Strong Mac sales boost Apple's quarterly earnings

by Agam Shah

April 23, 2008 —

Apple on Wednesday reported strong earnings for the second quarter of 2008,
with Macintosh computer sales overriding weak growth in iPod shipments.

The company's net revenue was US$7.51 billion for the quarter that ended March
29, a 43 percent rise from last year's second quarter. Analysts polled by Thomson
Financial estimated revenue would be $6.96 billion for the quarter.

The company's net profit was $1.05 billion, a rise from the $770 million it
reported last year. Earnings per share were $1.16.

Apple shipped 2.3 million Macintosh computers, a 51 percent rise in units and
54 percent revenue growth from the year-ago quarter. It sold 10.6 million iPods,
a 1 percent growth in units and 8 percent growth in revenue from a year ago.
iPhone sales for the quarter were 1.7 million.

The company is excited about new products in the pipeline, said Chief Financial
Officer Peter Oppenheimer during a call to discuss the results. When asked about
the possible release of a 3G iPhone, Apple executives declined comment.

Apple sold more iPhones than expected, said Tim Cook, chief operating officer
at Apple, during the call. Inventories fell during the quarter and stores were
short on stock, Cook said.

"Currently [aggregate iPhone] inventories are low in both the stores and
the channel" in the U.S. and Europe, Cook said. A contributor to the low
inventory could be the significant numbers of iPhones bought with the intent
of unlocking, Cook said.

Unlocked phones are being used in a number of countries where carriers don't
yet offer iPhones, which indicates strong worldwide demand for the phone, Cook
said. Apple plans to introduce the iPhone into more countries in Europe and
Asia-Pacific later this year.

Apple remains confident in reaching its goal of selling 10 million iPhones
in calendar 2008, Oppenheimer said. That forecast covers only phones activated
with carriers. The company plans to deliver iPhone 2.0 software as a free download
in late June. The software will support applications developed using the SDK
announced by Apple in March.

The SDK has already been downloaded 200,000 times and is being used in one-third
of the Fortune 500 companies to develop applications for the iPhone, Oppenheimer
said.

The SDK could also broaden the appeal of the iPod Touch as more applications
are developed, Oppenheimer said. The iPod Touch is a portable media player with
the iPhone design, but without phone features. Revenue from iPods for the quarter
was $4 billion.

Apple shipped 1.34 million portable Macs during the quarter, which includes
MacBook, MacBook Pro and MacBook Air. The growth in portable Macs was driven
by strong demand in the MacBook and MacBook Pro lines, Apple officials said.

The MacBook Air, which was announced this quarter, sold well too, Cook said.

The MacBook Air appealed to a large audience and didn't eat into sales of Apple's
other portable Mac lines, Cook said. Revenue from portable Macs was $2.04 billion
for the quarter.

Apple shipped 977,000 desktop Macs during the quarter. Overall Mac shipments
grew 52 percent year-over-year in the U.S. and 48 percent in Europe, Cook said.

Sales of the Leopard operating system to go into existing Macs dropped sequentially
to $40 million from $170 million in the first quarter of 2008. Apple announced
Leopard in October, and new OSes tend to perform better in the launch quarter,
but these are the best OS sales Apple has ever experienced in the first two
quarters, Oppenheimer said.

IDG News Service