Apple posts strong earnings, cautious outlook

Mac maker reports first-quarter earnings ahead of estimates, but offers a forecast below analysts' expectations.

Ina Fried
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.
3 min read
After selling a bundle of iPods over the holidays, Apple Computer on Wednesday reported better-than-expected earnings, but offered an outlook that was below some analysts' forecasts.

The Cupertino, Calif.-based company said it earned $565 million, or 65 cents per share, on revenue of $5.75 billion, for the 14 weeks ended Dec. 31. That compares with earnings of $295 million, or 35 cents per share, on revenue of $3.49 billion for the same quarter a year earlier.

That's well ahead of the outlook the company offered in October, when it predicted sales would be around $4.7 billion.

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During an earnings conference call, Apple Senior VP and CFO Peter Oppenheimer says the company is off to a great start in 2006.
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However, the company's outlook for the current quarter, which runs through March, was below what many analysts were predicting. Apple said to expect revenue of about $4.3 billion and earnings per share of about 38 cents per share, including an impact of 4 cents per share from stock-based compensation. According to First Call, analysts had been looking for per-share earnings of 48 cents and revenue of $4.63 billion.

Apple shares headed lower in after-hours trading. Shares traded recently at $78.30, down $4.19 from the close of regular trading, a drop of more than 5 percent.

For the just-ended quarter, Apple's sales were a record, but they did not come as a surprise. CEO Steve Jobs announced at Macworld Expo last week that the company had about $5.7 billion in revenue for the December quarter. He also announced that the company sold 14 million iPods and 1.25 million Macs.

Apple's 14 million iPods accounted for $2.9 billion in sales, or more than half of the company's total revenue for the quarter. Other music products, including sales from the iTunes music store as well as revenue from both Apple-made and non-Apple iPod accessories, totaled $491 million, up 177 percent from a year earlier and 85 percent from the prior quarter.

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Apple COO Tim Cook warns that the company may not meet demand for MacBook Pros when they begin shipping in February.
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Mac sales added $1.7 billion in revenue, up 7 percent from both the year-ago and prior quarter levels. Desktop revenue of $912 million came in slightly above Apple's notebook sales of $812 million. Software and services revenue totaled $325 million, up 11 percent from the prior quarter and 53 percent from a year earlier. Peripherals and other hardware accounted for $303 million, also up sequentially from a year ago.

Apple is in the midst of transitioning its Mac line to Intel-based chips. Jobs had promised Intel-based Macs would appear by the middle of this year, but last week unveiled the first such machines--a revamped iMac and the new MacBook Pro.

"We are working on more wonderful products for 2006, and I can't wait to see what our customers think of them," Jobs said in a statement. Although he did not provide specifics, Jobs said last week that Apple plans to shift its entire Mac line to Intel-based chips by the end of this year.