Oct. 11 (Bloomberg) -- Apple Computer Inc. probably will report today that annual profit topped $1 billion for the first time as sales of the iPod music player fueled revenue and buoyed demand for the company's computers.

Earnings quadrupled to $1.23 billion, or $1.44 a share, in fiscal 2005 as sales surged 69 percent to a record $14 billion, according to the average estimate of 25 analysts in a Thomson Financial survey. Apple will say fourth-quarter profit more than tripled to $321.8 million, or 37 cents a share, analysts estimate. Sales probably soared 59 percent to $3.74 billion.

Apple may have sold as many as 8.5 million iPods in the quarter, according to a Bloomberg survey, allaying concern that demand has peaked and conveying more interest in Macintosh computers. Chief Executive Officer Steve Jobs released the pencil- thin iPod Nano in September, and Cupertino, California-based Apple may unveil a model that also plays videos tomorrow.

``Given the level of research and development and the products we've seen so far, my sense is that the numbers still have a ways to go up,'' said Jim Grossman, who helps manage $63 billion and owns Apple shares at Thrivent Financial in Appleton, Wisconsin.

The company has beaten analysts' earnings estimates in each of the past six quarters, and its shares have gained 58 percent this year after more than tripling in 2004. The shares rose 56 cents to $50.93 at 9:41 a.m. in Nasdaq Stock Market composite trading.

Of 24 analysts following the shares, 17 suggest buying them and seven recommend holding them. None suggests selling. The Corporate Library, a governance research firm, gives Apple a ``B'' for the overall effectiveness of its board and a ``C'' for Jobs's compensation.

Apple reports profit for the quarter ended Sept. 24 today after the market closes.

`One More Thing'

Apple may have shipped a record 6.7 million to 8.5 million iPods last quarter, according to a Bloomberg survey of eight analysts. That's up from 6.16 million in the third quarter.

Sales of Macintosh personal computers likely jumped 40 percent to 1.17 million units as buyers of iPods also purchased Macs, said Merrill Lynch & Co. analyst Richard Farmer in New York. That would mark the fourth straight quarter Mac shipments have topped 1 million machines.

IPod revived the fortunes of Apple, founded in 1976 by Jobs and Steve Wozniak. The company rose to prominence in the 1980s and 1990s with Mac personal computers, sales of which helped take Apple's revenue to $11.1 billion in 1995. Apple then stumbled amid competition from Microsoft Corp., the largest software maker, and partner Intel Corp. and revenue slumped.

Mac revenue this quarter may have increased 25 percent to $1.54 billion, Farmer said. Apple and PC makers such as Dell Inc. and Hewlett-Packard Co. benefited from back-to-school demand for notebook computers, UBS AG analyst Ben Reitzes in New York said.

Mac Revenue

Jobs, who earns $1 a year in salary and didn't receive a bonus or stock in the year ended in September 2004, declined to comment for this story. Jobs, Apple's 16th-largest shareholder, has a personal fortune valued at $3 billion by Forbes magazine.

Apple is hosting an event in San Jose, California, tomorrow to introduce ``one more thing,'' a phrase Jobs, 50, often uses before showing new products. Jobs may offer an iPod video player, analysts including Piper Jaffray Cos.'s Gene Munster in Minneapolis said. Jobs also may display new Macs.

IPod is the best-selling digital music player in the U.S., accounting for 72 percent of all devices sold this year through August, according to NPD Group Inc. in Port Washington, New York. Apple's closest rival, SanDisk Corp., won 5 percent of the market.

In the past month, Dell, the world's largest PC maker, and Walt Disney Co., the No. 2 U.S. media company, released music players that cost less than $100 to lure customers.

Apple's three iPod models sell from $99 to $399.

New Customers

Apple's success comes from attracting new customers and convincing iPod owners to trade up to newer models. In a recent survey of U.S. teens, Munster found 74 percent of students who own a digital music player have an iPod. And 79 percent who expect to buy a player in the next year are ``most interested'' in an iPod, he said.

Apple probably won price concessions from suppliers including Samsung Electronics Co. That may let Apple retain its 20 percent profit margin on iPods, Reitzes said. Apple may pay even less next year and add higher-cost Nanos, bolstering profit, he said.

The Nano may push iPod shipments past 10 million this quarter, Reitzes wrote in an Oct. 3 note. The $249 4-gigabyte Nano may be Apple's ``key'' 2006 product, accounting for half of the 31.7 million iPods it may sell next year, he said.

Grossman said he ordered his black Nano right after Jobs pulled the business-card-sized player out of his jeans at a Sept. 7 event in San Francisco.

``As an investor, I look at the Nano and say `Wow','' Grossman said. ``Here's another product that will be a homerun.''

To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

Last Updated: October 11, 2005 09:48 EDT