Business | Technology
Apple cheers markets with strong results
Apple's quarterly profit beat expectations on strong iPod and Mac computer sales, and the company gave an outlook that cheered investors, sending its shares up 9.5 per cent on Wednesday.
- Reuters
- Published: 23:29 January 22, 2009
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San Francisco: Apple's quarterly profit beat expectations on strong iPod and Mac computer sales, and the company gave an outlook that cheered investors, sending its shares up 9.5 per cent on Wednesday.
The results cap a tumultuous few weeks for Apple, which is facing increased headwinds from slumping consumer spending, as well as investor concerns about management succession after chief executive Jobs said he would take a medical leave of absence until the end of June.
"I'd say in the face of one of the worst holidays in recent memory, Apple was able to pull a rabbit out of the hat," said Edward Jones analyst Bill Kreher.
"It's amazing that Apple was able to record its best revenue and earnings in an environment like this."
Apple said its net profit in the fiscal first quarter ended December 27 rose to $1.61 billion, or $1.78 a share, from $1.58 billion, or $1.76 a share, a year ago. Analysts were expecting a per-share profit of $1.40, according to Reuters Estimates.
Revenue rose 5.8 per cent to $10.2 billion, beating the $9.74 billion average Wall Street estimate.
Apple said visibility remains low, although chief operating officer Tim Cook said on a conference call that while the economy is in bad shape, it's not as "unpredictable" as it was in October.
The company, known for conservative forecasts, estimated a profit for the March quarter of 90 cents to $1 a share, on revenue of $7.6 billion to $8 billion. That wasn't far off from the average analyst forecast for earnings of $1.12 per share and revenue of $8.1 billion.
"This management team has always been conservative in the way it's guided," said Oppenheimer analyst Yair Reiner. "In that context, the first-quarter forecasts are quite encouraging."
Kaufman Bros analyst Shaw Wu said lower component prices, such as for processors, memory chips and panels, were helping Apple. "Pricing on those products has come down a lot and that enables Apple to maintain their margins even though they are selling a lower-end mix," he said.
Apple's gross margin was 34.7 per cent in its December quarter, flat with the year-ago period. It expects margins to be about 30 per cent in the second half of the fiscal year.
The December quarter is traditionally Apple's strongest, fuelled by holiday season sales. iPod sales rose three per cent from a year earlier to 22.7 million units, well ahead of the 18.5 million expected by analysts.
Mac computer sales rose nine per cent to 2.52 million units, in line with expectations.
Notebook sales climbed 34 per cent on a unit basis, while desktop sales fell 25 per cent, reflecting the broader market shift to portable computers, Apple said. Mac sales rose 16 per cent internationally and two per cent in the United States.
Sales of the iPhone fell considerably from the fiscal fourth quarter, when it was launched, to 4.3 million units. Analysts had expected sales of roughly five million units. But over the course of 2008, Apple sold over 13.7 million iPhones, ahead of its 10 million target.
Apple's shares have taken something of a beating in recent weeks, buffeted by worries about Jobs's health. The US Securities and Exchange Commission is examining Apple's disclosures about Jobs' health, Bloomberg reported.
When asked about CEO succession plans, Cook - who is overseeing the day-to-day operations while Jobs is on leave - called Apple's 35,000 employees "wicked smart" and said regardless of who is in what job, the company's values are entrenched, ensuring its success.
Collins Stewart analyst Ashok Kumar said Jobs was irreplaceable but if Apple gets "an operationally oriented CEO, I think the strength of the product pipeline should sustain Apple's financial momentum for the foreseeable future."
Apple continues to take market share in computers and smartphones, but with consumer spending expected to be weak at least through 2009, expectations are building about the company's product plans.
Many analysts hope a new device this year will be a sales catalyst - much as the 3G iPhone was in 2008 - or that Apple will launch products at lower price points. But Apple executives said the company is "not going to play in the low end" of the voice industry.
Apple shares closed up six per cent at $82.83 on Nasdaq before the results. They rose another 9.4 per cent in after-hours trading to $90.70.
Do you like Apple products? Or do you think they are over-rated? Why do you think Apple has such an iconic status? Is it responsible for changing the face of the music industry? What is the next innovation you expect from them?
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