Apple Revenues Up 43% On Mac Sales

However, the company saw a slowdown in sales of Leopard, the latest version of the Mac OS X operating system.
Apple on Wednesday reported a 43% jump in revenues in the fiscal second quarter and a 36% increase in profits, as Mac sales continued to soar despite a down economy.

The company shipped 2.3 million Macs in the quarter ended March 29, a 51% increase over the same period a year ago. Revenues increased 54%.

Apple shipped 10.6 million iPods, a 1 % increase from a year ago; while revenue from the portable media players rose by 8%. The company shipped 1.7 million iPhones in the quarter, which brought the total number of iPhones sold since its release last summer to 5.7 million. Company executives reiterated projections of selling 10 million iPhones this calendar year.

Apple reported total revenues for the quarter of $7.51 billion, compared to $5.26 billion a year ago. Net income grew to $1.05 billion; or $1.16 a share, from $770 million, or 87 cents a share. For the third fiscal quarter, Apple forecast earnings of $1 per share on revenue of $7.2 billion.

"We're delighted to report 43% revenue growth and the strongest March quarter revenue and earnings in Apple's history," Apple chief executive Steve Jobs said in a statement. "With over $17 billion in revenue for the first half of our fiscal year, we have strong momentum to launch some terrific new products in the coming quarters."

The company's gross margin, a key indicator of profitability, fell in the second quarter to 32.9% from 35.1% a year ago, drawing attention from financial analysts during a conference call with Apple executives.

The drop was primarily due to a slowdown in sales of Leopard, the latest version of the Mac OS X operating system, Peter Oppenheimer, chief financial officer for Apple, said. The drop was expected in the second fiscal quarter, given that Leopard, a high-margin product, was released in the first quarter. Operating systems traditionally sell very well the first quarter they are available, but then loose steam very quickly. Apple sold 170 million copies of Leopard in the first fiscal quarter, but that number dropped to 40 million last quarter, the CFO said.

Oppenheimer declined comment on whether a slowing economy would impact Apple sales later. Rather than predict "economic headwinds," Oppenheimer said, "we're focused on managing our business." Traffic to apple stores, however, was up more than 50% from a year ago. The company currently has 208, with all but 27 in the United States. Apple plans to open more than 40 stores this year.

Apple executives acknowledge a tight supply of iPhones during the quarter, with some U.S. Apple stores reportedly running out. "We sold more than expected," Tim Cook, chief operating officer for Apple, said. "We expected a sharper seasonal decline (following the holiday shopping season)."

In the U.S., supplies were particularly tight at some Apple stores. Cook attributed the unexpected demand to people buying the devices to unlock them so they can be used on carriers other than AT&T, Apple's exclusive partner in the U.S. "We do believe the number continues to be significant," Cook said of people unlocking iPhones.

Apple executives confirmed a report on Wednesday by Forbes magazine that Apple had bought PA Semi, a maker of low-power PowerPC processors. Apple had used IBM PowerPC chips in its Mac computers before switching to Intel.

Beyond confirming the purchase, Apple executives provided no other details. "We occasionally buy small technology companies from time to time, and we typically don't comment on our purpose or plans," Oppenheimer said.