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iPod sales drive Apple earnings

Analysts expected a little more revenue, but results are in line with Mac maker's predictions and earnings are higher than expected.

Apple Computer's second-quarter revenue increased 34 percent compared with last year, it announced Wednesday.

Revenue was $4.36 billion, up 34 percent from last year's second quarter. Net income was $410 million, or 47 cents per share, up from a net income of $290 million and earnings per share of 34 cents last year. Analysts polled by Thomson First Call were expecting revenue of $4.5 billion and earnings per share of 43 cents.

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Tim Cook, Apple's COO, discusses the shipments of the three Intel-based Macs during the Apple earnings conference call.
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Apple's revenue, while below what many analysts had expected, was in line with what the company had predicted in January.

"Everybody knew (the quarter) would be a little bit light," said Gene Munster, an analyst at Piper Jaffray. But the shortfall was not as bad as some had thought, and the positive news on earnings helped send Apple's stock up in after-hours trading.

Sales of iPods are still driving Apple's growth, with a 61 percent increase in shipments compared with last year's second quarter, the company said in a statement. Mac shipments grew just 4 percent compared with last year, but "our transition to Intel processors is going very well, and our music business just experienced another quarter of outstanding growth," Apple CEO Steve Jobs said in a statement.

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Apple CFO Peter Oppenheimer discusses customer demand for Intel-based Macs during Apple's earnings conference call.
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The past quarter was the company's first with products based on Intel's processors out in the market following the launch of MacBook Pro, iMac and Mac mini systems with Intel's Core Duo chip.

Apple sold 8.5 million iPods, which accounted for $1.7 billion in revenue. That's a roughly 40 percent drop in both units and revenue from the December quarter. Even with the drop, the company still drew more revenue from iPods than from Macs, which accounted for $1.6 billion in revenue, a 24 percent drop from the December quarter.

Apple sold 1.1 million Macs in the quarter, down 11 percent from the December quarter. Most PC companies see a drop in sales from the fourth quarter to the first quarter of the calendar year, following the strong holiday shopping season.

The company expects to record between $4.2 billion and $4.4 billion in revenue and earnings per share of 39 cents to 43 cents during its third quarter, Chief Financial Officer Peter Oppenheimer said in a statement. Apple will hold a conference call later on Wednesday to discuss its results.

CNET News.com's Ina Fried contributed to this report.