Apple Beats Expectations, but Outlook Disappoints

Apple on Wednesday posted a 36 percent rise in quarterly profit, helped by strong sales of its Macintosh computers and iPod media players, but its cautious outlook disappointed investors.

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Apple shares edged lower after the company, known for conservative financial forecasts, also gave a profit outlook for the current quarter that was below Wall Street estimates.

Apple said it expected earnings of $1.00 per share on revenue of $7.2 billion for its fiscal third quarter. Wall Street was looking for earnings per share of $1.11 and revenue of $7.17 billion, according to Reuters Estimates.

Apple also expects gross margins in its third fiscal quarter to be flat with the second quarter's 32.9 percent, Chief Financial Officer Peter Oppenheimer said.

For the second quarter, the maker of the iPhone and iPod said it earned $1.16 a share on sales of $7.51 billion. In the first quarter last year, Apple brought in a profit of 87 cents a share on revenue of $5.264 billion.

Thomson Financial compiled an analysts' estimate that put Apple's results at a profit of $1.07 a share and sales of $6.964 billion.

In January, Apple predicted second-quarter earnings of 94 cents per share on about $6.8 billion in revenue, compared with 87 cents per share on $5.26 billion revenue in the corresponding quarter a year ago.

Shares of Apple

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[AAPL  Loading...      ()   ] dropped about 4 percent in extended trading Wednesday. The stock finished regular hours up 1.68 percent at $162.89.

Shares of Apple fell about 27.5 percent in the quarter.

Apple said its second-quarter iPhone sales came in at 1.703 million units, while iPod sales reached 10.644 million units. (See more in the CNBC video at left.)

Sales of Apple's Macintosh reached 2.289 million units in the second quarter, compared with estimates of about 2.1 million.

"It looks like the Macs were good, the iPods were flat and the iPhones were OK," said Robert Stimpson, a portfolio at Oak Associates. The firm owns Apple stock. "Mac was very strong with 51 percent unit growth. It looks like the third quarter earnings view is a little below the Street. With the stock up 41 percent since the February low, it is going to take a lot of good news to propel the stock higher."

Scoops Up Processor Company

Separately, Apple has agreed to buy P.A. Semi, a privately held company that designs power-efficient processors, a spokesman confirmed Wednesday.

The company did not reveal the purchase price, or what it plans to do with P.A. Semi's technology, which could be suitable for power-thrifty devices like laptops or perhaps even the iPhone.

"Apple buys smaller technology companies from time to time and we generally do not comment on our purpose or plans," said Apple spokesman Steve Dowling.

The acquisition was first reported by Forbes.com.

P.A. Semi employs 150 people and is based in Santa Clara, Calif. It was founded in 2003 by Dan Dobberpuhl, the lead designer of the DEC Alpha series of processors, which were used in workstations and servers.

Oddly, the company's chips are based on IBM Corp.'s Power architecture, which Apple ditched in 2005. The company's Macintosh computers now run Intel Corp.'s chips.

P.A. Semi said its PWRficient processor has two cores running at 2 gigahertz, comparable to Intel chips, while using a third or a quarter of the power. It's aimed at industrial markets like networking equipment, high-volume storage devices and military applications.

- Wire services contributed to this report.