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Apple profit rises on strong iPod sales

Apple Computer Inc. posted a higher quarterly profit on Wednesday, boosted by strong sales of its iPod digital music player and notebook computers.
/ Source: Reuters

Apple Computer Inc.’s fourth quarter earnings soared on strong sales of laptop computers and its popular iPod music players, helping the company notch its highest revenue for the quarter in nine years.

The results easily topped Wall Street’s expectations.

The Cupertino, Calif.-based company attributed the successful quarter to robust sales across its product line, namely its iBook and PowerBook computers, its iPod music players and stronger-than-expected results from its retail and education sectors.

“They all came together and did very well,” said Peter Oppenheimer, Apple’s chief financial officer said in an interview.

For the three months ended Sept. 25, Apple said it earned $106 million, or 26 cents per share. In the same period last year, the company earned $44 million, or 12 cents a share.

Excluding a one-time restructuring charge of $4 million, Apple said that it would have earned $110 million, or 27 cents per share.

Revenue for the quarter was $2.35 billion, up 37 percent from $1.7 billion in the year-ago quarter.

Analysts surveyed by Thomson First Call had projected earnings of 18 cents a share on revenue of $2.15 billion.

Although its list of rivals for portable music players is growing, Apple clearly dominates. The iPod accounts for about 92 percent of unit sales of hard-drive based players and more than 65 percent of the overall portable player category, according to Apple.

Record iPod sales
The company said it sold more than 2 million iPods during the quarter — a record — bringing the product’s lifetime total to 5.7 million. The music player accounted for 23 percent of the company’s quarterly revenue, compared to 7 percent a year ago.

Apple’s groundbreaking licensing deal with Hewlett-Packard Co. also appeared to be paying off. H-P’s version of the iPod player, which started selling in September, accounted for about 6 percent of the quarter’s iPod sales, Oppenheimer told analysts during a conference call.

Apple officials believe the popularity of the company’s music products, which also includes the online iTunes Music Store, is also creating a “halo effect,” translating to more sales for the computer business, Oppenheimer said.

Nearly 50 percent of computer customers at Apple’s retail stores are either buying a Macintosh or a computer for the first time, Oppenheimer said.

For the quarter, Apple said it sold 836,000 Macintosh computers, accounting for 52 percent of the company’s total revenue.

An ongoing supply shortage of the G5 microprocessor dragged down sales of the new flat-panel iMac and Power Mac desktop models, but strong sales of laptops buoyed the segment. iBook sales grew 66 percent, and PowerBooks increased 20 percent, from the year-ago period.

Sales of laptops and iPods also led to the education sector’s best performance in four years, with unit sales up 19 percent and revenues up 21 percent, Oppenheimer said.

Meanwhile, retail store revenues climbed to $376 million, up 95 percent from the year-ago period. Apple had 86 stores worldwide at the end of the fourth quarter and plans to have 100 stores open by the end of 2004, including some that will be half the size of its existing stores, Oppenheimer said.

For the year, Apple reported net income of $276 million on revenue of $8.28 billion, compared to net income of $69 million on revenue of $6.21 billion in 2003.

The company said it expects first-quarter revenue of between $2.8 billion and $2.9 billion, and earnings of 39 cents to 42 cents per share.

Before the earnings report, Apple shares climbed $1.46 to close at $39.75 Wednesday on the Nasdaq Stock Market. They surged nearly 7 percent, or $2.66, in the extended session.