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IPod sales fuel record quarterly earnings for Apple

January 21, 2009 |  3:45 pm

Tim Cook and Steve Jobs 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