Apple Profit Almost Doubles After IPhone Debuts for Verizon

Apple Profit Almost Doubles After IPhone Debuts for Verizon
Apple Inc. iPhone 4 smartphones sit on display while Verizon Wireless employees prepare for customers at a Verizon store in New York. Photographer: Jeremy Bales/Bloomberg

Apple Inc. reported profit that almost doubled as rising demand for Mac computers and the iPhone, newly available from Verizon Wireless, outweighed lower-than-predicted sales of the iPad tablet.

Net income in the fiscal second quarter rose to $5.99 billion, or $6.40 a share, from $3.07 billion, or $3.33, a year earlier, Cupertino, California-based Apple said in a statement today. Sales jumped 83 percent to $24.7 billion. Analysts predicted profit of $5.39 a share on sales of $23.4 billion, the average of estimates compiled by Bloomberg.

Verizon Wireless started selling the iPhone in February, helping Apple sell 18.7 million units, surpassing the 16.3 million average of 13 predictions in a Bloomberg survey. Apple said last month’s earthquake in Japan isn’t having a “material” impact on results, allaying concern that the disaster would worsen an iPad supply shortage.

“This will restore in investors’ minds that Apple is the magical growth story in tech,” said Mark Moskowitz, an analyst at JPMorgan Chase & Co. “They really are amazing.”

Apple rose 3.2 percent in extended trading to as high as $353.39 after the results were released. The shares had gained $4.55 to $342.41 at 4 p.m. in Nasdaq Stock Market trading.

“We will continue to innovate on all fronts throughout the remainder of the year,” Chief Executive Officer Steve Jobs said in the statement. Jobs, who has been on medical leave since January, is seen regularly at Apple and involved in decision-making, said Tim Cook, who has taken over day-to-day leadership.

IPad Sales Miss Predictions

While sales of iPhones more than doubled, rising at the fastest pace in two years, Apple sold 4.69 million iPads, fewer than the 6.1 million units predicted. Cook said the company is trying to overcome supply shortages.

“The iPad has the mother of all backlogs,” Cook said on a conference call with analysts. Many stores sold out after the device went on sale on March 11.

Cook said Apple’s access to components hasn’t been harmed by the earthquake in Japan and that it doesn’t expect any material effect from the disaster in the current quarter. Still, sales of products in the country may be $200 million lower as consumers coping with the temblor and resulting tsunami buy fewer gadgets, he said.

In the quarter now under way, Apple forecast profit and sales below analysts’ predictions. Profit this quarter will be $5.03 a share on sales of $23 billion, Apple said. Analysts predicted that Apple would have profit of $5.25 a share on sales of $23.8 billion.

Profit Forecasts

Apple typically reports profit that exceeds analysts’ predictions, and its forecasts are often conservative. Apple has beaten the average estimate for earnings per share for at least 28 straight quarters, according to data compiled by Bloomberg.

Gross margin, the percentage of sales left after deducting production costs, will be about 38 percent this quarter, Apple said on the conference call. Gross margin was 41.4 percent last quarter, compared with 41.7 percent a year earlier, Apple said.

In the second quarter, Apple sold 3.76 million Mac computers and 9.02 million iPod media players. Analysts had predicted the sale of 3.6 million Macs and 9.8 million iPods.

Apple is fending off increased competition to the iPhone, the company’s top-selling product.

Rivals including Samsung Electronics Co., Motorola Mobility Holdings Inc. and HTC Corp. are using Google Inc.’s Android operating system in their devices. Android will account for 39.5 percent of global smartphone shipments this year, compared with 15.7 percent for Apple, according to market research firm IDC.

Last week, Apple filed an intellectual property lawsuit against Samsung, accusing the company of copying the iPhone and iPad. Samsung denied the accusations.

Apple also is Samsung’s largest customer for components, a relationship that shouldn’t be disrupted by the suit against Samsung’s mobile unit, Cook said.


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