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Apple Reports Record Profits

Posted on: Thursday, 18 January 2007, 06:00 CST

By Jefferson Graham

Apple reported record quarterly earnings Wednesday, including 21 million iPods sold -- but investors weren't impressed.

Revenue of $7.1 billion was up 25% from a year ago and topped Wall Street expectations. IPod sales jumped 50%, while sales of Mac computers rose 28% from a year ago.

But the number of Macs sold -- 1.6 million -- was about the same as in the previous quarter, when back-to-school sales bolster volume. Investors responded by pushing the stock down $1.04 in after-hours trading to $93.91.

Apple reported $1 billion in net income in its first fiscal quarter ended Dec. 30, or $1.14 per share. Analysts polled by Thomson Financial expected earnings of 78 cents per share and revenue of $6.4 billion.

Gene Munster, an analyst at equity firm Piper Jaffray, says investors are missing the big picture. "Billion-dollar companies don't generally have quarters like this. Apple beat (analyst-estimated) revenues by 17% and earnings by 47%. That's unheard of."

While the iPod has been a huge seller since its release in 2001, most of its sales have been in the last year, Munster says. Nearly 90 million iPods have been sold -- 60 million of them from December 2005 to December 2006, he says.

In the current quarter, Apple expects revenue of $4.8 billion to $4.9 billion. The first part of the year is usually slow for electronics sales.

Apple has been dogged by an investigation into the backdating of stock options. Federal prosecutors and the Securities and Exchange Commission are looking into past options grants given to Apple CEO Steve Jobs and others.

Apple's internal investigation cleared Jobs, "but this is a nuisance until it gets resolved some way or the other," says Charles Wolf, an analyst at equity firm Needham & Co. "The only thing that concerns investors about this is that Steve remains at Apple."

Apple Chief Financial Officer Peter Oppenheimer reiterated to analysts Wednesday that the company's board "has expressed utter confidence in Apple's current management team."

Apple wowed investors last week when it unveiled the iPhone, a combination iPod, cellphone and mini-computer. It begins shipping in June. Apple shares have risen 20% in the past year and have been trading at all-time highs.

But No. 1 network gear-maker Cisco is suing Apple, saying it owns the trademark to the iPhone name. Apple has called the suit "silly." (c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

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