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Apple earnings surpass forecasts, shares down

Customers look at an iPod display on Tuesday in San Francisco, California. PHOTO: AFP

Apple beat Wall Street expectations with its earnings report on Tuesday, but its shares fell more than 11 percent in after-hours trading as investors fretted over its prospects.

Apple earned US$1.58 billion, or US$1.76 for each diluted share, in the first quarter of fiscal 2008, compared with US$1 billion, or US$1.14 a share, in the period a year earlier. Revenue was US$9.6 billion, up from US$7.1 billion.

But while Apple executives paraded those as record-setting figures, investors focused on projections for the next quarter, which were lower than what analysts had expected. Apple said it expected revenue of about US$6.8 billion for the second quarter, or diluted earnings of US$0.94 a share.

Wall Street was forecasting profit of US$1.09 a share on revenue of US$7 billion.

Apple chief financial officer Peter Oppenheimer gave two reasons for the lower forecast: a decline in software sales and the normal slowdown in business after Christmas.

Asked whether the lumbering economy could be a factor in Apple's earnings outlook, Oppenheimer replied: "We'll leave the economic forecasting to others." Instead, he said: "our focus is on managing our business."

A slowdown in the economy is likely to hurt technology companies like Apple, which are dependent on consumers shelling out hundreds of dollars for their products.

Just last week, Sprint Nextel announced it was losing customers more quickly than expected, raising fears that spending on cellphones and other devices was slowing across the industry. Intel was also cautious about its financial outlook last week, in part because of concerns about a recession.

A.M. Sacconaghi Jr, a senior analyst at Bernstein Research, said one reason for concern about Apple was that domestic sales of the iPod were less robust than the company had expected.

Indeed, Oppenheimer said that sales of the iPod in the US were little changed in the quarter, although iPod sales abroad were quite strong. Overall, Apple saw a 5 percent increase in iPod sales in the first quarter compared with the period a year earlier.

What is worrisome, Sacconaghi said, is whether the flat domestic iPod sales are a harbinger of things to come for other Apple products.
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