Apple net up 73%, fueled by computers, iPods

The Baltimore Sun

SAN FRANCISCO -- All eyes were on the iPhone, but the Mac stole the show.

Apple Inc. said yesterday that it sold 270,000 of its new iPhone devices during the two days they were on sale last quarter, roughly meeting analysts' expectations.

But the company's oldest product - the personal computer - delivered surprising growth. Consumers snapped up a record 1.76 million Macintosh computers during Apple's fiscal third quarter, up 33 percent from a year ago. That outpaced the overall PC industry, which shipped 12 percent more computers last quarter.

The computer boom fueled a 73 percent jump in profit and 24 percent rise in revenue.

Analysts said the sales figures showed the "halo effect" of Apple's push into new markets during the past decade: The iPod and iPhone not only are generating new sources of revenue but also are getting people into Apple stores and boosting enthusiasm for its other products.

The news gave a jolt to Apple shares, which rose almost 10 percent to $150.18 in after-hours trading. The stock had closed at $137.12, up 2 percent.

"The Mac business was particularly strong," said Shaw Wu, an analyst with American Technology Research, a boutique investment bank. "That was the biggest surprise."

Mac sales propelled Apple's profit to $818 million, or 92 cents per share, compared with $472 million, or 54 cents, a year earlier. Revenue rose 24 percent to $5.41 billion.

According to a survey of analysts by Thomson Financial, Apple was expected to earn 72 cents a share on $5.29 billion in revenue.

The growth in Apple's traditional business has happened at a time when the company made a splashy entrance into the cell phone market with the June 29 introduction of the iPhone - the day before the quarter ended.

On Tuesday, AT&T; Inc., Apple's cellular partner, said it had activated just 146,000 phones in the first two days. In a conference call with analysts yesterday, Apple executives attributed the difference between the two numbers to delays in activating phones that people bought.

Apple predicted it would sell its one-millionth iPhone by the end of the current quarter and enter the European market by the end of the year. Company executives repeated their goal of selling 10 million iPhones by the end of 2008.

Apple is aiming to create a three-pronged business, with its Macintosh computers, iPod music and video players and now its iPhone, which combines an iPod, cell phone and Web-surfing device.

Apple sold 9.8 million iPods, up 21 percent, in the third quarter. The ubiquity of the device has made Apple a major player in the music industry. Apple's iTunes digital music store recently passed Amazon.com Inc. and Target Corp. to become the third-largest U.S. music seller, according to research company NPD Group.

Revenue for Apple's music-related products and services, which include iTunes, jumped 33 percent to $608 million.

Andy Hargreaves, a consumer electronics analyst at Pacific Crest Securities, a technology investment bank in Portland, Ore., called Apple's financial performance "huge."

"Given the company's brand value now, the expectation for the iPhone is very strong," he said. "And it seems the company is living up to it."

Michelle Quinn writes for the Los Angeles Times.

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