Apple profits up thanks to Mac, iPhone and iPod

Apple yesterday posted a 36 per cent rise in quarterly profit, helped by strong sales of Mac computers, iPod players and iPhones, but its profit margin and cautious outlook disappointed investors.

Shares of Apple fell one per cent after the company, known for conservative financial forecasts, gave a profit outlook for its current quarter that was below Wall Street estimates.

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Apple's chief financial officer Peter Oppenheimer also told Reuters he expected gross margin in the June quarter to be similar to the March quarter's 32.9 per cent, which was down from 35.1 per cent a year ago.

Robert Stimpson, portfolio manager at Oak Associates, which owns Apple shares said: "It looks like the Macs were good, the iPods were flat and the iPhones were OK."

He added: "It looks like the third-quarter earnings view is a little below the Street. With the stock up 41 per cent since the February low, it is going to take a lot of good news to propel the stock higher."

Apple said net profit for its fiscal second quarter ended in March rose to $1.05bn, or $1.16 per share, from $770m, or 87 cents per share, a year ago. Revenue grew by 43 per cent to $7.51bn.

The results beat the average analyst forecasts for revenue of $6.95bn and profits per share of $1.07, according to Reuters Estimates.

Shannon Cross, analyst at Cross Research, said: "It was a strong quarter in terms of Mac shipments and iPods. iPods, which had been a concern, were above Street expectations and that should hold back some who were speculating that iPod was saturated."

Apples sold 2.3 million Macs in the quarter, topping the two million to 2.2 million units forecast by five analysts, who saw sales being spurred by new designs, the halo effect from iPods and iPhones, and consumer complaints about Microsoft's rival Windows Vista operating system.

Apple sold 10.6 million iPods and 1.7 million iPhones, both near the top end of Wall Street expectations. Apple is expected to launch a faster iPhone model in a few months, to address a major complaint about the gadget, especially in Europe.

Apple's Oppenheimer said on a conference call: "We are very pleased with iPhone momentum and we remain confident of achieving our goal of selling 10 million iPhones in calendar 2008."

He said Apple's US revenue was up 40 per cent, while overseas revenue rose 47 per cent. Apple's retail stores, which number more than 200, "hit the ball out of the park", with sales up 74 per cent, Oppenheimer said.

The company blamed the slide in its gross margin on lower sales of its Leopard operating system, a price cut on low-end iPod shuffles, and higher sales at its iTunes online music and movies store, which runs at break-even or slightly profitable.

Apple traditionally gives very conservative financial forecasts, which it usually ends up easily beating. Still, some analysts have said that, this time, low-estimating executives may turn out to mean what they say given the weak US economy.