SAN FRANCISCO (Reuters) - Apple Inc (AAPL.O) on Wednesday posted a 36 percent rise in quarterly profit, helped by strong sales of Macintosh computers and iPod players, but its profit margin and cautious outlook disappointed investors.
Shares of Apple fell 1 percent after the company, known for conservative financial forecasts, gave a profit outlook for its current quarter that was below Wall Street estimates.
Chief Financial Officer Peter Oppenheimer also told Reuters he expected gross margin in the June quarter to be similar to the March quarter’s 32.9 percent, which was down from 35.1 percent a year ago.
“It looks like the Macs were good, the iPods were flat and the iPhones were OK,” said Robert Stimpson, portfolio manager at Oak Associates, which owns Apple shares.
“It looks like the third-quarter earnings view is a little below the Street. With the stock up 41 percent since the February low, it is going to take a lot of good news to propel the stock higher.”
Apple said net profit for its fiscal second quarter ended in March rose to $1.05 billion, or $1.16 per share, from $770 million, or 87 cents per share, a year ago. Revenue grew by 43 percent to $7.51 billion.
The results beat the average analyst forecasts for revenue of $6.95 billion and earnings per share of $1.07, according to Reuters Estimates.
“It was a strong quarter in terms of Mac shipments and iPods,” said Shannon Cross, analyst at Cross Research. “IPods, which had been a concern, were above Street expectations and that should hold back some who were speculating that iPod was saturated.”
Apples sold 2.29 million Macs in the quarter, topping the 2.04 million to 2.2 million units forecast by five analysts who saw sales spurred by sexy new designs, the halo effect from iPods and iPhones, and consumer complaints about Microsoft Corp’s (MSFT.O) rival Windows Vista operating system.
Apple sold 10.6 million iPods and 1.7 million iPhones, both near the top end of Wall Street expectations. Apple is expected to launch a faster iPhone model in a few months, to address a major complaint about the gadget, especially in Europe.
“We are very pleased with iPhone momentum and we remain confident of achieving our goal of selling 10 million iPhones in calendar 2008,” Oppenheimer said on a conference call.
He said Apple’s U.S. revenue was up 40 percent, while overseas revenue rose 47 percent. Apple’s retail stores, which number more than 200, “hit the ball of out of the park” with sales up 74 percent, he said.
The company blamed the slide in its gross margin on lower sales of its Leopard operating system, a price cut on low-end iPod shuffles, and higher sales at its iTunes online music and movies store, which runs at break-even or slightly profitable.
Apple famously gives very conservative financial forecasts that it usually ends up easily beating. Still, some analysts have said that, this time, low-balling executives may turn out to mean what they say given the weak U.S. economy.
Apple said it expected earnings of $1.00 per share on revenue of $7.2 billion for its fiscal third quarter ending in June. Wall Street was looking for earnings per share of $1.11 and revenue of $7.17 billion, according to Reuters Estimates.
The company’s shares initially rose about 4 percent on the report in after-hours trading, but quickly erased gains to trade at $160.56 versus their Nasdaq close of $162.89.
Additional reporting by Duncan Martell and Tiffany Wu in San Francisco and Calvin Mankowski in New York; Editing by Braden Reddall