Apple Reports Profit Surge From Holiday Selling Season

For the quarter ended Dec. 25, 2004, Apple posted a profit of $295 million, or 70 cents per diluted share, compared with $63 million, or 17 cents per diluted share, a year earlier. The earnings topped analysts' consensus estimate of 49 cents per share, as well as the high forecast of 55 cents per share, according to Thomson Financial/First Call. Gross margin rose to 28.5 percent from 26.7 percent a year ago.

First-quarter 2005 revenue totaled $3.49 billion, up 74 percent year over year, Apple said. The Cupertino, Calif.-based company shipped nearly 1.05 million Macintosh computers and 4.58 million iPod portable music players in the quarter, which represented a 26 percent gain in CPU units and a 525 percent rise in iPods over the year-ago period.

"We are thrilled to report the highest quarterly revenue and net income in Apple's history," Jobs said in a statement. "We've sold over 10 million iPods to date and are kicking off the new year with a slate of innovative new products including iPod shuffle, Mac mini and iLife '05."

With the new products launched at Macworld, Apple appears to be making a serious play to lure more users to the Mac platform. The $499 Mac mini gives the company a low-cost desktop to compete in the budget PC space, and the $99 iPod shuffle flash-memory music player provides a much cheaper option to the standard iPod player, which starts at about $300.

What's more, Apple's new iWork '05 office productivity suite, also unveiled at Macworld, offers a less-expensive alternative to Microsoft Office for the Mac, which carries a street price of around $400. iWork, priced at $79, includes a new word processor called Pages as well as Keynote 2, an upgrade of Apple's well-regarded presentation application. And earlier this month, Apple also upgraded its Xserve rack-mount Unix server and shipped its Xsan storage system.

Such offerings could serve as stepping stones for new purchases of Mac computers, which still account for the bulk of Apple's revenue--despite the iPod's success. In the company's 2005 first quarter, which includes the holiday selling season, CPU units represented roughly $1.6 billion in sales vs. $1.2 billion for the iPod. That was up from $1.23 billion for CPUs and $537 million for the iPod in fourth-quarter 2004.

Among Apple's computer offerings, the lower-end models led the way in first-quarter 2005. Unit sales of the iMac desktop segment, which includes the eMac, doubled from a year ago, while the iBook laptop saw a 35 percent year-over-year gain. However, the higher-end Macs struggled. The Power Mac segment, including the Xserve, saw a 7 percent unit-sales uptick from the fourth quarter, but it fell 19 percent year over year. PowerBook notebooks suffered unit-sales decreases of 30 percent from the fourth quarter and 22 percent year over year.

Apple CFO Peter Oppenheimer said the company expects revenue for the second quarter of fiscal 2005 of about $2.9 billion and earnings per diluted share of about 40 cents.