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Fri, Jan 14, 2005 - Page 12 News List

Apple records four-fold rise in profit

ABOVE EXPECTATIONS The company's top executive attributed the jump in profits to increased sales of its personal computers and popular iPod music player

NY TIMES NEWS SERVICE , NEW YORK

Apple Computer Inc customer Jake Olsan, 11, listens to an Apple iPod Mini at an Apple Store in Palo Alto, California on Wednesday. Apple's first-quarter earnings more than quadrupled, dramatically exceeding Wall Street expectations.

PHOTO: AP

Apple Computer announced a quadruple increase in first-quarter profit on Wednesday -- its biggest ever -- on strong holiday sales of iPod music players.

The results came a day after the company embarked on a strategy of trying to capitalize on the success of iPod by selling a line of lower-cost computers.

Apple, based in Cupertino, California, reported net profit of US$295 million, or US$0.70 a share, for its first quarter, which ended Dec. 25. That compares with US$63 million, or US$0.17, for the fourth quarter and beats the consensus forecast of analysts of US$0.49 a share.

"We're pretty thrilled," said Steven Jobs, Apple's chief executive, in an interview on Wednesday. "This was Apple's biggest revenue increase in its history."

Jobs attributed the increase to rising sales of personal computers and iPods, and said about 40 percent of Apple's sales in the quarter came from music-related products.

Revenue for the quarter was US$3.49 billion, up 74 percent from US$2 billion in the fourth quarter. Analysts had expected revenue of about US$3.18 billion. The company also projected that revenue for the current quarter would be US$2.9 billion, and estimated that earnings per share would be US$0.40, also surpassing analysts' expectations.

The company shipped more than a million Macintosh computers in the quarter, a 26 percent increase over last year. Of those, the greatest demand was for the iMac, whose sales nearly tripled.

"This is the first proof positive that the halo effect is real," said Gene Munster, an analyst at Piper Jaffray, referring to the notion that customers interested in buying an iPod sometimes buy a Macintosh as well.

The iMac is Apple's best-selling personal computer, with an average price of around US$1,400.

But the iPod remained the big story, with Apple selling 4.6 million of them in the quarter, five times more than the quarter a year earlier. That brought the total number of iPods sold by Apple in three years to about 10 million.

Apple's iTunes music store made a small profit during the quarter, and has to date sold 230 million songs, Apple's chief financial officer, Peter Oppenheimer, said.

Gross margin for the quarter, a crucial indicator of profitability, was 28.5 percent, up from 26.7 percent in the fourth quarter last year.

On Tuesday, at the annual MacWorld conference in San Francisco, Apple introduced new versions of its Macintosh computer that are aimed at consumers who have traditionally opted for lower-priced Windows systems.

The Mac Mini, a stripped-down Macintosh that is priced as low as US$499 without a keyboard, monitor or mouse, is the least-expensive computer Apple has ever shipped and is competitively priced with machines from Dell Computer and other low-cost manufacturers.

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