Apple Profits Quadruple As IPod Sales Soar
SAN JOSE, Calif. — Apple Computer Inc.’s first-quarter earnings more than quadrupled, dramatically exceeding Wall Street expectations, based on strong holiday sales of laptop computers and its wildly popular iPod music players.
Company shares soared nearly 12 percent Wednesday in extremely heavy late trading.
For the three months ended Dec. 25, Apple said it earned $295 million, or 70 cents per share. In the same period last year, the company earned $63 million, or 17 cents per share.
Revenue for the quarter was $3.49 billion, up nearly 75 percent from $2 billion in the year-ago quarter.
Analysts surveyed by Thomson First Call had projected earnings of 49 cents a share on revenue of $3.18 billion.
"We came in quite a bit stronger than we guided, and I’d attribute that to the fantastic results of iPod," said Peter Oppenheimer, Apple’s chief financial officer.
Apple, which holds $2.48 billion in cash, said Wednesday that it shipped a record 271,000 iBook laptops last quarter. It collected more than $1.2 billion from 4.58 million iPods, a 525 percent boost from the holiday quarter of 2003.
iPods have made Apple a Wall Street darling, and the company has sold more than 10 million since their debut in 2001. In the past year, Apple’s stock has tripled, and the company holds 65 percent of the hard drive-based portable music player market.
Analysts are expecting scorching sales. In a research report Wednesday, Darcy Travlos of Caris & Co. called the new items "nothing short of brilliant."
"New products will contribute positively to both revenue and margins," Travlos wrote. "Apple is in front of the curve."
Apple shares climbed 90 cents, or 1.4 percent, to close Wednesday at $65.46 on the Nasdaq Stock Market. In extended trading after the earnings report was released, the stock gained another $7.64, or 11.7 percent.
The earnings came a day after Apple introduced a cut-rate computer the size of a paperback. The 40-gigabyte Mac mini will cost $499, an 80-gigabyte model $599.
The units, which go on sale Jan. 22, mark Apple’s most brazen attempt to woo entry-level technology shoppers away from computers that rely on the Microsoft Windows operating system.
Apple has only 3 percent of the U.S. computer market, and company executives say they’re aiming with the Mac mini to woo PC users who may have felt Apple products were too expensive.
The bare-bones minis are smaller than some standalone external computer drives and do not come with monitors, mice or keyboards.
Apple also introduced Tuesday the tiny iPod shuffle, which starts at $99 and seeks to maintain Apple’s dominance in the portable music business. The shuffle is a flash memory-based digital music player, more durable and lightweight than iPods that use hard drives for storage.
The shuffle is smaller than most packs of chewing gum, weighs less than an ounce and is a third of an inch thick. It has no display – only a scroll wheel for the controls so stored songs can either be played sequentially or automatically shuffled in random order.
But Apple executives warned that adding two new products would make it difficult to provide accurate financial guidance for upcoming quarters. They would not provide estimates on sales or even say how many minis and shuffles their factories could produce.
"We’re very pleased with the reception that we’re getting today," said Timothy Cook, executive vice president of worldwide sales and operations. "But frankly it’s too early to gauge demand on these."
Profit margins on the mini and shuffle are lower than the company’s 27 percent gross margins. Although Apple executives wouldn’t provide many details, analysts speculate the shuffle margin is about 20 percent, and the mini is as low as 18 percent.
In a conference call Wednesday, Oppenheimer warned financial analysts not to expect a repeat of the last quarter’s revenue growth of nearly 75 percent.
"It’s our objective to grow at 15 percent or better," Oppenheimer told analysts. "As you model the company, that would be something to think about."
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