For the three months ending December 26 of last year, the company recorded profits of 95 cents per share, nearly three times the 33 cents per share posted in the corresponding quarter a year earlier.
Apple also reported $1.71 billion in revenues, a significant increase from 1998's first-quarter revenues of $1.6 billion and an important measure of the company's long-term prospects. In addition, gross margins came in at 28.2 percent, up from 22.4 percent in the previous year.
It was the company's first year-over-year quarterly revenue growth since the fiscal first quarter of 1996.
The quarter's results included a $29 million after-tax gain from the sale of 2.9 million shares of ARM Holdings. Without this one-time-only item, the company's net income for the quarter would have been $123 million, or 78 cents per share.
Even without gains from stock sales, the results easily bettered Wall Street expectations: Analysts were predicting earnings of 70 cents per share, according to the consensus estimate compiled by First Call.
"The turnaround is--if not totally complete--close to complete," said analyst Daniel Kunstler of J.P. Morgan Securities.
Hurdles still to be cleared include unveiling a new low-cost, consumer portable product in the first half of 1999, which is expected to boost demand from new users rather than just loyal Macintosh buyers, much as the iMac has done. "Apple right now is really on a roll and is in the middle of major momentum," Prince Alwaleed bin Talal, who owns about 5 percent of Apple's shares, told Bloomberg News. "The important thing is they have to keep it up."
Cupertino, California-based Apple's shares closed the day at $46.5, up .375 percent from Tuesday's close. Earnings were released after the close of U.S. trading. The stock price has almost quadrupled since touching a low of 12.9375 at the end of 1997, and it was the third-best performing stock in the Standard & Poor's 500 Index in 1998.
With a year of profits in the bank, analysts say Apple is moving beyond a turnaround story. However, it still has a final hurdle to overcome in 1999: The company must show it can sustain sales growth beyond its market of core fans.
Interim CEO Steve Jobs declared earlier this month that Apple would announce a quarterly profit and indicated that the popular iMac continued to sell at a rapid pace--so much so that some analysts raised their earnings estimates slightly after the speech. Jobs delivered on his promise in spades.
The company said it sold 519,000 iMacs during the quarter, which translated into overall unit growth of 49 percent compared to the same period a year ago. Ending inventory dropped to $25 million, which represents two days of inventory.
"Unit growth year over year was three to four times higher than the industry average," Jobs said in a statement. "In addition, Apple ended the quarter with only two days of inventory, besting industry-leading Dell's seven days of inventory."
Apple CFO Fred Anderson told analysts in a conference call not to expect inventory to stay at those same levels in the upcoming quarter. Anderson said the company's goals are to maintain four to six days of inventory, which would still "place us in an industry leading position," he noted.
First quarter inventory levels were unusually low because of the company's decision to stop selling systems from its online store in early December and to stop shipping systems to dealers during that same time period as the company prepared to release new iMacs and Power Macintosh G3 systems in early January, reseller sources previously told CNET News.com.
As expected, Anderson reiterated research showing that 32 percent of iMac buyers were new computer users, which combined with another 13 percent of purchasers being owners of Windows-based machines showed the company was growing.
"We couldn't be more pleased that the iMac is increasing our installed base. For the first time in over three years, Apple has achieved unit, revenue, and earnings growth," in the same quarter, said a pleased Anderson.
iMacs account for 55 percent of shipments
iMac's accounted for more than 55 percent of the systems Apple shipped during the quarter, compared to 33 percent for the prior quarter where there was constrained supply of the systems.
Higher sales of the iMac pulled down the company's average system selling price from approximately $2,400 in the first quarter of 1998 to $1,740 this quarter, yet the company's profit margins were at their highest levels in four years. Anderson attributed Apple's improved margins to high sales of Macintosh operating system upgrades and improved notebook sales.
Apple doesn't expect to see profit margins continue to increase in the second quarter and unit sales growth is expected to slow because the period is historically a slow one for the company, Anderson cautioned. Still, he stated lofty goals for the next quarter.
"Our objective continues to be to grow unit sales and revenue above the industry growth rate, achieve margins above 25 percent [and hold operating expenses constant," Anderson said.
"There's still plenty of question marks--Apple has to execute well, they have to continue to come up with what they call 'insanely great products,'" said Andrew Neff of Bear Stearns, prior to today's earnings report. "Their problems are not over. But they are much stronger than they've been in years."
Bloomberg contributed to this report.