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Apple Shares Rise Nearly 6 Percent

Posted on: Thursday, 19 October 2006, 18:00 CDT

By MAY WONG

SAN JOSE, Calif. - Apple Computer Inc. shares climbed almost 6 percent Thursday after beating Wall Street's profit expectations for its fourth quarter on strong sales of its iPod and Macintosh computers.

A day after reporting its earnings, Apple shares rose $4.46, or 5.98 percent, to close at $78.99 on the Nasdaq Stock Market. That approached the high end of their 52-week range of $50.16 to $86.40.

After the markets closed Wednesday, Apple said it shipped 8.7 million iPods, up 35 percent from the year-ago period. A good back-to-school season also helped Apple ship a record 1.6 million computers, up 30 percent from a year earlier, breaking its previous record of 1.38 million units in the first fiscal quarter of 2000.

The sizzling sales put Apple's fiscal 2006 revenue at a record $19.3 billion, up from its previous all-time high of $13.9 billion last year.

Apple also ended its fiscal year with more than $10 billion in cash, up from more than $8 billion fiscal 2005.

"This strong quarter caps an extraordinary year for Apple," Apple CEO Steve Jobs stated.

Apple said it earned $546 million in the quarter ended Sept. 30, or 62 cents per share. That compared with net income of $430 million, 50 cents per share, in the same period last year.

Revenue for the quarter totaled $4.84 billion, a 32 percent jump from $3.68 billion last year.

The average estimate by analysts was for earnings of 51 cents per share on sales of $4.66 billion, according to Thomson Financial.

Apple's iPod-iTunes juggernaut has helped the company reap record profits in recent years, but some of the earnings might be eroded when Apple later restates some quarterly reports due to earlier mishandling of stock options accounting.

The likely restatements could lead to a "significant adjustment," Apple said Wednesday.

Still, investors cheered the latest results.

"The iPod is still the must-have product for almost anyone under 30 and certainly for anyone under 18," said Barry Jaruzelski, a management consultant at Booz Allen Hamilton. "Because Apple has a 75 percent share in the music player market, people have been waiting for the laws of gravity to kick in, but it certainly has more legs than most people have expected."

In addition, the popularity of the iPod, which is compatibile with both Mac and Windows computers, seems to be creating a "halo effect" for increased sales of Macs, Jaruzelski said.

Among computers, laptop sales were particularly strong: shipments rose 56 percent to almost 1 million units, while revenue climbed 63 percent to $1.3 billion from the previous year.

Sales for all computers reached $2.2 billion, up 37 percent from a year-ago, while sales of iPods reached $1.56 billion, up 29 percent. The iconic portable music player, first introduced in October 2001, accounted for about a third of Apple's quarterly sales.

For the fiscal year, Apple sold more than 39 million iPods and 5.3 million Macs - all while undergoing a complex transition to a new kind of chip for its computers, Jobs noted.

Unsatisfied with its previous chip suppliers, Apple began switching its computers to Intel Corp.-based microprocessors in January. The Intel chips are similar to those used in rival computers running on Microsoft Corp.'s Windows operating system.

The move to Intel chips was part of the Cupertino-based company's larger goal to broaden its small share of the PC market. Apple has also been heavily promoting its Mac platform in television ads that criticize the Windows operating system.

Apple's efforts are apparently paying off.

Not only was it the best Macintosh quarter in Apple's 30-year history, but a little more than half of the 323,000 computers sold in Apple's retail stores during the period were to people who had never owned a Mac before, Apple's chief financial officer Peter Oppenheimer said during an analyst conference call. "We were thrilled by that," he said.

For the full fiscal year, Apple said it earned $1.99 billion, or $2.27 per share, up from $1.335 billion, or $1.56 per share, the previous period.

Apple officials said they were optimistic about the current holiday quarter, despite new competition in the marketplace. Many analysts don't expect Microsoft's upcoming Zune player to knock down Apple's dominance in music players, but some are wondering how well the Zune and other players will compete.

For the first quarter, Apple said it expects revenue of $6 billion to $6.2 billion and earnings per share of 70 cents to 73 cents.

Source: Associated Press/AP Online

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