October 22, 2008 / 12:49 AM / 11 years ago

Surging iPhone sales spur Apple, issues safe outlook

SAN FRANCISCO/SEATTLE (Reuters) - Apple Inc reported a stronger-than-expected 26 percent rise in quarterly profit, spurred by strong sales of its new iPhone, and its shares rose 13 percent on Tuesday.

Apple Inc CEO Steve Jobs displays a redesigned iPod Nano at Apple's "Let's Rock" media event in San Francisco, California September 9, 2008. REUTERS/Robert Galbraith

Apple posted a six-fold increase in iPhone shipments during the September quarter, the first since it released a faster, next-generation model. The company said it sold 6.89 million iPhones during the quarter, outpacing Blackberry-maker Research in Motion Ltd.

Chief Executive Steve Jobs called the iPhone’s performance “remarkable” and said Apple is now the third-largest mobile phone supplier by revenue behind Nokia and Samsung Electronics.

Oppenheimer analyst Yair Reiner called the iPhone shipments a “pretty stunning number” and said the company’s revenues do not fully reflect the strength of iPhone demand because Apple records sales from the phone over a two-year period.

Apple, which is famously cautious in its outlook, issued forecasts for the important December quarter that were below Wall Street estimates, but investors and analysts said it was probably another example of Apple lowering expectations only to exceed them later on.

“Our visibility is low and our forecast is challenging, and as a result, we are going to be prudent in producing the December quarter,” Apple Chief Financial Officer Peter Oppenheimer said.

Even as the company confronts an expected drop in consumer spending, Jobs sounded untroubled, pointing to the company’s core of loyal customers. “While they may postpone purchases in tough times, they’re unlikely to abandon them,” he said.

“We may get buffeted around by the waves a little bit, but we’ll be fine and stronger than ever when the waters are calm in the future.”

Apple reported profit in its fiscal fourth quarter ended September 27 of $1.14 billion, or $1.26 a share, up from $904 million, or $1.01 a share, in the year-ago period. Revenue rose 27 percent to $7.9 billion.

The profit bested analysts’ average expectations for the company to post a profit of $1.11 a share but the reported revenue was below their average forecast of $8.04 billion, according to Reuters Estimates.

The company said its fourth-quarter figures would have been better if it fully accounted for iPhone revenue. Including deferred revenue from the iPhone, sales in the quarter would have reached $11.68 billion and $2.44 billion in net income.

In the past, Apple had not provided adjusted figures, which include all the revenue it defers from the iPhone and Apple TV. If it had not deferred iPhone revenue, the phone would have represented 39 percent of Apple’s sales in the September quarter, according to the company.


For the holiday quarter ending in December, Apple forecast profit between $1.06 and $1.35 a share on revenue of $9 billion to $10 billion. Analysts, on average, were expecting earnings of $1.69 per share on revenue of $10.7 billion in the period, according to Reuters Estimates.

Gabelli & Co analyst Robert Haley said the company forecast is “traditionally conservative, and with the economy being a big wild card they’re being more conservative.”

In the September quarter, Mac shipments increased 21 percent from last year to 2.61 million, while iPod shipments rose 8 percent to 11.05 million.

Some fear that Apple may be more susceptible to an economic downturn because it charges premium prices for its products. But Jobs said the company has no interest in going down-market, and he scoffed at so-called netbooks, which are stripped-down, budget laptops.

“There are some customers which we choose not to serve. We don’t know how to make a $500 computer that’s not a piece of junk,” he said.

Jobs also gave clues to the company’s approach as it enters what may be an extended period of economic uncertainty.

“We have almost $25 billion safely in the bank and zero debt. This provides us tremendous stability and the ability to invest our way through this downturn. This is what we did during the last downturn.”

Shares of Cupertino, California-based Apple closed the regular session down $6.95, or 7.06 percent, at $91.49. In extended trading, the stock rose to $103.61.

Additional reporting by Sue Zeidler in Los Angeles and Jim Christie in San Francisco; Editing by Andre Grenon, Gary Hill

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