Apple posts highest Q4 revenue in almost a decade

Apple's iPod music player continues to help the company grow revenue at dizzying rates, leading Apple to its highest fourth-quarter revenue in nine years, the company said.

Revenue for the period ending September 25 was $US2.35 billion, up 37 per cent from the $US1.72 billion in revenue recorded during last year's fourth quarter. Analysts polled by Thomson First Call had expected Apple to record $US2.15 billion in revenue.

Apple increased Macintosh shipments by 6 per cent and iPod shipments by an amazing 500 per cent compared to the fourth quarter of last year, the company said.

A total of about two million iPod music players were shipped during the quarter, Apple said.

Net income for the quarter was $US106 million, up from the $US44 million in net income posted during last year's fourth quarter. This translates to earnings per share of $US0.26.

Apple's music business is quickly becoming one of its crown jewels. For the first time, the company earned more revenue from the iPod during the quarter than from any other product. Total revenue from iPod shipments was $US537 million with revenue from PowerBook sales trailing at $US419 million.

The increase in iPod shipments was driven by the introduction of the iPod Mini in Europe and the rollout of the fourth generation of the product, Apple's chief financial officer, Peter Oppenheimer, said.

HP accounted for about six per cent of iPod shipments during the quarter, he said.

Apple enjoys a leading position in the markets for both music players and online music downloads, according to market research released this week.

The company planned to add more features over the upcoming year to build on that position, Oppenheimer said.

Like other PC companies, Apple has struggled with some inventory problems this year. However, Apple is trying to keep up with demand for its products while other PC companies that use processors from Intel are having to deal with excess inventory.

Shipments of both iMac and Power Mac systems fell in the fourth quarter compared to last year, as processor supply problems continued to affect Apple's shipments, Oppenheimer said.

Increased shipments of Apple notebooks accounted for the overall growth in shipments of Macintosh systems.

IBM supplies the processors for Apple's Power Mac G5 and iMac G5 systems.

The supply of those processors had remained constrained throughout the fourth quarter, although the situation improved toward the end of the quarter, executive vice-president for worldwide sales and operations at Apple, Tim Cook.

Apple has complained several times this year about IBM's ability to supply adequate numbers of the G5 processor.

IBM has admitted that it has had production problems at its manufacturing facility in East Fishkill, New York, earlier this year, but said in May that the company was making progress toward reversing that situation.

Apple had expected supplies of the 2.5GHz G5 processors to be short during the quarter, but the company received even fewer chips than anticipated, Cook said.

Supplies of the 1.8GHz and 2GHz G5 processors were supposed to be in balance with demand, but that didn't happen either, he said.

Supply is expected to come in balance with demand during Apple's first quarter, Cook said. However, the company hedged its statements about the 2.5GHz processor, saying that while it expected all of its systems to meet demand requirements it couldn't be sure about Power Mac systems with that particular chip.

One of the other reasons behind Apple's resurgence was the growth of its retail store network, Oppenheimer said.

Revenue from Apple's retail stores increased 95 per cent compared to last year, he said.

Apple would soon open its first European store in London and planned to expand its retail operations in both Europe and Asia over the coming fiscal year, he said.

For the 2004 fiscal year, Apple recorded revenue of $US8.28 billion and net income of $US276 million, both substantial increases over the company's results in 2003.

The company expects revenue to grow to between $US2.8 billion and $US2.9 billion during the consumer-focused first quarter of its fiscal year, it said. Earnings per share during that quarter are expected to fall between $US0.39 and $US0.42, the company said.

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Tom Krazit

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