IPod sales fuel record quarterly earnings for Apple

Despite a bleak economy, Apple today reported record revenue and profit for its first quarter ended Dec. 27 -- propelled by surprisingly strong sales of its iPod.

The Cupertino, Calif., company reported a profit of $1.61 billion, or $1.78 a share, which beat analysts' consensus estimate of $1.39 a share. Revenue rose 6% to $10.2 billion.

Apple shares rose 6% to $82.83 in regular trading then leapt an additional 10% after hours.

Wall Street had worried that the recession and cutbacks in consumer spending would hit all three of Apple's major products: Mac computers, iPhones and iPods. The chill economic winds significantly slowed iPod sales in the first two months of the holiday quarter, which some analysts predicted would fall nearly 18% from a year ago.

But the portable media player exceeded expectations thanks to a last-minute surge in holiday buying that was spurred by retailers' decision to throw in sales sweeteners, such as iTunes cards. Apple said it sold a record 22.7 million iPods, which commands a 70% share of the U.S. market for music players.

"Even in these economically challenging times we are incredibly pleased to report our best quarterly revenue and earnings in Apple history -- surpassing $10 billion in quarterly revenue for the first time ever,” Apple Chief Executive Steve Jobs, who is on medical leave, said in a statement.

Analysts reported anecdotal evidence of declining demand for the iPhone since the September quarter, when the iPhone 3G was launched globally. Consumers purchased ...

... nearly 4.4 million smart phones, bringing the total number of iPhones sold to 13.7 million.

Even Mac sales rose during a quarter in which most small businesses stopped making such hardware purchases. Sales of desktop computers dropped 25% from the year-ago quarter, but sales of laptops, notably the new Macbook and Macbook Pro, more than offset those declines by rising 34%.

Apple predicted that revenue for its March quarter would fall to $7.6 billion to $8 billion, with earnings per share of 90 cents to $1.

Apple executives refused to provide analysts additional information about the health of the company's CEO, who has taken a six-month medical leave of absence. Nor did Chief Operating Officer Tim Cook directly answer a question about whether he was being groomed as Jobs' successor. Instead, Cook extolled what he called the "extraordinary breadth and depth" among the Apple executive team that leads more than 35,000 "wicked smart" employees. He said that the company's values were well entrenched -- and that everyone was focused on innovation.

"We believe we're on the face of this earth to make great products," Cook said. "That's not changing."

Cook said the company wouldn't settle for anything less than excellence. "Regardless of who's in what job, those values are so embedded in this company that Apple will do extremely well," he said.

--Dawn C. Chmielewski

Photo: From left, Apple Chief Operating Officer Tim Cook with Apple CEO Steve Jobs in August 2007. Credit: Monica M. Davey / EPA

Comments

[rd4sndk]

I'm sorry but ipods didn't fuel Apples sales. It was the iphone and particularly huge gross margins that accounts for the yoy growth. What's more interesting is that the ipod gross margin shrinked sequencially when most would have expected more ipod touch sales to improve ipod gross margins.

The greatest contributor to yoy earnings growth was iphones-- about $1Billion increase yoy. Ipod revenue was actually 16% lower even though volume was up 3%. With another strong quarter, iphone GAAP sales will put it in second place behind iMacs in revenue contributions. By this time next year it may exceed even iMac sales. Also, itunes+App store sales continued its above 25% yoy growth rate contributing an additional $200 Million yoy revenue.

Finally, I know analysis don't want to hear this but, the future for portable devices are iphone related for the next 2 years. With improved ipod gross margins, ipods seems to have a life with iphones after all.

[JB The Hut]

ALL HAIL THE iPHONE 3G! iPhone Baby iPhone!

Get one whilst you can or LOSE!

[Juan Mariscal]

You are missing the word "to" in the statement: "Apple predicted that revenue for its March quarter would fall $7.6 billion to $8 billion, with earnings per share of 90 cents to $1."

Apple revenues will fall TO $7.8 to $8 Billion dollars in the March quarter.

Apple's Oppenheimer's exact statement was "we expect revenue (for the March quarter) in the range of about $7.6 billion to $8 billion ..."

That is a huge difference from your incorrect report.

Also this type of drop in the present quarter is not unusual after Christmas

Also, everyone should keep in mind that iPhones are iPods. If an iPhone is purchased, it may be a replacement for an existing iPod.

[D1]

Don't worry, Steve Jobs shall return from his medical leave stronger than ever. He is obviously just studying the tricks of carb counting and pump usage.

[Chris Gaither]

Juan, thanks for reading and for pointing out that dropped word. We've fixed it.