Apple earnings top estimates

The company narrowly beat analysts' expectations, but attention from investors is focused on what's next for the Mac maker.

Ina Fried Former Staff writer, CNET News
During her years at CNET News, Ina Fried changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley.
Ina Fried
3 min read
Apple Computer reported on Tuesday earnings that narrowly topped analysts' expectations, though sales fell short of what some were expecting.

Apple reported fiscal fourth-quarter earnings of $430 million, or 50 cents per share, on revenue of $3.68 billion. That compares with earnings of $106 million, or 13 cents per share, on revenue of $2.35 billion for the same period a year earlier.

The most recent quarter's earnings included a benefit from tax-related issues that amounted to 12 cents per share. Excluding that benefit, Apple would have had earnings of 38 cents per share. Sales were somewhat less than some analysts were projecting, and investors sent shares down more than 10 percent in after-hours trading.

The earnings report came on the verge of the Cupertino, Calif.-based company's press event scheduled for Wednesday in San Jose, Calif., with considerable speculation about whether a video iPod might be on the way.

Apple had said in July to expect earnings of 32 cents per share on revenue of $3.5 billion, an outlook some analysts had said was overly cautious. As of Tuesday, the average estimate was for earnings of 37 cents per share, on revenue of $3.72 billion, according to First Call.

Apple said it sold 1.24 million Macs and 6.45 million iPods during the past quarter, which ended Sept. 24.

That's up from both the prior quarter and the same quarter a year earlier. In the prior quarter, Apple sold 1.18 million Macs and 6.16 million iPods. In the fourth quarter of last year, Apple sold 836,000 Macs and 2.02 million iPods.

"We're thrilled to have concluded the best year in Apple's history, with 68 percent year-over-year revenue growth and 384 percent net profit growth," CEO Steve Jobs said in a statement. "This is the direct result of our focus on innovation and the immense talent and creativity at Apple. We could not be more excited about the new products we're working on for 2006."

Looking ahead, Apple said to expect earnings of 46 cents per share in the current quarter, including the costs of stock-based, noncash compensation, with revenue of $4.7 billion. Excluding the compensation charges, Apple said it expects per share earnings of 49 cents.

According to First Call, analysts were looking for earnings of 48 cents per share and revenue of $4.53 billion for the quarter that ends in December.

The past quarter saw the introduction of the iPod Nano, a slim, flash-memory-based player that replaced the iPod Mini, the most popular of the iPod models.

Apple CFO Peter Oppenheimer said the company sold more than 1 million iPod Nanos in the 17 days following the gadget's launch last month.

"The demand for this product is staggering," said Apple executive vice president Tim Cook, who added that the company had an "enormous backlog" of orders with strong demand from all regions of the world. "I can't project when supply will meet demand," he said.

Oppenheimer also noted that more carmakers are adding iPod connection abilities, estimating that 30 percent of new cars sold next year will be able to accommodate an iPod.

"The iPod economy continues to flourish," Oppenheimer said on a conference call with analysts.

Oppenheimer also pointed to improvements in the education market, noting that Apple sold more Mac systems for educational use in the past quarter than for any quarter in the last 10 years.

In the fourth quarter, sales of songs and iPod accessories continued to rise, hitting $265 million, up from $241 million in the prior quarter and from $98 million a year ago. Apple saw its software sales slide to $294 million, down from $345 million in the prior quarter as it benefited from strong sales of Mac OS X 10.4, known as Tiger. Apple also generated $296 million from peripherals and other hardware, up from $266 million in the prior quarter.

On the computer side, Apple sold 602,000 desktops and 634,000 laptops. Both figures are up from a year ago, but desktop shipments dropped 12 percent from the prior quarter.

Sales through Apple's own retail stores totaled $663 million, up 19 percent sequentially and 76 percent from the prior year.

Ahead of the report, Apple shares closed Tuesday at $51.59, up $1.22, or more than 2 percent, but in after-hours trading they were down $5.68, to $45.91.