San Francisco: Apple Inc landed blockbuster results and a strong outlook on dazzling sales of the iPhone and iPad, reassuring investors that visionary CEO Steve Jobs’ medical leave will have no impact on growth.
Shares in Apple leapt almost 4% after hours following a brief trading suspension. It later backtracked to stand about 2% higher, recouping most of the losses incurred after Jobs’ surprise announcement.
Apple, once notorious for its conservative forecasts, said it expected earnings for the March quarter of $4.90 a share on revenue of $22 billion, surpassing the forecast of $4.47 a share on revenue of $20.8 billion.
An across-the-board show of strength came as Wall Street displayed increasing confidence in the management team surrounding Jobs, who is seeking medical treatment for an unspecified condition for an indefinite time.
Jobs was hardly mentioned during an hour-long conference call with analysts, and the subject of his future with the company never came up.
Investors were widely expecting a strong performance from Apple over the holidays, and the company did not disappoint.
“I expected a strong quarter but it even blew away my expectations,” said David Dillon, a portfolio manager at HighMark Capital Management, which owns Apple shares.
All key product lines exceeded expectations. The company sold 16.2 million iPhones in the quarter, up 86% from the year-ago quarter. It also had strong sales of 7.33 million iPads, and Mac sales rose 23% on a unit basis to 4.1 million units.
Executives again said they could not build enough iPhones to meet demand. But it was the iPad, which executives claimed about four out of five Fortune 100 companies were now field-testing, that caught investors’ attention.
“The iPad numbers were huge,” said Kaufman Bros analyst Shaw Wu.
Jobs’ role is “important but at the same time, as the company continues to execute, it becomes more secondary. The way Steve thinks, his methodology, his sense of style: frankly, a lot of it has been ingrained into the Apple culture.”
The world’s largest technology company by market capitalization said on Monday that Jobs, 55, was taking a medical leave of absence without specifying a return date or detailing his condition.
Jobs, a pancreatic cancer survivor who underwent a liver transplant in 2009, and his health have been in the spotlight for years, but chief operating officer Tim Cook and the rest of Apple’s upper echelons had led the company capably during two previous absences, winning over Wall Street.
But aside from its chieftain’s health, the company is entering 2011 on a roll, a cash-generating machine with surging sales across its product lines. In coming months, Apple’s iPhone will go on Verizon Wireless’ network, further accelerating sales of the smartphone.
Strong sales in the Asia Pacific region kept growth sizzling: Apple saw revenue nearly triple to some $5 billion in the first quarter, propelled by a booming market in China.
And at more than 7 million sold versus the roughly 6 million expected, Apple’s iPad has not only virtually created the tablet market, but has become a significant slice of business for the consumer electronics powerhouse.
That puts the company in good shape for several years.
“The unknown is what happens beyond this timeframe. Steve is the conductor, so to speak. Yes, there’s a deep bench at Apple but, it’s only Steve that makes it bigger than the sum of its parts,” said Rodman & Renshaw’s Ashok Kumar.
Apple reported earnings for the fiscal first quarter ended 25 December of $6 billion, or 6.43 cents a share, up 78% from a year-ago net profit of $3.4 billion, or $3.67 a share.
Analysts on average were expecting a profit of $5.40 a share, according to Thomson Reuters I/B/E/S.
Revenue rose 71% to $26.7 billion, much better than Wall Street’s forecast for revenue of $24.4 billion.
Gross margins of 38.5% got a boost from better-than-expected commodity costs. The company guided to the same level in the March quarter, telegraphing to investors an even higher figure as Apple routinely outperforms its forecasts.
The results helped make up for a roughly 2% loss in Apple’s share price during regular trading on Tuesday, driven by concerns that Jobs’ eventual departure would derail his company’s famed innovation train.
“Steve is an important part of what Apple is. Everyone wants to know, does the company fall apart? No,” said BGC Partners’ analyst Colin Gillis.