Best Non-Holiday Quarter for Apple
Justin Sullivan/Getty Images
At an Apple store in San Francisco, shoppers experimented with the iPad when it was released this month. Apple said it shipped 500,000 iPads in the first week.
Published: April 20, 2010
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The company said on Tuesday that iPhone sales surged 131 percent in the most recent quarter, to 8.75 million units, helping Apple deliver a 90 percent rise in profit and a 49 percent increase in sales.
“We had some staggering growth rates,” Tim Cook, Apple’s chief operating officer, said in a conference call with investors.
Apple delivered strong results for the quarter that ended March 31 despite the sluggish economic recovery and the typically slow postholiday season, easily beating Wall Street’s most upbeat estimates.
Shares of the company surged more than 5 percent, to a record high, in after-hours trading following the release of the earnings report.
“We’re thrilled to report our best nonholiday quarter ever,” Steven P. Jobs, Apple’s chief executive, said in a statement. “We’ve launched our revolutionary new iPad and users are loving it, and we have several more extraordinary products in the pipeline for this year.”
Apple, based in Cupertino, Calif., said it sold 2.94 million Macintosh computers, up 33 percent from a year ago, while iPod sales declined 1 percent, to 10.9 million units.
But the company said a shift in sales to iPod Touch devices from less expensive models helped lift iPod revenue 12 percent.
But it was the surging sales of the iPhone, one of Apple’s most profitable products, that surprised analysts and pleased investors the most.
“The iPhone is on fire,” said Gene Munster, an analyst with Piper Jaffray. “The iPhone is being bought by people who don’t have Apple products. I suspect that that will have a halo effect that benefits other Apple products.”
The rapid rise in iPhone sales was driven in part by overseas customers. Unit sales leaped nearly sixfold in Asia, 183 percent in Japan and 133 percent in Europe. International sales accounted for 58 percent of the quarter’s revenue, Apple said.
“The quarter was gargantuan relative to expectations,” said A. M. Sacconaghi Jr., an analyst at Sanford C. Bernstein & Company. He said the majority of the upside was driven by the unexpected surge in iPhone sales.
“People want a computer in their pocket,” he said, “and Apple is at the very forefront of that business.”
The company said net income in the quarter that ended March 31 rose 90 percent, to $3.07 billion, or $3.33 a share, from $1.62 billion, or $1.79 a share, a year earlier, after adjustments for an accounting change. Revenue rose 49 percent, to $13.5 billion, from $9.08 billion, after adjustments.
On average, analysts had expected Apple to report net income of $2.45 a share on revenue of $12 billion.
The company said its gross profit margin rose to 41.7 percent, from 39.9 percent a year earlier.
Apple’s stock stood at $244.59 at the close of regular trading. After the company announcement, its shares rose to around $257 in after-hours trading.
Apple executives did not update investors on sales of the iPad, saying only that they were “shocked” by the high levels of demand for the tablet computer.
“We have been very aggressive with pricing,” Mr. Cook, the chief operating officer, said. “We think the market for the iPad will be large and want to capitalize on our first-mover advantage.” He said Apple’s overall profit margins would most likely erode in the current quarter as a result of the aggressive pricing.
Mr. Sacconaghi said that warning appeared to be the only thing keeping Apple shares from surging even further. “The enthusiasm would be even more unbridled had they not lowered the gross margins outlook,” he said.
The iPad went on sale April 3 after the end of the second quarter, and Apple said it had shipped 500,000 units in the first week. On Tuesday, Apple said that iPads equipped with 3G would begin shipping to customers on April 30.
Apple is not the only company benefiting from the shift to mobile computing. Google recently reported that sales of devices running its Android software were brisk. But the increased competition from Google has not yet affected sales of the iPhone.
Indeed, Apple’s iPhone business, which grew 90 percent in the last quarter of 2009, is gaining momentum. Mr. Jobs said earlier this month that the company had sold more than 50 million iPhones since it introduced the device three years ago.
Apple is expected to release a new version of the phone this summer. Images of the device leaked out this week, after an Apple engineer left a prototype on a barstool and a gadget blog bought the phone from the person who found it.
The phone is expected to ship with a new version of Apple’s mobile operating software and a built-in advertising system, which will probably sharpen the already intense competition between Google and Apple.
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