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Thu, Oct 13, 2005 - Page 12 News List

Apple's earnings soar as consumers go for iPods, Macs

NY TIMES NEWS SERVICE , SAN FRANCISCO

Apple Computer Inc reported on Tuesday that its earnings quad-rupled in its fourth quarter on strong demand for both iPods and Macs. But overall sales of iPods fell short of analysts' high expectations.

Apple's report came a day before a product announcement that has the industry speculating about the company's future direction. Much of the speculation has focused on the possibility of an iPod that can play video accompanied by music video sales through Apple's iTunes service.

And while iTunes continues to dominate online music sales, the competitive pressure became tighter on Tuesday as Microsoft Corp agreed to promote the Rhapsody music service, a rival to iTunes, after settling an antitrust suit by Rhapsody's owner, RealNetworks Inc.

Apple said that net income for the fourth fiscal quarter that ended on Sept. 24 rose to US$430 million, or US$0.50 a share, including a US$0.12 benefit from several tax-related items. That compared with US$106 million, or US$0.13 a share, in the quarter a year earlier. The earnings out-paced the consensus forecast of analysts of US$0.37 a share. But Apple's revenue fell short of expectations at US$3.68 billion, a 57 percent increase from a year earlier. Analysts, though, had been expecting sales of US$3.73 billion.

For the fiscal year, Apple's revenue increased 68 percent to US$13.93 billion. Net income for the year rose 384 percent, to US$1.335 billion.

Peter Oppenheimer, the chief financial officer, said that Apple benefited in the quarter from a combination of strong Mac sales, a healthy back-to-school season and continued brisk demand for the iPod.

The fourth quarter reflected Apple's introduction of the iPod nano, a pencil-thin model that replaced the popular iPod mini, which had been the company's best-selling music player. Timothy Cook, the executive vice president for worldwide sales and operations, called the demand for the iPod nano "staggering," and said Apple sold more than a million units in the 17 days of the fourth quarter it was available.

But executives acknowledged that Apple could have sold many more iPod nanos.

"We ended the quarter with an enormous backlog in iPod nanos. At this point, I can't project when supply will meet demand," Cook said.

Apple's revenue from iPod sales in the fourth quarter was US$1.21 billion, up from US$537 million a year earlier. The company, which has roughly 75 percent of the worldwide share of portable music players, shipped a total of 6.5 million iPods in the quarter, an increase from 2 million in the same quarter last year.

Analysts, though, had predic-ted that Apple would sell 7 million to 7.2 million units. A Goldman, Sachs report forecast sales of about 7.8 million in the quarter.

Apple said it expected to report a 35 percent increase in revenue this quarter, to US$4.7 billion, from the first quarter last year.

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