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Business News/ Industry / Apple’s Mac sales shine, iPhone lags Street view
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Apple’s Mac sales shine, iPhone lags Street view

Apple’s Mac sales shine, iPhone lags Street view

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San Francisco: Apple Inc posted better-than-forecast Mac sales and strong growth in Asia and Europe, but iPhone shipments came in just below Wall Street’s somewhat heightened expectations.

The stock edged 1 percent higher in after-hours trading, building on a 2.7% rise on Nasdaq during the day, and provided Apple a boost heading into Wednesday, when it is expected to launch a highly touted tablet computer.

International sales made up nearly 60% of Apple’s revenue in the quarter, with sales more than doubling in the Asia Pacific and rising 40% in Europe.

Apple said on Monday it shipped 8.7 million iPhones in the holiday quarter, double the year-ago figure but just short of the Wall Street target of roughly 9 million. Apple’s iPhones compete with Research in Motion’s BlackBerry and other smartphones.

But Mac sales continued to show momentum, rising 33% from a year ago to 3.36 million units versus analysts’ average estimate of about 3 million.

“Mac sales were very strong, which more than offset what might be perceived as a ho-hum iPhone number," said Bill Kreher, an analyst with Edward Jones.

“Maybe some on the Street were getting a little euphoric with their expectations on the iPhone."

Gross margin rose to 40.9% from 37.9% a year ago on a continued shift toward higher-margin products like Macs and iPhones. Apple said its margins benefited from more favorable component costs, higher revenue and better leveraging of its fixed costs.

“Margins appear very solid, and it seems like iPhone (results) were OK — normally it’s a blowout. That was my only disappointment," said Sushil Wagle, vice president of the technology group at Riversource Investments.

Big week begins

As Wall Street looks ahead to Apple’s new product announcement on Wednesday, the holiday-quarter results have provided the company with a strong start to the week.

Apple, which has surpassed Wall Street targets for earnings per share by at least 15% in the past four quarters, adopted new accounting standards for its fiscal first quarter that generated some initial confusion among investors, as they rendered Wall Street’s estimates for the period unusable.

The company posted net income of $3.38 billion, or $3.67 a share in the fiscal first quarter ended 26 December, up from $2.26 billion, or $2.50 cents a share, in the year-ago period.

Revenue surged 32% to $15.68 billion from $11.9 billion.

Under new accounting standards that affect products that combine software and hardware, Apple will be able to recognize substantially all of the revenue from the iPhone and Apple TV when they are sold. Such revenue was previously recognized over two years.

Apple forecast earnings for the current quarter of $2.06 to $2.18 a share on revenue of $11 billion to $11.4 billion. Its expected gross margin of 39 percent will be impacted by less favorable component costs, the company said.

Apple’s stock has more than doubled over the past 12 months and hit an all-time high of $215.59 on 5 January on mounting excitement over its new product. Analysts expect it to be a 3G-enabled, 10-inch touchscreen device good for consuming all sorts of media.

On a conference call with analysts, Apple was coy about the product.

“I wouldn’t want to take away your joy of surprise on Wednesday when you see our latest creation," chief operating officer Tim Cook said.

Growth in iPods, one of the Apple’s three main products line, has been slowing for some time and the company hopes the tablet can help pick up some of the slack, analysts say.

“The iPod is getting a little long in the tooth so they need to find another hot new product to hang their hat on," said Gartner Research analyst Van Baker.

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Published: 26 Jan 2010, 06:20 PM IST
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