Profit result gives Apple some good news

SAN FRANCISCO - Apple, whose chief executive Steve Jobs said on Tuesday he was taking a medical leave of absence, posted a 78 per cent jump in quarterly profit, helped by holiday buying of iPads, iPhones and Macintosh computers.

Net income in the fiscal first quarter rose to US$6 billion ($7.75 billion), or US$6.43 a share, from US$3.38 billion, or US$3.67, a year earlier, Apple said yesterday.

Analysts projected profit of US$5.41 a share, the average of estimates compiled by Bloomberg.

Apple rose as much as 4.8 per cent in extended trading.

Sales increased 71 per cent to a record US$26.7 billion, exceeding the US$24.4 billion predicted by analysts in a Bloomberg survey.

The company sold 7.33 million iPad tablet computers in the first holiday season for the device, topping the 6 million projected by Mike Abramsky at RBC Capital Markets.

The results suggest Apple will fare well in the coming months as Jobs hands day-to-day operations to chief operating officer Tim Cook, said Ashok Kumar, an analyst at Rodman & Renshaw.

"It was a blowout quarter," said Kumar.

"The momentum should sustain for the next 12 months with the iPad and iPhone refresh. The uncertainty investors have to prepare for is beyond that time frame in terms of the company's ability to execute in this flawless manner and develop new markets." He rates Apple a "buy" and doesn't own it.

Apple, based in Cupertino, California, climbed to as high as US$357 in extended trading, after earlier falling US$7.83 to $340.65. The shares rose 53 per cent last year. The company is the world's second-most valuable company behind Exxon Mobil.

Jobs, 55, who has been fighting a rare form of cancer since 2004, said in an email disclosed yesterday, "I love Apple so much and hope to be back as soon as I can."

The company is likely to fare well under Cook, said Barry Jaruzelski, a partner at Booz & Co. "It's a well-oiled machine."

Jobs' "ethos and things he focuses on from marketing and innovation are deeply embedded in the process and people, making it an institutional capability," he said.

Apple sold 16.2 million iPhones, 4.13 million Mac computers and 19.5 million iPod media players, according to the statement.

Abramsky predicted sales of 16 million iPhones, 6 million iPads, 18.7 million iPods and 4.2 million Macs.

Apple, whose potential US customer base for the iPhone will almost double by adding Verizon Wireless as a carrier next month, said profit this quarter would be US$4.90 a share on sales of US$22 billion.

"We are firing on all cylinders and we've got some exciting things in the pipeline for this year, including iPhone 4 on Verizon, which customers can't wait to get their hands on," Jobs said.

Analysts estimate Apple will have second-quarter profit of US$4.47 a share on sales of US$20.9 billion, according to data compiled by Bloomberg.

The period will be the first to include sales from Verizon Wireless, the largest US carrier, which will begin selling the iPhone on February 10.

The arrangement ends AT&T's exclusive US rights to the iPhone and adds 93.2 million potential customers for Apple.

The iPhone is Apple's top-selling product, accounting for 39 per cent of revenue last fiscal year. The iPad also is becoming a bestselling product for Apple, accounting for 17 per cent of revenue last quarter. The company has now sold 14.8 million since it was introduced in April.

Gross margin, the percentage of sales left after deducting production costs, was 38.5 per cent in the first quarter, compared with 36.9 per cent in the fourth quarter.

Apple introduced a line-up of the Macbook Air notebook computers and iPod media players to entice shoppers last quarter, while also adding songs from the Beatles to iTunes for the first time.

Jobs took a leave of absence as his health deteriorates from a bout with a rare form of cancer and the effects of a liver transplant he had almost two years ago, according to a person with knowledge of the situation.

The chief executive has been unable to keep on weight as he undergoes treatment for his conditions, said the person, who requested anonymity because the matter is private. He took two previous leaves - for cancer surgery in 2004 and the transplant in 2009.

Jobs will continue as chief executive, according to a company statement citing an email he sent to employees. Jobs co-founded Apple in 1976 and after being ousted in 1985, he returned in 1997 and transformed it from a computer-industry also-ran into the world's largest technology company by market value.

"I hope he comes back," said Jane Snorek, who helps oversee about US$75 billion at Nuveen Asset Management and said Apple was Nuveen's biggest holding. "I don't care who they get, there's no way you can replace Steve Jobs."

- BLOOMBERG