Apple earnings set company records, but revenue off

Apple set company records for revenue and earnings during the fourth quarter, but disappointed analysts looking for more.

Apple Computer's fourth quarter of 2005 was the best operating period in the company's history, according to Apple, but financial analysts were expecting even more from the company in yesterday's earnings release.

Fourth-quarter revenue was $US3.68 billion, up from $US2.35 billion in last year's fourth quarter, but slightly below the expectations of analysts polled by Thomson First Call for revenue of $US3.73 billion.

Analysts have been worried that Apple's skyrocketing growth over the last few years would inevitably fall as its iPod music player becomes almost ubiquitous. However, even though revenue fell short of expectations, iPod shipments were up an astounding 220 per cent compared to last year's fourth quarter.

When it announced its third-quarter results in July, Apple predicted that fourth-quarter revenue would be $US3.5 billion. Analysts had expected the company to do even better during what was considered a strong back-to-school season, but shipments of iPods and Macs were in line with the company's expectations, senior vice-president and chief financial officer at Apple, Peter Oppenheimer, said.

Apple's fourth-quarter profit was $US430 million, or $US0.50 in earnings per share. This compares to profit of $US106 million, or $US0.13 per share, last year. The profit numbers included a $US0.12 per share benefit related to revisions in Apple's tax accounting. Excluding the benefit, earnings per share were $US0.38, slightly ahead of analyst estimates of $US0.37 per share.

The quarter was highlighted by the introduction of the iPod nano in early September. The company sold 1 million iPod nanos in the 17 days between the device's debut and the end of the quarter, Oppenheimer said. In total, 6.45 million iPods were shipped during the quarter, marking the 10th consecutive quarter of sequential increases in iPod shipments, he said.

Demand for the iPod nano far exceeded supply, and Apple had a large backlog of orders heading into the new quarter, executive vice-president of sales and operations for the company, Tim Cook, said.

On the Mac side, Apple shipped 1.23 million units, the second highest quarterly shipment total in the company's history, Oppenheimer said. Desktop sales were up 56 per cent compared to last year, while notebook sales were up 41 per cent.

For the full year, Apple recorded $US13.93 billion in revenue and $US1.34 billion in profit, both of which were company records, Apple said.

The company expects revenue of $US4.7 billion and earnings per share of around $US0.46 for the upcoming quarter.

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Tom Krazit

IDG News Service
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