China Electronics Wholesaler

Apple results top targets, Mac sales strong

By Scott Hillis Mon Oct 22, 7:46 PM ET

SAN FRANCISCO (Reuters) - Apple Inc blew by analysts' estimates with a 67 percent rise in profit on Monday as the popularity of its iPhone and iPod boosted Macintosh computer sales, and its shares jumped 7 percent. ADVERTISEMENT

"There's no question that Mac sales are still having a halo effect from the iPod and iPhone," said Tim Bajarin, president of technology consulting company Creative Strategies.

Net profit rose to $904 million, or $1.01 per share, in its fiscal fourth quarter, from $542 million, or 62 cents per share, a year ago. Revenue rose 29 percent to $6.22 billion.

That handily beat Wall Street's average targets of 85 cents per share in profit and $6.06 billion of revenue, according to Reuters Estimates.

Apple also benefited from falling prices of electronic components, lifting its gross profit margin to 33.6 percent. The company said it expects that to fall to 31 percent in its current quarter as prices for some parts start to rise again.

Apple also forecast first-quarter revenue of $9.2 billion, well ahead of the $8.7 billion average Wall Street target.

"It appears that they are expecting an extremely solid holiday shopping season and, I would guess, strength from the launch of the iPhone in Europe," said analyst Shannon Cross of Cross Research.

Apple shipped 1.12 million units of the iPhone, which went on sale in the United States in late June. That was toward the high end of analysts' forecasts.

Some investors had hoped for even better performance from the iPhone but said sales could pick up following Apple's move last week to let users install other software on the devices.

"They have real value in the iPhone. We were a little disappointed in the sales number itself. More and more people will find the phone more useful as they add outside applications," said Nicholas Kaiser, president of Saturna Capital, which owns Apple shares in mutual funds and private accounts.

Apple sold 2.2 million Macs in the quarter, up 34 percent from a year earlier and above Wall Street expectations of about 2 million.

IPod sales were up 17 percent from a year earlier, but at 10.2 million units, came in below most expectations. Apple rolled out new iPods at the start of its current quarter.

"The product line that has the most reasons to have questions about is iPod, which in many ways is a victim of its own success," said Barry Jaruzelski, head of Booz Allen Hamilton's strategy and innovation practice. "At some point iPod will plateau."

Shares of Apple have more than doubled since the start of the year, when Chief Executive Steve Jobs unveiled the iPhone. The stock trades at 37 times its expected 2008 profit, at the high end of the company's historical range.

Shares of Apple rose to $184.39 in after-hours trade from a Nasdaq close of $174.36.

(Additional reporting by Robert MacMillan, Paul Thomasch and Calvin Mankowski in New York, and Doris Frankel in Chicago; editing by Braden Reddall)