Mac, iPod help Apple set records in quarter

SAN JOSE, Calif. — Apple's fiscal third-quarter profit soared more than 73 percent, fueled by demand for the company's Macintosh computers and the strength of its iPod media players.

Apple also said Wednesday it sold 270,000 iPhones in the first two days on the market. The multimedia handset had little impact on the quarter's results because the company plans to account for its sales as subscription revenue over two years.

Apple shares jumped 9.4 percent in extended-session trading Wednesday even as the company issued a conservative outlook that fell short of Wall Street's expectations.

For the quarter ended June 30, Apple's profit rose to $818 million, or 92 cents a share, up from $472 million, or 54 cents a share in the year-ago quarter.

Sales grew to $5.41 billion from $4.37 billion last year.

Analysts polled by Thomson Financial had expected Apple to report earnings of 72 cents a share on sales of $5.28 billion, while Apple itself had projected earnings of 66 cents a share on quarterly sales of $5.1 billion.

"We're thrilled to report the highest June quarter revenue and profit in Apple's history, along with the highest quarterly Mac sales ever," said CEO Steve Jobs.

"iPhone is off to a great start — we hope to sell our one-millionth iPhone by the end of its first full quarter of sales — and our new product pipeline is very strong."

But for the quarter ending in September, Apple said it expects to earn about 65 cents a share on revenue of about $5.7 billion. Analysts were expecting 83 cents a share on sales of $6 billion.

The highly anticipated iPhone launched June 29 and sold out within days. Wall Street analysts and investors have had lofty expectations for the multimedia cellphone, driving up Apple's stock more than 30 percent during the quarter.

Apple's silence on how many iPhones were available at launch added to the frenzy. Analysts had hoped to gain some insight when the company discussed its quarterly earnings during a conference call Wednesday.

Apple officials reiterated the company's target of selling 10 million iPhones in 2008 but declined to elaborate on how much of a cut it will get from exclusive service provider AT&T under their multiyear deal.

During the June quarter, revenue from iPhones and iPhone accessories totaled $5 million, the company said. Shared revenue from AT&T was not included.

Established products were the moneymakers. The company said it shipped a record 1.76 million Macs, up 33 percent from the year-ago period, accounting for $2.5 billion, or more than 60 percent of the quarter's revenues.

Unit sales of iPods grew 21 percent from last year to 9.8 million and generated $1.57 billion in revenue.

Yet all eyes were on the iPhone, and investors seemed unsure at first with how to react to Apple's report.

Before Apple's results were announced, shares rose $2.37, or 1.8 percent, to close at $137.26. Then in heavy-volume trading after hours, shares fell as much as 6 percent before rising 9.4 percent, or $12.92, to $150.18.

On Tuesday, Apple shares tumbled more than 6 percent after AT&T said it had activated 146,000 iPhones June 29 and 30, a number that disappointed investors after some analysts forecast Apple would sell 500,000 or more iPhones in its first weekend.

The reason for the discrepancy between Apple's and AT&T's numbers was unclear. But service-activation problems may be the reason, and Apple Chief Financial Officer Peter Oppenheimer apologized during the analyst call for the "less-than-stellar" activation experience.

"There was initially some disappointment in the 270,000 iPhone units, but as people realized the gross margins came in at 37 percent, they were very encouraged by the profitability of the company," said Caris & Co. analyst Shebly Seyrafi. "Clearly, Apple is a growth story."