Apple Posts Sharply Higher Profit But Softens Outlook

Kirsty Wigglesworth / AP Apple reported earnings Wednesday after the bell.

Apple reported a profit for its fiscal second quarter that trounced expectations, but the company provided third-quarter revenue guidance that was softer than anticipated.

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Earnings were fueled by strong sales of its MacBook computers and iPods.

Net income for Apple's fiscal second quarter rose to $770 million, or 87 cents a share, from $410.0 million, or 47 cents a share. Revenue rose 21% to $5.26 billion from $4.36 billion.

Analysts who follow the company anticipated Apple reporting earnings of 64 cents a share, according to Thomson Financial. In the comparable period last year, Apple earned 47 cents a share. Forecasts for the most recent quarter put revenue at $5.2 billion.

The results blew away Apple's own forecast of 54 cents to 56 cents and which has historically been cautious.

Earlier this month, Apple said it had sold its 100 millionth iPod in just over five years. The music player, which also now plays videos, has a more than 70 percent share of the digital music market. Apple's iTunes music store, which also sells television shows and movies, has sold more than 2.5 billion songs since it opened.

Apple said in the quarter it sold 1.52 million Macintosh computers and 10.5 million iPods, up 36% and 24%, respectively, from the year-ago period.

Deutsche Bank analyst Chris Whitmore wrote in a note to clients this week that he expected Apple to sell about 11 million iPods in the quarter, and he believed demand was strong enough for Apple to meet his Mac unit shipment estimate of 1.4 million.

Also earlier this month, Apple said it was delaying the release of the next version of its Mac OS X operating system, code-named Leopard. It plans to give software developers a test copy and to ship Leopard in October.

Shares of Apple have climbed about 12% this year, after advancing 18% in 2006 and more than doubling in 2005, driven by sales of iPods and redesigned Macintosh computers.

Third-Quarter Guidance Short of Street's Outlook

For its fiscal third quarter, Apple provided sales guidance of $5.1 billion, shy of analyst forecasts of $5.45 billion.

Apple Chief Financial Officer Peter Oppenheimer said the company's iPhone is on track to ship in late June.

Oppenheimer also said that the gross margin of 35% the company turned in during its most recent quarter was "not sustainable" because component costs are not expected to remain as low as they had been.

"We look forward to shipping the iPhone in late June and are very excited," he told Reuters in a telephone interview.