Apple Profit Tops Analyst Estimates on Holiday Sales (Update3)
By Connie Guglielmo
Jan. 21 (Bloomberg) -- Apple Inc. surpassed analysts’ estimates for profit and sales last quarter, overcoming the worst U.S. holiday shopping season in at least four decades. The shares jumped as much as 12 percent in late trading.
First-quarter net income climbed 1.5 percent to $1.61 billion, or $1.78 a share, Apple said today. Sales rose 5.8 percent to $10.2 billion in the period ended Dec. 27. Analysts surveyed by Bloomberg estimated profit of $1.39 and sales of $9.76 billion.
Apple updated its Macintosh notebook computers, revised its iPod designs and began selling the iPhone in more overseas markets to boost sales over the holidays. The company is operating without the daily oversight of Chief Executive Officer Steve Jobs, who is on medical leave through June.
“They sell a premium product, and if this is truly one of the worst economic backdrops since the Great Depression, this is a huge triumph,” said Jim Grossman, an analyst at Appleton, Wisconsin-based Thrivent Asset Management, which owns more than 800,000 Apple shares among about $67 billion in assets.
Apple, based in Cupertino, California, rose as much as $9.87 to $92.70 in late trading after closing at $82.83 on the Nasdaq Stock Market. The shares declined 57 percent last year.
IPhone Sales
Apple sold 4.36 million iPhones in the quarter, a record 22.7 million iPods and 2.52 million Macs. Analysts anticipated 5 million iPhones, 18.6 million iPods and 2.4 million Macs, said Piper Jaffray & Co.’s Gene Munster in Minneapolis.
The lower-than-expected iPhone number isn’t cause for concern, said Andy Hargreaves, an analyst with Pacific Crest Securities in Portland, Oregon. “The iPhone is still in the early stages of the product cycle, with a lot of growth left.”
Apple introduced the iPhone in 2007. A faster version debuted last July.
Chief Operating Officer Timothy Cook, who is handling day- to-day operations in Jobs’s absence, said today that Apple isn’t interested in offering a stripped-down version of the iPhone. The device is a smart phone, meaning it can play music and video, surf the Internet, and access e-mail.
“Our objective is not to be the unit share leader in the cell-phone industry,” Cook said on a conference call. While the economy may lead some consumers to shun smart phones, which require higher-priced monthly service plans, “we feel very good about our competitive position and extremely good about our product pipeline,” he said.
Patent Fight?
Apple also plans to protect the iPhone’s patented touch- screen technology, Cook said. The company plans to go after other smart-phone makers that use its multi-touch interface, which lets people use more than one finger at once and make swiping motions.
On the conference call, Cook declined to name specific companies that are using Apple’s intellectual property. An analyst had asked if he was referring to Palm Inc.’s Pre, a touch-screen phone due later this year.
“Apple is not the first to do multi-touch and it has a long history dating back to the mid-1980s,” said Lynn Fox, a spokeswoman for Palm.
Apple continued its pattern of offering a forecast that missed analysts’ estimates. This quarter, Apple anticipates profit of 90 cents to $1 a share and sales of $7.6 billion to $8 billion. That compares with the $1.12 in profit and $8.19 billion in revenue predicted by analysts.
Low-Balling
“I rarely pay attention to the forecast because I haven’t found it has any bearing on reality,” Hargreaves said.
The company missed analysts’ estimates with its profit and sales forecasts in the previous nine quarters, then went on to beat those predictions.
Apple also released an adjusted sales figure, one that doesn’t use its typical accounting rule of spreading revenue from the iPhone and Apple TV set-top box over two years. On that basis, revenue was $11.8 billion and IPhone sales were more than $2.6 billion, Chief Financial Officer Peter Oppenheimer said.
First-quarter profit in the year-earlier period was $1.58 billion, or $1.76 a share.
Apple released new versions of the iPod media player in September, adding colors to its iPod Nano line and putting more storage capacity in other models. In October, at his last public appearance, Jobs unveiled smaller new MacBook notebooks.
Profit Margin
The first-quarter gross margin, the percentage of sales left over after taking out production costs, was 34.7 percent. That topped an estimate of 31.5 percent from Goldman Sachs Group Inc.
Apple said it’s investing some of its more than $28 billion in cash in engineering, marketing and customer- experience efforts, Oppenheimer said. The company will add 25 stores this year to its retail network, with half of those opening in international markets, he said.
Jobs, who appeared increasingly thin and frail throughout 2008, announced his medical leave last week, saying his health problems are “more complex” than he originally thought.
Jobs had said on Jan. 5 that he would remain CEO while seeking a “relatively simple and straightforward” treatment for a hormone imbalance, which caused him to lose weight. In 2004, Jobs had successful surgery to remove a rare type of pancreatic cancer.
U.S. regulators are examining Apple disclosures about Jobs’s health problems to ensure investors weren’t misled, a person familiar with the matter said. The Securities and Exchange Commission’s review doesn’t mean investigators have seen evidence of wrongdoing, the person said, declining to be identified because the inquiry isn’t public.
Bloomberg News reported last week that Jobs is considering a liver transplant as a result of complications from his cancer treatment, citing people who are monitoring his illness.
Cook, who filled in for Jobs during a monthlong leave in 2004, declined to say how Jobs was faring. Cook also wouldn’t say if he was prepared to succeed Jobs as CEO.
“There is an extraordinary breadth and depth and tenure among the Apple executive team,” who lead more than 35,000 “wicked smart” employees, Cook said. “We believe we’re on the face of the earth to make great products, and that’s not changing.”
To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net
Last Updated: January 21, 2009 19:33 EST |
