News Column

Apple Profit Nearly Doubles as Sales of iPhones Surge

April 21, 2011

by Jefferson Graham


The iPhone just keeps on dialing up profits.

Apple said it sold 18.65 million iPhones in the latest quarter, up 113 percent from the year-ago period, fueled by the addition of Verizon as a second U.S. carrier and foreign growth.

Apple reported a 95 percent profit jump with second-quarter earnings of $5.99 billion on $24.6 billion in revenue compared with $3.07 billion in earnings on revenue of $13.5 billion a year ago. Revenue was up 83 percent compared with a year ago.

The numbers would have been higher had Apple been able to meet demand for its latest hit, the updated iPad 2.

Sales for the iPad were lower than the 7 million units that analysts expected. In a conference call with analysts, Apple Chief Operating Officer Tim Cook said a confluence of events resulted in the lower numbers.

The previous iPad was discontinued, and consumers waited for the new one before buying. The iPad 2 was only on sale for two weeks of the quarter.

"I bet 75 percent of the iPad sales in the quarter were for the first one," says Gene Munster, a Piper Jaffray analyst. "They just couldn't produce enough of them."

Cook called supply constraints "unprecedented," and "the mother of all backlogs." Munster believes it will take Apple another few months to get iPad 2 production under control.

The situation in Japan -- hit hard by an earthquake, tsunami and radiation leakage at a nuclear power plant -- was thought to have played a role, but Cook said that it didn't and that he didn't expect any shortfalls from parts suppliers in the coming months.

Munster says that if there was "even a hint," of a problem, Apple would have addressed it on the call with lower guidance numbers for the new quarter.

"They had every opportunity to say it -- people were expecting them to say it -- but they didn't."

Cook is running much of the day-to-day calls during Steve Jobs' open-ended medical leave. On the conference, Cook said that during his leave, Jobs has been at Apple on "a regular basis," and that he continues to be involved in strategic decisions. In the press release announcing the earnings for Apple's second fiscal quarter, Jobs -- not Cook -- is quoted.

Apple sold 3.8 million Macintosh computers in the quarter. But its once highflying iPod continues to decline, with 9 million sold in the quarter, down 17 percent from the year-ago period.

Apple stock rose $13.44 in after-hours trading to close at $355.85.

Source: Copyright USA Today 2011

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