggest platform, by far, in the world. Windows market share of 90 or 95 percent pales next to the market share of the web, which is effectively 100 percent. You can’t buy a computer that doesn’t ship with a web browser. When the Next Big Thing happens these days, it usually happens on the web — and that means Mac users don’t miss out.

Apple’s switch to Intel CPUs was seamless, and the existence of Windows-on-the-Mac solutions like Boot Camp, Parallels, and VMWare makes the idea of switching a lot less scary. Windows really is the new Classic: in the same way that the Mac OS Classic environment eased the transition for existing Mac users switching to Mac OS X, Boot Camp/Parallels/VMWare ease the transition for Windows switchers. This wasn’t possible when the Mac was based on the PowerPC.

Microsoft hasn’t done anything interesting with Windows since XP. Windows-vs.-Mac arguments tend to be inflammatory, but there’s nothing in Vista — nothing — that would tempt a Mac user to switch. And given Microsoft’s pace of Windows development, it seems obvious that Vista is it for this decade: that come 2010, Vista, with a few subsequent service packs, is going to be all Microsoft will have to show for the 2000s. It was a long wait for Vista and it didn’t seem worth it.

Windows lost a huge chunk of the nerd market. Nerd switchers, in and of themselves, don’t constitute a significant enough number of people to account for anything other than a tiny blip in Apple’s Mac sales. But nerds are the people who recommend computers to friends and families; it seems inarguable that there are an awful lot of nerds recommending Macs today who weren’t five years ago.

Young people love Apple. Arguably, this is another aspect of the iPod halo effect. I’ve been linking to a series of recent stories about the Mac’s tremendous rise in market share on college campuses; this one from Harvard shows that the difference is significant even between freshmen and seniors: 35 and 27 percent, respectively. Strong back-to-school sales account for an enormous chunk of Apple’s record-breaking quarter. And consider the long-term effect: hook students on the Mac today — and keep them happy — and Apple has gained new Mac customers for life.

The Mac has never experienced sustained growth at this sort of pace. Breaking this quarterly sales record isn’t a fluke — it’s part of a trend. What we’re seeing now is what Mac enthusiasts have been hoping to see for 20 years: more people deciding to buy a Mac. The question now is how big can this trend get.

Source: Daring Fireball