Apple Makes Profits Look As Easy As Pie

Apple Store customers look at the Apple iMac October 22, 2007 in San Francisco, California.
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Apple Inc.'s financial juggernaut is showing no signs of waning.

Shares of Apple rose almost 7 percent in after-hours trading after the company reported fiscal fourth-quarter profits that soared 67 percent to cap a year of unprecedented momentum in the company's Macintosh computer business, as well as continued demand for iPods and the successful launch of the iPhone.

Apple beat expectations, and the tech sector could get a boost Tuesday from Apple's strong earnings, reports CBS News correspondent Alexis Chrisoforous.

Apple said Monday it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent from the same period a year ago. That generated $3.1 billion, or about half of the company's revenues for the quarter.

The Cupertino-based company also sold 10.2 million iPods, up 17 percent. The debut of a slate of new iPods in September helped accelerate sales and is expected to boost holiday revenues, Apple officials said.

For the entire fiscal year, Apple said it sold 7 million Macs and 52 million iPods, each figure more than 30 percent higher than in fiscal 2006.

Apple earned a record $3.5 billion for the year, up more than 75 percent from last year, when it earned $1.99 billion. Yearly sales reached over $24 billion, a 24 percent jump from fiscal 2006.

And the new iPhone, a combination cell phone and media player, is already tracking better than the iPod, Apple Chief Operating Officer Tim Cook told analysts in a conference call.

In the quarter that ended Sept. 30, the first full quarter of iPhone sales, Apple said it sold 1.12 million units, bringing the cumulative total to 1.39 million since the product debuted June 29.

"It took us over two years to achieve a comparable number for the iPod," Cook said. "So we're thrilled here."

Apple's fortunes have skyrocketed in recent years as its iPods became a cultural phenomenon. More than 120 million have been sold since its debut in 2001.

The portable players, which work with Macs as well as machines that run Microsoft Corp.'s Windows, have also drawn more people to Apple's software and design, leading to what analysts call a "halo effect" on Mac sales.

After hovering for years with a 2 percent to 3 percent share of the personal computer market in the United States, Apple's slice has now grown to 8 percent, according to the latest figures from market researcher Gartner Inc.

"It's clear the Mac is going mainstream," said Piper Jaffray analyst Gene Munster. "Two years ago you had to explain to your friends why you are buying a Mac. Now you have to explain why are buying a PC."

Many investors are betting Apple's foray into the cell phone market will be another lucrative engine.

The iPhone "is a game-changing product," said Stephen Coleman, chief investment officer at Daedalus Capital LLC.

Based on income from the iPhone alone, he said, "I expect Apple's earnings to continually grow materially at 50 percent a year, for the next three years."

For its fiscal fourth quarter, Apple said it earned $904 million, or $1.01 per share, compared with $542 million, or 62 cents per share, in the year-ago quarter.

Apple easily beat the expectations of analysts polled by Thomson Financial, who predicted earnings per share of 86 cents on sales of $6.07 billion.

Revenue totaled $6.22 billion, compared with $4.84 billion in the same quarter last year.

Apple's stock price, which has more than doubled since January, rose $3.94, or 2.3 percent, to close Monday at $174.36. After the earnings report, shares climbed $11.99, or 6.9 percent, in extended trading.

Apple reiterated Monday its previous target of selling 10 million iPhones in 2008, helped by the launch of the iPhone in Europe next month, then in Asia next year.

For the current quarter, Apple said it expects earnings of about $1.42 per share on revenue of about $9.2 billion. Analysts on average had been expecting earnings of $1.39 per share on sales of $8.58 billion.

"We're looking forward to a strong December quarter as we enter the holiday season with Apple's best products ever," said Steve Jobs, Apple's CEO.