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Apple profit grows 2% in holiday quarter

AP , CUPERTINO, CALIFORNIA

Isaac Peterson, product manager for the Simply Mac Store, looks through a stack of Apple iPod Nano’s inside the store in Orem, Utah, on Wednesday. Apple Inc reported an increase in first-quarter profit after posting its best quarterly sales ever, defying the worst US holiday shopping season in at least four decades.

PHOTO: BLOOMBERG

Apple Inc said on Wednesday its profit in the holiday quarter edged up 2 percent and beat Wall Street’s expectations, buoyed in part by growing iPod sales outside the US.

The iPod and iPhone maker’s predictions for the quarter came in lower than analysts were predicting, but investors seemed happy to focus on the results rather than the forecast. In extended trading after the report was released, Apple’s shares jumped US$7.83, or 9.5 percent, to US$90.66.

The first question for executives in a conference call regarded the health of chief executive Steve Jobs, who announced a week ago that he would take a six-month medical leave.

Apple gave no new details, but Tim Cook, the chief operating officer who is handling day-to-day operations in Jobs’ absence, attempted to assure analysts that Apple will continue to do well no matter who’s in charge.

“The values of our company are extremely well entrenched,” Cook said. “We believe that we’re on the face of the Earth to make great products and that’s not changing.”

In the fiscal first quarter that ended on Dec. 27, Apple’s earnings rose to US$1.61 billion, or US$1.78 per share. In the comparable period last year, profit was US$1.58 billion, or US$1.76 per share.

Sales improved 6 percent to US$10.2 billion.

The results topped analysts’ forecast on both counts. Analysts surveyed by Thomson Reuters were looking for a profit of US$1.39 per share on US$9.75 billion in sales.

“This goes to show the point that the high-end consumer electronics market is not dead despite the challenging economy,” American Technology Research analyst Brian Marshall said in an interview.

Cupertino, California-based Apple said it sold a record number of iPods in the quarter — about 22.7 million, beating analysts’ average expectations. In the conference call, Cook said all the growth in iPod sales came from outside the US during the last week of the quarter.

“The iPod business was way better than anyone would have thought,” Kaufman Bros analyst Shaw Wu said. “It shows the economic malaise seems to be ... impacting the US more.”

Macintosh computer sales grew 9 percent from the year-ago quarter and met analysts’ view, thanks to booming laptop sales.

While the rest of the PC industry is looking to netbooks — cheap, low-powered laptops meant mostly for Web surfing and checking e-mail — Apple isn’t rushing out with one of its own.

“The products in there are principally based on hardware that’s much less powerful than we think customers want, software technology that is not good, cramped keyboards, small displays, etc,” Cook said. “We don’t think that people are going to be pleased with those type of products. But we’ll see.”

Sales of Apple’s iPhone clocked in at 4.4 million, shy of some analysts’ predictions for about 5 million.

Looking ahead, Apple said that it expected to earn US$0.90 to US$1 per share on US$7.6 billion to US$8 billion in sales in the current quarter, which ends in March. That’s lower than what analysts had been looking for — US$1.13 per share of profit on US$8.2 billion in revenue — but Apple is known for issuing guidance that falls well below Street estimates.

“It was better than the fears,” Wu said.

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