Surging sales of Apple iPods, iPhones boost profit and revenue

Shrugging off a bad economy, Apple Inc. on Wednesday reported a 15.2% jump in profit and an 8.6% uptick in revenue for its first quarter, juiced by sales of its iPhones and iPods.

“Apple continues to surprise,” said Hudson Square Research analyst Daniel Ernst, who noted that consumer jitters about job losses and lower housing values did not prevent them from buying millions of the relatively pricey iPod Touches, which sell for $229 to $399 depending on the capacity of the disk drive.

“People were starting to get nervous about sales of expensive phones in a down economy,” Ernst said.

Trip Chowdhry, analyst with Global Equities Research, credited Apple’s App Store for helping boost the growing popularity of iPhones and iPod Touches.


The App store is a segment within Apple’s iTunes online store at which people can download bite-sized applications for their iPhones or iPod Touches. Many of the 35,000 applications on the site are free, and most sell for somewhere between 99 cents and $10. Apple said it expected consumers to have downloaded 1 billion apps as of sometime today.

“It’s clear that iTunes and the App Store are catalysts for driving sales of iPods and iPhones,” Chowdhry said.

The Cupertino, Calif. company rang up $1.21 billion in net income, or $1.33 a share, on $8.16 billion in sales of iPhones, iPods and Macs in its first quarter. A year earlier, Apple posted $1.05 billion in profit, or $1.16 a share, on revenue of $7.51 billion.

Its shares, which fell 25 cents to $121.51 before the earnings announcement, surged $3.59 in after-hours trading following the news release.


“We feel great about our performance, especially in this environment,” Apple Chief Operating Officer Tim Cook said in a conference call with analysts.

The company sold 11 million iPods, up 3% from a year earlier. It also sold 3.79 million iPhones, up 123%. In total, shoppers have snapped up 37 million iPhones and iPod Touches. But sales of its Macintosh computers fell 3% to 2.22 million units compared with last year, when Apple launched its ultra-thin MacBook Air laptop. Apple Chief Financial Officer Peter Oppenheimer noted that the decline was smaller than the 7% drop experienced in the first quarter by the broader personal computer market as consumers delay new purchases and make do with their current PCs.

Some of that drop was due to lower sales to schools, which account for about 15% of Apple’s PC sales, Ernst said.

“Every state budget is under pressure right now, which puts pressure on school spending on things like computers,” he said.


Sales of Apple’s iPhones helped lift the shares of another company. Telecommunications giant AT&T; Inc. said Wednesday that it sold 1.6 million iPhones to customers during the first quarter, more than 40% of them to new customers. It had sold 1.9 million during the gift-fueled December quarter, and many analysts had expected a bigger drop in iPhone sales in the first quarter. Shares of the Dallas-based carrier rose 46 cents to $25.74.

“More than half of AT&T;'s new subscribers came through iPhone sales,” said Ronald Gruia, telecommunications analyst with Frost & Sullivan.

AT&T; earned $3.1 billion in profit, or 53 cents a share, on revenue of $30.6 billion. That’s down from $3.5 billion in profit, or 57 cents a share, on sales of $30.7 billion a year earlier.

In the past, AT&T;'s profits were squeezed as it subsidized sales of iPhones for which it is the exclusive carrier in the United States. Now, however, it stands to reap the benefit as iPhone owners sign up for data and voice services on their devices.


“A good portion of the company’s margins in the quarter can be attributed to the iPhone because iPhone customers spend more on data and voice service” than subscribers who don’t own iPhones, Gruia said.