Apple reports $1.67 billion quarterly profit on record Mac, iPhone sales

Apple enjoyed its most profitable quarter ever, as the company set sales marks for both Mac and iPhone sales. The company announced earnings for its fiscal fourth quarter on Monday.

For the quarter ending September 30, Apple reported a net profit of $1.67 billion, or $1.82 per share, on revenue of $9.87 billion. Those numbers blew away analysts’ earnings and revenue estimates of $1.42 a share and $9.2 billion in sales, respectively.

Comparing those numbers to Apple’s year-ago figures, quarterly profit rose 46 percent, while earnings per share jumped 44 percent. Revenue increased 25 percent from the September 2008 quarter. At the end of the corner, the company had $34 billion of cash on hand.

For the full 2009 fiscal year, Apple’s revenue rose 12 precent while its income increased 18 percent from 2008, according to chief financial officer Peter Oppenheimer. Those increases come during what the Apple executive called “extraordinary challenging times” which have done little to slow the company’s growth.

“We are thrilled to have sold more Macs and iPhones than in any previous quarter,” said Apple CEO Steve Jobs in a statement accompanying the earnings announcement. “We’ve got a very strong lineup for the holiday season and some really great new products in the pipeline for 2010.”

For the December quarter, Apple told analysts to expect between $11.3 and $11.6 billion in sales and earnings ranging from $1.70 to $1.78 per share. That guidance was given without accounting for a rule change in the way Apple recognizes revenue from the iPhone and Apple TV. Apple was uncertain when it would adopt the new accounting method, which was OK’d by the Financial Accounting Standards Board last month.

To put Apple’s December quarter guidance in perspective, the company reported sales of $10.17 billion in last year’s fiscal first quarter along with earnings of $1.78 a share.

Mac sales

Apple sold 3.05 million Macs during the quarter—a 17 percent increase over what it sold for the same three-month period in 2008. That 3.05 million figure sets a record for Mac sales, topping the previous high-water mark of 2.61 million Macs sold during the fiscal fourth-quarter of 2008.

Apple continues to reap the rewards of its June overhaul to its line of notebooks, which featured price cuts on nearly every model. The result has been two straight quarters of growth. During the quarter, Apple sold nearly 2.3 million laptops, with portables accounting for an astounding 74 percent of the Macs sold during the last three months.

“Last quarter was the quarter of the portable,” chief operating officer Tim Cook said during a Monday conference call to discuss Apple’s earnings. In response to one analyst's comment that "the [laptop] price cut worked," Cook responded loudly, "Yes, it did!"

Oppenheimer noted that the rise in Mac sales outpaced the 2-percent growth of the PC market for the quarter, according to figures tallied by market-research firm IDC. That marks the 19th time in the last 20 quarters that Mac sales have grown faster than overall PC market, Oppenheimer said.

Apple executives also cited a strong back-to-school quarter for the company. Sales to U.S. schools rose 12 percent, as Apple tallied its highest quarterly sales ever for the U.S. education market. Those figures were buoyed by shipments of 50,000 books to Maine as part of that state’s ongoing 1-to-1 Learning initiative.

Apple also noted particularly strong sales in its Asia Pacific market, with Mac sales increasing 42 percent from the year-ago quarter.

Cook also said that Snow Leopard sales were stronger than Apple expected, with twice as many sales of Snow Leopard upgrades during the operating system's first five weeks on sale than Leopard made during its first five weeks.

iPhone increases

iPhone sales rose 7 percent from the year-ago quarter to nearly 7.4 million units. That compares to a little less than 6.9 million iPhones in the September 2008 quarter—a three-month period that saw Apple roll out the iPhone 3G in a number of markets around the globe.

For the quarter, Apple reported recognized revenue from iPhone handset sales of $2.3 billion. That’s a 185-percent jump from $806 million in last year’s fourth quarter.

Apple executives pointed to several events that could continue the iPhone’s momentum in the coming quarter. China Unicom will start selling the iPhone in China this month. “This very large market offers a great oppotunity to expand sales,” Oppenheimer said.

New carriers will be able to serve the iPhone in both the U.K. and Canada. That also opens up the iPhone to new customers in those countries.

Apple believes its App Store of mobile software from third-party developers gives it an edge over rival smartphones. The 85,000 apps in the store is “a country mile more than anyone else,” Cook said, claiming that Apple's smartphone competitors are trying to match the original iPhone of 2007, not where Apple is now. "We feel good about competing against anyone," he added.

iPod declines

If Apple had any disappointments in the quarter, it would be in its iPod business, where sales of the handheld music players fell eight percent from the year-ago quarter to 10.2 million units. It was the second consecutive quarter where Apple saw iPod sales drop from the year-ago period.

However, Apple saw signs for optimism in its iPod numbers. According to the company, 50 percent of recent iPod buyers were purchasing their first iPod. What’s more, sales of the iPod touch doubled when compared to the same quarter a year ago, and Apple believes it can attract even more customers to the widescreen music player after cutting the price of the 8GB iPod touch to $199 last month.

“We believe the iPod lineup is attractive positioned for the holiday buying season,” Oppenheimer told analysts during Monday’s conference call. And that’s critical for Apple, which traditionally sees its highest iPod sales during the December quarter. In the December 2008 quarter, for example, Apple sold 22.7 million music players.

Retail efforts

Apple opened 15 brick-and-mortar stores during its fourth quarter, giving the company 273 retail outlets by quarter’s end. For the entire 2009 fiscal year, Apple opened 26 stores and remodeled 72 existing outlets. In what Oppenheimer called a “milestone year” for Apple’s retail efforts, the company opened more stores internationally than in the U.S.

Look for more stores to open in the current quarter. Oppenheimer said the company plans to open two retail outlets in France in November. That same month, a fourth Apple Store will open in Manhattan on New York’s Upper West Side.

Average revenue per store was $7.1 million, down from $7.6 million a year ago in one of the few signs of how the recession negatively impacted Apple. The company saw 45.9 million visitors to its stores, up from 42.7 million in last year’s quarter. Retail stores sold 670,000 Macs—an increase of 12 percent from last year—with about half of those sales to new Mac users.

Updated at 2 p.m. PT to add more information
Updated at 2:37 p.m. to include more information on Mac sales.
Updated at 2:58 p.m. to include iPod and retail sales figures.
Updated at 3:19 p.m. to include iPhone figures and Apple’s quarterly guidance.
Updated at 3:35 p.m. to include additional detail.

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