Apple profits surge on iPod sales boom

Apple has reported first-quarter profit of $1bn as iPod sales increased by 50 per cent compared with the same period a year ago.

Revenue was $7.1bn, up about 25 per cent from the previous year's first quarter of $5.7bn. Profits per share were $1.14, up sharply from the previous year's per share profits of 65 cents, for Apple's first fiscal quarter ending on 30 December.

Peter Oppenheimer, Apple's chief financial officer, said on a conference call following the company's profits release: "Our fiscal year 2007 is off to a tremendous start."

The results far outdid analyst expectations as tallied by Thomson First Call. The projection was for revenue of $6.4bn and profits per share of 78 cents.

Apple provided conservative guidance for its second quarter, however. It said it expects revenue of $4.8bn to $4.9bn, and profits per share of 54 cents to 56 cents. Both ranges are below what analysts were projecting going into the current quarter.

The device has been around for five years but iPod sales are still going strong, Apple reported. Just over 21 million iPods were purchased during the quarter, compared with 14 million during the previous year's holiday season. Revenue from iPods increased just 18 per cent, however, from $2.9bn to $3.4bn. Revenue from the iTunes Store was up 29 per cent.

One sour spot for iPods was in Apple's retail stores. Both iPod revenue and shipments were down at the company's own stores but given the overall surge in iPod sales, this reflects the increasing use of channel partners and retailers to carry iPods, said Tim Cook, Apple's chief operating officer.

Cook said: "iPod demand was extraordinary." But that's not expected to last - normal seasonal patterns mean iPod shipments will decline in Apple's second quarter, the first calendar quarter of the year. In September, the company introduced redesigned iPods in its three major categories: the iPod video, iPod Nano and iPod Shuffle.

On the Mac side, unit shipments increased 28 per cent compared with the previous year, and revenue increased by 40 per cent. Desktop unit shipments fell, evidence of the same trend towards laptops that is affecting all PC makers. Accordingly, laptop shipments were up 65 per cent and revenue from laptops was up 79 per cent. Portable Macs now account for 60 per cent of all Mac sales, Oppenheimer said.

Gartner estimated that Apple's US Mac shipments grew 30.6 per cent even as overall US PC shipments declined by 3.2 per cent, measured against the same period last year. Shipments to Europe were up 27 per cent but shipments to Japan declined 14 per cent amid a tough market for consumer PCs in that country, Cook said.

Apple executives did not offer any new information regarding the stock options backdating scandal that has dogged the company amid its record financial performance and hoopla over the unveiling of the iPhone at Macworld.

The company continues to co-operate with investigators, Oppenheimer said. Apple has said CEO Steve Jobs was aware that favourable grant dates were selected when awarding options but an internal investigation has cleared Jobs of any wrongdoing. Outside investigations continue.

Tom Krazit writes for CNET News.com