Apple earnings continue to hum along
Spurred by another quarter of strong Mac and iPod sales, Apple Computer's earnings surge past Wall Street estimates.
The Mac maker said it earned $290 million, or 34 cents per share, on sales of $3.24 billion in the three months ended March 26. In the same quarter a year ago, Apple earned $46 million, or 6 cents per share, on revenue of $1.91 billion.
Analysts had been expecting the company to report earnings of 24 cents per share on revenue of $3.2 billion, according to First Call. That's ahead of the company's own forecast from January, when the company predicted sales would be about $2.9 billion, with earnings of 20 cents per share, adjusted for a February stock split.
The company said it sold 5.3 million iPods and 1.07 million Macintosh PCs. During the prior quarter, which included the holiday selling season, Apple sold 4.5 million iPods and just more than a million Macintoshes. Compared with a year ago, Mac sales are up nearly 40 percent and iPod sales are up five-fold.
"Apple is firing on all cylinders, and we have some incredible new products in the pipeline for the coming year," CEO Steve Jobs said in a statement.
Apple also offered its forecast for the current quarter, which ends in June. The company said it expects to report 28 cents per share in earnings, with revenue of $3.25 billion. Analysts had been looking for earnings of 24 cents per share, with revenue of $3.2 billion.
The Mac maker said it is seeing what it believes is evidence of a "halo effect" in which Windows iPod buyers are turning into eventual Mac customers. The company noted that of its computer sales in its stores, more than two in five are going to first-time Mac buyers.
At the same time, Apple executives also sounded a cautionary note, warning that the company's recent growth rates won't continue unabated. On three occasions during a conference call with analysts, CFO Peter Oppenheimer said that high double-digit growth like Apple has seen is not sustainable. Oppenheimer said that he would be happy if Apple can post 15 percent sales growth.
"I don't see the recent growth rates continuing forever," Oppenheimer said.
Apple should get a boost from Mac OS X 10.4 Tiger. The company said Tuesday that the $129 operating system upgrade will go on sale April 29.
Although Apple's unit sales of the iPod increased 16 percent from last quarter's 4.6 million, the company's iPod revenue dropped by 16 percent as Apple added the lower-cost iPod Shuffle to its mix and cut prices on the iPod Mini and iPod Photo.
On the Mac side, the company sold $483 million worth of iMacs, eMacs and Mac Minis, down from $620 million in the December quarter but more than double the sales from the year-ago quarter. The iBook laptop generated $278 million in revenue, down 6 percent from December but up 25 percent from a year earlier. Power Mac sales of $320 million were down 16 percent from the December quarter and 8 percent from a year ago. PowerBook sales of $413 million were up 35 percent from the December quarter and 23 percent from a year ago.
Apple also said it got $216 million in sales from "other music products," which include both songs from the iTunes Music Store and add-on hardware and services for the iPod. The company reported $177 million in such revenue for December and $60 million a year ago. Peripherals and other hardware, including displays, keyboards and mice, totaled $280 million, while software and other products accounted for $239 million.
The company is seeing an improvement in its education sales, though many of those gains are coming from college students buying Macs and iPods. The company saw overall education computer unit sales up 21 percent for the quarter, but sales to elementary, junior high and high schools were up only 5 percent.
Apple executives said the company is seeing budget constraints in about half the states in the U.S., with weakness in California a particular drag on sales. The school market will become even more important next quarter as the industry heads into the traditional school computer buying season.
The company also said it is continuing to see strong market share for both its iTunes Music Store and for its iPod. Apple said it has more than 70 percent market share in the digital music download market and noted that it recently sold its 350 millionth song.
As for the iPod, the company said that February NPD figures give the company a greater than 70 percent market share of all types of MP3 players, including more than 90 percent of the hard drive market and 43 percent of the flash market, as of February.
Analysts also asked what impact Apple saw from reported problems with a new trackpad that the company introduced in its latest update to the PowerBook line.
"We had some isolated issues early on with regards to the trackpad," said executive Vice President Tim Cook. "I think we've now resolved that."