Apple Computer Inc, maker of the iMac personal computer, had a fiscal first-quarter profit, compared with a year-earlier loss, as sales rose 37 percent. The company said earnings this period will top analysts' targets.
Net income was US$38 million, or US$0.11 a share, compared with a loss of US$195 million, or US$0.58, a year ago, the Cupertino, California-based company said. Sales in the period ended Dec. 29 rose to US$1.38 billion from US$1 billion.
Apple missed its own forecast for at least US$1.4 billion in sales as customers waited for a remodeled iMac, Chief Financial Officer Fred Anderson said in an interview. The company said demand for the new, flat-panel iMac, which debuted last week, may outstrip supply this quarter, leading Apple to forecast sales of about US$1.5 billion, higher than analysts expect.
"Initial demand for iMac has been very strong," said David Bailey, an analyst with Gerard Klauer Mattison, who said production of the new computer is still accelerating. "The second half of this year is when we are expecting revenue growth to really pick up." He rates Apple "outperform" and owns the shares.
The company's shares fell US$0.92 to US$20.78 in regular US trading before the report. They climbed as high as US$22 after hours. The stock has gained 21 percent in the past year.
Apple said second-quarter earnings will be little changed from the first quarter's US$0.11 a share. Analysts had forecast profit of US$0.09 on sales of US$1.33 billion, according to Thomson Financial/First Call.
Apple expects gross margin, a measure of profitability, to decline "significantly" in the second quarter from 30.7 percent in the first quarter, because of costs such as fees for transporting iMacs by air freight, Anderson said on a conference call with analysts, without giving a specific forecast. Costs for iMac parts such as memory chips and flat-panel screens are also rising, he said.
"You've got your start-up costs," said Brett Miller, an analyst with A.G. Edwards, who rates the shares "buy" and doesn't own them. "They're talking about air-shipping products in, which is expensive."
Apple is willing to see gross margin decline if sales rise, Anderson said.
Orders in the first week for the new iMac are the most Apple has received for a product since the original iMac was introduced in 1998, Anderson said. He declined to provide specific details.
The company is forecasting a rare increase in sales in the quarter ended in March from the quarter ended in December. PC sales are typically strongest during the holiday season.
Still, Anderson said demand for PCs may remain tepid because of the economic recession.
"As far as I see, there hasn't been any turn in the economy," he said. "It was a very challenging business environment."
Schools and colleges in particular have put off placing new orders because of budget constraints, which may lead Apple's sales in the education market to fall this year, Anderson said.
Education sales were 26 percent of Apple's revenue last year, according to a regulatory filing.
Apple's chain of 27 retail stores lost US$8 million on sales of US$48 million during the first quarter, Anderson said. He declined to say how many stores the company will open this year.
For its first quarter, Apple was expected to report profit of US$0.11 a share on sales of US$1.43 billion, the average estimates in a First Call poll of analysts. Estimates ranged from US$0.09 to US$0.14.
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