Apple earnings soar

iPod maker posts better-than-expected profit and revenue; iPod sales up 24 percent.

By Jessica Dickler, staff writer

NEW YORK ( -- Apple's profit soared in the latest quarter thanks to strong sales of its iPods and Macintosh computers, the company reported Wednesday.

Apple (Charts, Fortune 500) stock jumped 6 percent in after hours trading, from a close of $95.35 on the Nasdaq.

The iPod maker reported profit of 87 cents per share for the second quarter on revenue of $5.26 billion.

Analysts estimated the company would earn 64 cents a share on $5.17 billion in revenue for the quarter, according to Thomson Financial.

The company earned 47 cents per share in the year-earlier period on revenue of $4.36 billion.

Net income rose 88 percent to $770 million, up from $410 million in the 2006 quarter.

Gross margins rose to 35.1 percent, up from 29.8 percent in the year-earlier quarter. International sales accounted for 43 percent of the quarter's revenue, the company said.

Apple shipped 10.5 million iPods this quarter, up 24 percent from the prior-year quarter. The company shipped 1.5 million Macintosh computers, up 36 percent from the fiscal 2006 first quarter.

"The Mac is clearly gaining market share, with sales growing 36 percent - more than three times the industry growth rate," Steve Jobs, Apple's CEO, said in a statement.

"We are very pleased to report the most profitable March quarter in Apple's history," Peter Oppenheimer, Apple's chief financial officer, said in the statement.

But the company offered fiscal third-quarter guidance slightly below what analysts expected, saying it forecast revenue of $5.1 billion and earnings per share of 66 cents.

Analysts had expected profit of 67 cents per share on revenue of $5.5 billion.

Oppenheimer cited the seasonality of iPod sales as partly responsible for the company's downward revision. Last year iPod sales declined from the March to June quarters, he said on a conference call, adding "we see this as a market seasonality issue."

Still, "net income was only down by a penny a share, and that's a lot less conservative than expected," according to Shaw Wu, an analyst with American Technology Research.

Investors were also impressed with strong shipments of Macs and iPods last quarter. Although sales were down from the prior quarter, which encompassed the year-end holidays, they were down less than expected, according to Wu.

That, coupled with the board's strong support of CEO Steve Jobs, "is why the stock is getting such a strong reaction from Wall Street," Wu said.

The earnings report comes a day after Apple's former finance chief, Fred Anderson, blamed Jobs for a 2001 stock option grant that was backdated.

On Wednesday, six Apple board members issued a statement of confidence in the Securities and Exchange Commission's investigation's conclusion of a stock options probe into Apple, as well as CEO Steve Jobs' "integrity and ability to lead." Top of page