Record iPhone, Mac Sales Boost Apple's Earnings

Apple recorded revenue of $9.6 billion for its first fiscal quarter, a 35 percent year-over-year increase, beating estimates from analysts.

Apple reported strong quarterly earnings on Tuesday, boosted by record Macintosh computer and iPhone sales.

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Apple recorded revenue for its first fiscal quarter, ended Dec. 29, of $9.6 billion, a 35 percent year-over-year increase, beating estimates of $9.47 billion from analysts polled by Thomson Financial.

The company posted quarterly net profit of $1.58 billion, an increase from the $1 billion net profit from the year-earlier quarter. The company recorded earnings of $1.76 per share.

Unit shipments of the iPod were 22.1 million units, up 5 percent over the year-earlier period. Apple sold 2.3 million iPhones during the quarter, up from 1.12 million in its fourth fiscal quarter. It shipped 2.3 million Macintosh computers, a 44 percent growth from the year-earlier quarter.

Sales of the iPhone will continue to grow as the product enters Asia and other European countries in 2008, said Tim Cook, Apple's chief operating officer, during a conference call to discuss the results. "We remain confident on hitting the 10 million goal for 2008," he said.

The number of iPhones that were bought to be unlocked, so that they can be used on other networks, was significant, and shows the heavy worldwide interest in the iPhone, according to Cook. The iPhone is locked to work only with certain wireless phone providers.

Asked to comment on plans to introduce 3G capabilities in the iPhone, Cook declined.

Apple is shifting its strategy around the iPod to position it less as a simple music player and more as a complete Wi-Fi and mobile application platform, Peter Oppenheimer, Apple's chief financial officer, said on the call. The company recently introduced five mobile applications for the iPod Touch, including an application that allows users to watch movies from the iTunes store.

According to figures from IDC, Apple's PC shipments in the U.S. grew 30.9 percent to 1.06 million during the fourth quarter last year, with a 5.7 percent market share, behind Dell, Hewlett-Packard and HP. Apple was not among the top five vendors in PC shipments worldwide, according to IDC.

In the quarter just ended, Apple announced the Mac OS X Leopard operating system. It started the current quarter with a bang, announcing a movie rental service for iTunes and an ultrathin laptop, the MacBook Air, which CEO Steve Jobs proclaimed was the "world's thinnest notebook" during a keynote address at the Macworld Conference and Expo in San Francisco.

A week prior to Macworld, Apple announced revamped versions of the Mac Pro workstations and Xserve servers powered by Intel's power-efficient Penryn processors.

Asked if the MacBook Air would cannibalize sales of other MacBook products, Cook did not address the question directly: "The customer reaction has been great, and the customer orders have been strong," Cook said. "The MacBook Air will appeal to travelers ... to different kinds of people who want to access a computer wherever they are," Cook said. The ultramobile segment is great for Apple and it will continue to pursue that space, Cook said.

The customer response to Leopard has also been strong, Oppenheimer said. About 19 percent of Mac OS X users have switched to Leopard, and the OS generated revenue of $170 million during the quarter, Oppenheimer said.

Apple's international revenue grew 46 percent year-over-year, he said. Revenue from Europe was $2.47 billion, up from $1.71 billion the previous year. Revenue from Japan was $400 million, up 40 percent.

Apple forecast revenue for the second quarter at $6.8 billion, up 29 percent from the same quarter a year earlier. That would be lower than the $6.98 billion forecast by analysts. Investors reacted poorly to the news, pushing Apple's shares down 11.4 percent to $137.85 in after-hours trading on the Nasdaq.

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