Apple Enjoys Record First Quarter Results
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There's just no stopping this company.
Apple on Wednesday reported a record net quarterly profit of $1.61 billion, or $1.78 per diluted share, on revenue of $10.17 billion for its first fiscal quarter ended December 27, 2008.
Revenue grew six percent over the $9.6 billion in revenue from the fourth quarter of 2007, but was flat over the net revenue of $1.58 billion, or $1.76 per diluted share. Gross margin was 34.7 percent, equal to the 2007 quarter. International sales accounted for 46 percent of the quarter's revenue and did wonders to boost sales.
For instance, iPod sales in the U.S. actually contracted three percent over the fourth quarter of 2007, according to Apple Chief Financial Officer Peter Oppenheimer, who hosted a conference call with financial analysts. Yet for the quarter, Apple (NASDAQ: AAPL) sold 22.7 million iPods, a three percent growth over last year.
All of that came from international sales, said Oppenheimer. Apple has 70 percent of the MP3 player market in the U.S., England and Australia, 60 percent of Japan and 50 percent of Canada.
Apple sold 2.5 million Macintosh computers during the quarter for a nine percent unit growth over the 2007 quarter. It was the MacBook, which got a major refresh last October, that carried the day, rising 34 percent over 2007 sales to 1.8 million units sold, or 72 percent of all of Apple's computer sales.
Desktop unit sales were down 25 percent year over year, but Oppenheimer noted that 2007 growth was up a notable 53 percent from the prior year thanks to the introduction of new models.
Oppenheimer said the iTunes Store had its biggest music quarter and highest sales ever for Christmas day and week but did not give figures. He also said there are 15,000 apps on the iPhone App Store, and downloads have surpassed 500 million.
iPhone exceeds expectations
In the quarter, Apple sold 4.4 million iPhones for a total of 13.7 million units, putting it well past the 10 million unit goal in 2008 that Apple had set for it. Since Apple recognizes revenue from the iPhone over its two year life, it racked up $1.25 billion in revenue this past quarter. The sale value of the phones was $2.6 billion. No matter how you slice it, that's well above the $241 million in the fourth quarter of 2007.
Despite its popularity, Tim Cook, chief operating officer and acting head of the company during CEO Steve Jobs's absence, told the conference call "Our objective isn't to be the unit leader in the cell phone industry. It's to build the world's best phone."
Apple Stores account for $1.74 billion, or 17 percent of Apple's total revenue this quarter. The stores sold 515,000 Macs, roughly 20 percent of all Macs sold. Average revenue dropped from the 2007 quarter, however, $7 million per store in 2008 vs. $8.5 million in 2007, which Oppenheimer attributed to the "difficult retail environment."
In fiscal 09, Apple expects to open 25 more stores, half of them internationally.
For the current quarter, which is traditionally slow coming off the Christmas rush, Oppenheimer projected revenue of $7.6 billion to $8 billion and diluted earnings per share in the range of about $.90 to $1.00.
What about netbooks?
Apple has in the past balked at netbooks, with Jobs stating "We don't do cheap." Cook was again asked about the sector. "We're watching that space, but right now from our point of view, the product in there is based on hardware much less powerful than we think customers want, software technology that is not good, a cramped keyboard, small displays, etc. We don't think people will be satisfied with those products. But we'll see," he said.
Apple TV, its television add-on device, experienced a "tremendous pickup" in the quarter, with sales tripling over last year. "We still consider this a hobby, but it is clear the movie rental business has helped Apple TV and there are more customers who want to try it," said Cook.