Apple fiscal 3Q profit rises 15 percent as 5 million iPhones get sold in 3 months

By Jessica Mintz, AP
Tuesday, July 21, 2009

Apple profit up 15 pct, helped by iPhones, laptops

SEATTLE — Apple Inc., the closest thing the tech industry has to a luxury brand, said Tuesday its profit jumped 15 percent in the most recent quarter despite the recession. IPhone revenue surged and reduced prices pushed laptop sales higher, even as the rest of the PC industry shrank.

The company, which recently welcomed CEO and co-founder Steve Jobs back from medical leave, said earnings in the quarter that ended June 27 rose to $1.23 billion, or $1.35 per share. Apple’s profit was $1.07 billion, or $1.19 per share, in the same period last year.

Sales increased 12 percent to $8.34 billion from $7.46 billion in the year-ago quarter, which is the third in Apple’s fiscal calendar.

Apple beat Wall Street’s forecast on both counts, which helped send its stock higher in extended trading. Analysts were expecting Apple to earn $1.17 per share on $8.20 billion in revenue, according to a Thomson Reuters survey.

“In a better economy I think we would have sold even more,” Apple Chief Financial Officer Peter Oppenheimer said in an interview.

Apple said it sold more than 5.2 million iPhones in the quarter, more than seven times what it sold in the 2008 quarter, thanks in part to a newly released version of the device.

Apple also sold 4 percent more Mac computers than a year ago, with a 13 percent rise in laptop unit sales more than making up for a 10 percent drop in desktops. Meanwhile, researchers recently reported a 3 percent to 5 percent decline for the overall worldwide PC market in the same period.

“Times are tough. Apple continues to post pretty strong numbers,” said Shaw Wu, an analyst for Kaufman Bros. “It’s pretty incredible. It truly is.”

Apple’s decision to cut laptop prices during the quarter helped it buck the industry trend, even though the move dragged laptop revenue down 2 percent. Tim Cook, Apple’s chief operating officer, said Mac sales picked up after the company announced the cuts, its first major price reductions in the recession.

Cook said Mac revenue was also hurt as businesses that typically buy more expensive models continued to put off technology spending. Other computer makers, such as Dell Inc., have also said customers are holding on to their existing machines for longer than normal.

Wu noted that lowering prices didn’t eat into Apple’s gross margin, which improved from a year ago and beat his expectations. Apple said component costs weren’t as high as anticipated, and Wu said he thinks the Mac remained one of Apple’s most profitable businesses.

The main weak spot was Apple’s iPod line. Even though iPod Touch unit sales more than doubled, total iPod unit sales fell 7 percent, hurt by declines in what Apple considers its traditional MP3 players — iPod Classic, Nano and Shuffle. Oppenheimer told analysts on a conference call that such declines are to be expected as Apple “cannibalizes” iPod sales by offering similar features, plus access to thousands of third-party applications, on the $229-and-up iPod Touch and the iPhone — the cheapest of which is now $99, plus a monthly service contract.

Apple’s revenue increased in every region, including the U.S. and Europe. Average revenue in each of Apple’s retail stores was $5.9 million, lower than the $6.8 million Apple reported at the same time last year.

Shares of Cupertino, Calif.-based Apple jumped $6.77, or 4.5 percent, to $158.28 in after-hours trading, after slipping $1.40 to close at $151.51.

For the current fourth quarter, Apple said it expects to earn $1.18 to $1.23 per share on $8.7 billion to $8.9 billion in sales. Analysts are looking for a stronger performance — profit of $1.30 per share on revenue of $9.1 billion — but Apple’s guidance is typically conservative.

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