Apple Earnings up 50%

Apple Inc. rocketed to its most profitable quarter ever over the holidays, as huge sales of the iPhone and Macintosh computers led to a nearly 50 percent jump in net income.

The company offered no clues about what it plans to unveil Wednesday in San Francisco, although analysts expect the new product to be a tablet-style computer. CEO Steve Jobs indicated that investors should expect a significant event.

"The new products we are planning to release this year are very strong, starting this week with a major new product that we're really excited about," Jobs said in a statement.

Apple also offered a profit and revenue forecast above Wall Street forecasts.

The iPhone's rollout in several major new markets, including China and South Korea, helped Apple double sales of the hot phone. Apple also got a boost because now it puts iPhone revenue and profit on its books when the gadget is sold, rather than deferring those results over the presumed life of the device.

Apple said Monday it earned $3.4 billion, or $3.67 per share, in the latest quarter, which ended Dec. 26. In the same period of 2008, had the same accounting standards been in place, it would have had net income of $2.3 billion, or $2.50 per share.

Revenue was $15.7 billion, a 32 percent jump from $11.9 billion in the same period last year.

Apple's report reflected the company's ability to allure shoppers without deep cuts to its premium prices. Apple's reputation as a luxury brand hasn't dented its ability to put up better numbers even as many computer buyers gravitate toward cheaper options.

Apple sold 8.7 million iPhones in the quarter, double what it sold in the same period the year before. And its sales of Macintosh computers rose 33 percent.

But the 21 million iPods it sold marked an 8 percent decline. Although Apple refreshed its iPod Nano with new colors and a video camera last fall, sales of the iPod have suffered as the iPhone, which has iPod features built in, has grown in popularity.

The earnings report was released after Apple shares gained $5.32, 2.7 percent, to close at $203.07. In extended trading the shares rose 61 cents to $203.68.

Analysts had been predicting profit of $1.77 per share and revenue of $10.4 billion in the current quarter, according to Thomson Reuters.

"Mac sales were very strong, which more than offset what might be perceived as a ho-hum iPhone number," said Bill Kreher, an analyst with Edward Jones.
"Maybe some on the Street were getting a little euphoric with their expectations on the iPhone."

Although Wall Street is already looking ahead to the tablet announcement, Apple's holiday-quarter results may have provided the company with a strong start to the week.

Apple, which has surpassed Wall Street expectations for earnings per share by at least 15 percent in the past four quarters, adopted new accounting standards for its fiscal first quarter.

Analysts had expected Apple to earn $2.09 per share on revenue of $12.09 billion, according to Thomson Reuters I/B/E/S, but it was not clear if the numbers were comparable given the surprise accounting change.

"There is a bit of confusion because the consensus numbers are somewhat meaningless (due to new accounting). There is a state of confusion," said Kaufman Bros analyst Shaw Wu. "What we do know is the iPhones were light. People were looking for closer to 9.5 (million)."

Apple forecast earnings for the current quarter of $2.06 to $2.18 a share on revenue of $11 billion to $11.4 billion. Wall Street analysts, on average, had expected earnings of $1.77 a share on revenue of $10.37 billion, but again it was unclear if those estimates were comparable.

Apple's stock has more than doubled over the past 12 months. The stock rose above $205 after closing at $203.08 on Monday.

"Apple has reached its distribution profile by and large that it's going to reach for the iPhone," said Gartner Research analyst Van Baker. "So you would expect that growth would slow somewhat because now it becomes a replacement market as opposed to a new user market."

Here's a link to Apple's 10Q report.

More to come.