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Apple’s Profit Trounces Estimates on Holiday Sales

Apple’s Profit Trounces Estimates on Holiday Sales

Apple Inc. shattered analysts’ estimates for profit and sales last quarter, defying the worst U.S. holiday shopping season in at least four decades. The shares jumped 8 percent in late trading.

First-quarter net income climbed 1.5 percent to $1.61 billion, or $1.78 a share, from $1.58 billion, or $1.76, a year earlier, Apple said today. Sales rose 5.8 percent to $10.2 billion in the period ended Dec. 27. Analysts surveyed by Bloomberg estimated profit of $1.39 and sales of $9.76 billion.

Apple updated its Macintosh notebook computers, revised its iPod designs and began selling the iPhone in more overseas markets to help boost sales over the holidays. The company is operating without the daily oversight of Chief Executive Officer Steve Jobs, who is on medical leave through June.

“They sell a premium product, and if this is truly one of the worst economic backdrops since the Great Depression, this is a huge triumph,” said Jim Grossman, an analyst at Appleton, Wisconsin-based Thrivent Asset Management, which owns more than 800,000 Apple shares among about $67 billion in assets.

Apple, based in Cupertino, California, rose $6.66 to $89.49 in late trading after closing at $82.83 on the Nasdaq Stock Market. The shares declined 57 percent last year.

IPhone Sales

Apple sold 4.36 million iPhones in the quarter, a record 22.7 million iPods and 2.52 million Macs. Analysts were anticipating 5 million iPhones, 18.6 million iPods and 2.4 million Macs, Munster said.

The lower-than-expected iPhone number isn’t cause for concern, Hargreaves said. “The iPhone is still in the early stages of the product cycle, with a lot of growth left.”

Apple introduced the iPhone in 2007, with a faster version debuting last July.

“The bottom line is that even in a bad market, people want Apple products,” said Gene Munster, an analyst with Piper Jaffray & Co. in Minneapolis. “Whatever money people have, they’re spending on Apple.”

Apple repeated its pattern of offering a forecast below analyst expectations. This quarter, Apple anticipates profit of 90 cents to $1 a share and sales of $7.6 billion to $8 billion. That compares with the $1.12 in profit and $8.19 billion in revenue predicted by analysts.

Track Record

The company missed analysts’ estimates with its profit and sales forecasts in the previous nine quarters, then went on to beat those predictions, Munster said.

“I rarely pay attention to the forecast because I haven’t found it has any bearing on reality,” said Andy Hargreaves, an analyst with Pacific Crest Securities, in Portland, Oregon.

Apple also released an adjusted sales figure, one that doesn’t use its typical accounting rule of spreading revenue from the iPhone and Apple TV set-top box over two years. On that basis, revenue was $11.8 billion.

Jobs released new versions of the iPod media player in September, adding colors to its iPod Nano line and putting more storage capacity in other models. In October, at his last public appearance, Jobs unveiled smaller new MacBook notebooks.

Apple’s first-quarter gross margin, the percentage of sales remaining after taking out production costs, was 34.7 percent. That topped an estimate of 31.5 percent from Goldman Sachs Group Inc.

‘More Complex’

Jobs, who appeared increasingly thin and frail throughout 2008, announced his medical leave last week, saying his health issues are “more complex” than he originally thought.

Jobs had said on Jan. 5 that he would remain CEO while seeking a “relatively simple and straightforward” treatment for a hormone imbalance, which caused him to lose weight. In 2004, Jobs had successful surgery to remove a rare type of pancreatic cancer.

Chief Operating Officer Timothy Cook, who filled in for Jobs during a monthlong leave in 2004, is now handling day-to-day operations at Apple.

U.S. regulators are examining Apple disclosures about Jobs’s health problems to ensure investors weren’t misled, a person familiar with the matter said. The Securities and Exchange Commission’s review doesn’t mean investigators have seen evidence of wrongdoing, the person said, declining to be identified because the inquiry isn’t public.

Bloomberg News reported last week that Jobs is considering a liver transplant as a result of complications from his cancer treatment, citing people who are monitoring his illness.

[Thanks: http://www.bloomberg.com]

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