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The Honolulu Advertiser
Posted on: Wednesday, April 21, 2010

Apple's net income skyrockets 90%


By JESSICA MINTZ
Associated Press

Hawaii news photo - The Honolulu Advertiser

A consumer displays the new iPad, left, next to his iPhone. iPhones make up 40 percent of Apple's total revenue.

Associated Press library photo

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SEATTLE Blockbuster iPhone sales helped Apple Inc. blow past Wall Street's expectations with a 90 percent leap in net income in the recent quarter. Shares of the company skyrocketed to an all-time high in extended trading yesterday.

Apple said it sold a record 8.8 million of its popular iPhones in the three months that ended March 27, more than double the number sold a year ago. The phones accounted for 40 percent of Apple's total revenue.

Piper Jaffray analyst Gene Munster said he was astounded by such ongoing growth for the three-year-old iPhone. "It's defying the law of gravity," Munster said. "Internationally, it's catching fire."

Peter Oppenheimer, Apple's chief financial officer, said in an interview that strong sales came from both existing and new mobile carriers. Although AT&T Inc. remains the exclusive U.S. carrier, Apple is selling phones through multiple carriers in other countries.

After a brief trading halt, investors sent Apple's stock bounding up $13.71, 5.6 percent, to $258.30 in after-hours trading yesterday, surpassing its previous high of $251.14, which had been set Friday. Earlier yesterday, the stock had shed $2.48 to close at $244.59.

Apple's net income and revenue were its highest ever in a non-holiday quarter, Oppenheimer said. Earnings rose to $3.1 billion ($3.33 per share) from $1.6 billion ($1.79 per share) in the same period last year.

Revenue rose 49 percent to $13.5 billion from $9.1 billion in the year-ago quarter.

The company said it sold 2.9 million Macs, a 33 percent increase; iPod unit sales edged down 1 percent, but Apple still sold 10.9 million of the digital players.

Apple didn't start selling the iPad, its new touch-screen tablet computer, until after the second quarter ended.

During a conference call with analysts, Apple chief operating officer Tim Cook said in response to questions that there are no production problems with the iPad. He said the international launch was delayed a month, to late May, only because of demand in the U.S., where Apple said it sold more than 500,000 iPads in its first week.

"It has shocked us, the level of demand, at least initially. We'll see what happens from here," Cook said.

Brisk iPad sales will drag down Apple's gross margin in the current quarter, which ends in June. Gross margin is the profit Apple makes on each dollar of revenue once the costs of making products are subtracted. In the second quarter, gross margin rose because a greater share of Apple's revenue came from its profitable iPhones.

New products such as the iPad are generally less profitable until companies can buy parts in higher volumes to drive down prices.

Apple also said its margin will be lower in the current quarter because of a "future product transition." That's likely the next version of the iPhone, which analysts expect Apple to unveil in June.