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Apple's big gains not big enough

Posted by inet - 2005-10-13

Apple Computer on Tuesday reported that profit in the latest quarter quadrupled, buoyed by strong sales of     Macintosh computers and ``staggering'' demand for its newest iPod -- but that wasn't good enough for Wall Street.
 
Shares of the Cupertino company fell more than 10 percent in after-hours trading, after the company's revenues and earnings for its fiscal fourth quarter did not wildly exceed analysts' expectations. The stock slumped $5.41, or 10.5 percent, to $46.18 a share.

``We're thrilled to have concluded the best year in Apple's history,'' said     Steve Jobs, Apple's CEO, in a statement. ``This is the direct result of our focus on innovation and the immense talent and creativity at Apple.''

The earnings report came a day before Apple was expected to unveil its latest products, at a news conference in San Jose.

Apple's revenue jumped 57 percent for its fiscal fourth quarter that ended Sept. 24, to $3.68 billion, compared with revenue of $2.35 billion in the year-ago quarter. Net income surged four times to $430 million, or 50 cents a share, compared with net income of $106 million, or 13 cents a share, in the year-ago quarter.

But earnings per share included a 12-cent gain from several tax-related items. Excluding the gain, Apple reported profit of 38 cents per share -- a penny better than the consensus analysts' estimate of 37 cents a share.

Analysts had estimated revenue to come in at about $3.7 billion.

``If you look at the stock price, it's obviously been a darling,'' said Shaw Wu, an analyst with American Technology Research. ``Expectations were very high. . . . Apple had to report a flawless quarter. It wasn't flawless.''

Analysts were hopeful that Apple would beat estimates, in part because of the successful debut in mid-September of the iPod nano, its ultra-thin digital music player.

Apple said it shipped 1.2 million Macintosh computers and 6.45 million iPods during the quarter, a jump of 48 percent in Mac sales and 220 percent growth in iPods, compared with a year earlier. The company said it shipped more than 1 million iPod nanos but wasn't able to meet demand.

``We were able to ship one million nanos in the 17 days'' remaining in the quarter, said Tim Cook, Apple's senior vice president of worldwide sales and operations. ``But they fell short of demand. The demand for this product is staggering.''

Some analysts had much higher estimates for total iPod sales in the quarter. Goldman Sachs had forecast that Apple would sell 7.8 million iPods.

When analysts asked Apple executives if there was a parts shortage leading to the inability to meet demand for the iPod nano, they declined to comment further.

Wu said Apple is probably seeing short supply of the 4-gigabyte version of the iPod nano, and that the 2-gigabyte version was easy to find. A quick check on Apple's Web site Tuesday indicated that the 2-gigabyte version of the iPod nano would ship in 24 hours, while the 4-gigabyte model would ship within one to two weeks.

Some analysts also said they believed Apple experienced disappointing sales of its iMac mini, even though Apple saw strong overall sales of the Macintosh, fueled by notebook sales. The company said the Macintosh business was 50 percent of its total revenue and that the 1.2 million Macs sold was its second-highest ever for a quarter.

Despite disappointing Wall Street, Apple's latest results were much better than the company had initially forecast. In July, Apple had projected that sales for the quarter would be flat compared with a year earlier because of possible uncertainties related to its eventual shift of its Mac computers to Intel processors from IBM Power PC chips.

For the current quarter, which will include the typically strong holiday season, Apple Chief Financial Officer Peter Oppenheimer said he was giving ``strong guidance.''

Oppenheimer forecast revenue of $4.7 billion and earnings per share of 46 cents, including an estimated cost of 3 cents a share for expensing stock options.

Oppenheimer said he included Apple's expected new products in his estimates.

Some analysts are expecting that at today's San Jose news conference, Apple may introduce a video iPod or iPod nanos in additional colors.

The company also may launch some new Macintosh computers, based on the PowerPC chip, Wu said. Those would be its last batch of Macs based on the IBM chip before it transitions to Intel next year.

Other speculation centers on pop star Madonna, who appeared via a live video feed with Jobs last month at the iPod nano launch.

A Madonna fan Web site reported Monday that Apple will introduce a Madonna iPod, with her entire music collection, in pink. Apple officials have declined to comment on today's event.



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