Quick Apple Q2FY07 coverage prediction

The numbers have been out for about 15 minutes, and here’s our quick prediction of the initial non-SEC coverage:

Lots of stories about “Is the iPod overpriced? Has Apple lost iPod dominance?” and the like.

Why? Apple’s music revenues are up only 7% year-over-year, despite selling 24% more iPods in the March 2007 quarter than in the March 2006 quarter. Sequentially, iPod unit sales were down 50% from the Holiday 2006 quarter and revenue down 51%, but you expect to sell a ton more iPods for Christmas than you do for St. Patrick’s Day.

The problem? Last year, in the March 2006 quarter, Apple’s music sales were up 79% year-over-year, including 61% more iPod units than in March 2005 and 69% more iPod revenue. On top of that, Apple had guided analysts to expect gross margins of about 29.5% for the March 2007 quarter, but the gross margin was actually an almost-obscene 35.1% – a relative increase of 17.4% in margins that Wall Street already considered to be pretty high.

Therefore, we predict the usual suspects will take high margins and lowered sales and ask if Apple’s missed the boat – if the company could have made more money and grabbed more marketshare by lowering iPod prices, since the iPod provided 39% of Apple’s quarterly revenue, and all music products combined comprised 50% of Apple’s revenue – perhaps a first for a non-holiday quarter (we’ll have to check).

Add this to the SEC drama and it should be a fun conference call to observe, in the sense that observing an episode of 24 is more fun than actually being in it. Check out the live webcast if you want here, or click that link after 5PM PDT today for a replay.