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Apple profit soars with iPhones, iPods sales

Apple profit soars with iPhones, iPods sales
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First Published: Thu, Apr 23 2009. 08 57 AM IST
Updated: Thu, Apr 23 2009. 08 57 AM IST
San Francisco: Apple Inc’s quarterly profit soared past Wall Street expectations on strong sales of iPhones and iPods, underscoring the popularity of the company’s relatively expensive products even in the midst of a weak economy.
Known for giving conservative outlooks, Apple projected profit and revenue for the current quarter below average Wall Street estimates, but that did not discourage investors, who drove its shares up 3% after-hours on Wednesday.
“As the world economy began to spiral the big question on investors’ minds was if the Apple brand was going to be resilient or particularly susceptible,” said Oppenheimer analyst Yair Reiner. “I think that what these results show is that Apple and this brand are relatively resilient.”
In the first quarter since chief executive Steve Jobs went on medical leave, net profit rose to $1.21 billion, or $1.33 a share, compared to $1.05 billion, or $1.16 a share, a year ago. Analysts had expected earnings of $1.09 a share, according to Reuters Estimates.
Revenue rose 8.7% to $8.16 billion in the fiscal second quarter ended 28 March, beating the average Street forecast of $7.96 billion.
“I think in a better economy our sales certainly would have been higher but ... we have just reported the best non-holiday quarter in Apple’s history despite the economy that we find ourselves in,” chief financial officer Peter Oppenheimer told Reuters in a telephone interview.
When asked about Jobs on a conference call, he said, “We look forward to Steve returning to Apple at the end of June.”
Apple’s gross margin rose to a higher-than-expected 36.4%, from 32.9% a year ago, benefiting from favorable commodity and component costs.
The company forecast fiscal third-quarter earnings of 95 cents to $1 a share on revenue of $7.7 billion to $7.9 billion. That compared to Street estimates for earnings of $1.12 a share on revenue of $8.3 billion.
Apple said the revenue outlook reflects its decision to delay revenue recognition for iPhones sold on or after 17 March until its new iPhone operating system is released. Apple did the same thing last year when it updated software.
While some analysts said it may be prudent for Apple to be conservative given the economy, Pacific Crest Securities analyst Andy Hargreaves pointed to some worries that sales may slow as consumers anticipate new products coming to the market, including a possible new iPhone.
“There is going to be concern in this quarter due to purchasing delays in front of new June product releases, but outside of that, it’s really clean,” he said of the results.
Apple shipped 3.79 million iPhones in the March quarter, better than the roughly 3.3 million units analysts were expecting but down from 4.4 million in the December period.
Chief operating officer Tim Cook said Apple was happy with its relationship with AT&T Inc, the exclusive US carrier for the iPhone, and had no plans to change it. Apple also said it would like to begin selling the iPhone in China in the next year.
More than 21 million iPhones have now been sold since launch in 2007. Combined with the iPod touch, which uses the same software as the iPhone, around 37 million units have been sold. Apple expects to see the 1 billionth iPhone application downloaded from its online store on Thursday.
Mac shipments in line
Apple sold 11.01 million iPods during the quarter, above the 10 million forecast by analysts. Mac computer shipments totaled 2.22 million, down from last year but in line with expectations.
“Apple has been one of a few companies where business has been pretty strong throughout this economic downturn,” said Eric Kuby, chief investment officer for Northstar Investment Management Corp.
Shares of Apple rose to $125.10 in extended trading, after closing the regular Nasdaq session down 25 cents at $121.51.
The stock has gained more than 50% since hitting a 52-week low in January, despite some concerns about Jobs.
“Apple is a $30 billion company. It’s an institution and clearly Jobs has been an iconic leader but ... there is a deep bench of talented people there at all levels,” said Barry Jaruzelski, partner at Booz & Co.
The company ended the quarter with $29 billion in cash and marketable securities on its balance sheet, but Oppenheimer said there were no plans to announce a stock buyback or other forms of returning cash to shareholders.
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First Published: Thu, Apr 23 2009. 08 57 AM IST
More Topics: Company Results | Apple | Music | Steve Jobs | iPhones |