updated 1/13/2005 4:28:04 PM ET 2005-01-13T21:28:04

Shares of Apple Computer Inc. surged Thursday after the the computer maker plowed through earnings forecasts with strong sales of its popular iPod digital music player.

The company reported Wednesday that it earned $295 million, or 70 cents per share in its fiscal first quarter. In the same period a year ago, the company earned $63 million, or 17 cents per share.

Revenue for the quarter was $3.49 billion, up nearly 75 percent from $2 billion in the year-ago quarter.

Analysts surveyed by Thomson First Call had projected earnings of 49 cents a share on revenue of $3.18 billion.

For the three months ended Dec. 25, Apple cited strong sales of its computers and the wildly popular iPod digital music player for helping quadruple profits.

But even as the stock surged Thursday, Apple executives warned Wall Street veterans not to expect similar success in upcoming quarters.

They cautioned that the Tuesday introduction of two relatively low-priced products would make it difficult to provide accurate financial guidance for the rest of the year. Nor would they estimate sales or even say how many minis and shuffles their factories could produce.

“We’re very pleased with the reception that we’re getting today,” said Timothy Cook, executive vice president of worldwide sales and operations. “But frankly it’s too early to gauge demand on these.”

Apple, which has amassed $2.48 billion in cash, announced Tuesday that it would begin selling a cut-rate computer the size of a paperback on Jan. 22. The 40-gigabyte Mac mini will cost $499, an 80-gigabyte model $599.

The mini is Apple’s most brazen attempt to woo entry-level technology shoppers away from computers that rely on the Microsoft Windows operating system.

Cupertino-based Apple has only 3 percent of the U.S. computer market, and company executives say they’re aiming with the Mac mini to woo PC users who may have felt Apple products were too high-priced.

The bare-bones units are smaller than some standalone external computer drives and do not come with monitors, mice or keyboards.

Apple also introduced Tuesday the tiny iPod shuffle, which starts at $99 and seeks to maintain Apple’s dominance in the portable music business. The shuffle is a flash memory-based digital music player, more durable and lightweight than iPods that use hard drives for storage.

The shuffle is smaller than most packs of chewing gum, weighs less than an ounce and is a third of an inch thick. It has no display — only a scroll wheel for the controls so stored songs can either be played sequentially or automatically shuffled in random order.

The iPod has made Apple a Wall Street darling, and the company has sold more than 10 million since their debut in 2001. In the past year, Apple stock has tripled, and the company holds 65 percent of the hard drive-based portable music player market.

But profit margins on the mini and shuffle are lower than the company’s 27 percent gross margins. Although Apple executives wouldn’t provide many details, analysts speculate that shuffle margin is about 20 percent, and the mini is as low as 18 percent.

In a conference call, Apple’s chief financial officer, Peter Oppenheimer, warned financial analysts not to expect a repeat of the last quarter’s revenue growth of nearly 75 percent.

“It’s our objective to grow at 15 percent or better,” Oppenheimer told analysts. “As you model the company, that would be something to think about.”

Such pessimism sufficiently alarmed Jeff Embersits, an analyst with San Francisco-based Shareholder Value Management. He planned to issue a research note Thursday morning downgrading Apple from “sell” to “strong sell.” He thinks the stock is overvalued and could become a target for short sellers, who make money when a stock falls quickly.

“Frankly, I think this is as good as it gets for Apple,” Embersits said. “We’ve been though Christmas, so they’re not going to get that kind of boost again. It’s great they have a sub-$500 PC, but so does everyone else, and everyone will do a knockoff iPod shuffle in three to six months. I just don’t see the upside.”

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