Apple beats for Q1; iPod sales strong

updated: Apple, which has grabbed headlines recently over the health of CEO Steve Jobs and its withdrawl from the annual Macworld conference, today reported a first quarter profit of $1.61 billion, or $1.78 per share, on revenue of $10.17 billion, beating Wall Street's estimates of $1.39 per share on sales of $9.74 billion, according to a survey by Thomson Reuters. (Statement)

Sales of Mac computers, at 2.5 million, and iPhones, at 4.4 million, were considered in-line. But the company surpassed expectations on iPods, selling 22.7 million while analysts had expected less than 20 million.

Revenue and profits were up from the same quarter a year ago, when the company reported $1.76 per share on revenue of $9.6 billion. The forecast, however, is what Wall Street is watching closely, as most companies these days are talking about lower estimates and workforce reductions that are stemming from the economic downturn. Analysts had been expecting $1.12 for the second quarter and Apple is offering guidance of 90 cents to $1.12 per share, which is being viewed as a good thing because Apple consistently offers conservative guidance and then beats estimates.

As expected, analysts on the conference call today immediately asked about the condition of Steve Jobs, who announced a medical leave of absence earlier this month, and whether COO Tim Cook was the expected successor. CFO Peter Oppenheimer's reply was simple: Jobs is still the CEO and will be involved in key strategic decisions while Cook oversees the day-to0day operations. But Cook immediately chimed in, not to answer the question directly but to stress that the company's executive lineup and thousands of employees - who Cook referred to as "wicked smart" - are all entrenched in Apple's culture and values. His point: "Regardless of who is in what job, the values are so embedded in this company that Apple will do extremely well."

This morning, Bloomberg reported that the Securities and Exchange Commission may be looking into Apple's disclosures about Jobs' health conditions. Still, investors react to strong results. Shares of Apple were up almost 6 percent in regular trading and continued the climb, gaining an additional 9 percent in after-hours trading.

Last quarter, Jobs made a rare cameo on the conference call with analysts, stressing that Apple had no more insight into the twists and turns of the economy than anyone else out there but that the company was financially stable enough to ride the storm. The holiday shopping season, however, was considered to be one of the worst in decades and Apple - like many others - wasn't immune to it. Analyst previews hinted that iPhone sales were down for the holiday quarter but that Mac and iPod sales, as well as iPhone launches in other countries, might offset a drop in performance in the U.S.

Other highlights:

• Cook told analysts that the netbook market is one that Apple is watching closely but is not ready to jump into, calling the current netbooks on the market "inferior products" that Apple customers would not be happy with.
• The company will continue to invest in AppleTV, even though it's still considered to be a hobby. It was worth noting, he said, that the quarter saw AppleTV growth almost triple over the year-ago quarter. The movie rental business helped Apple TV and customers increasingly want to try it out, Cook said. "We believe there's still something fundamentally there for the future," he said.
• The company is not commenting on the next version of the Mac operating system, dubbed Snow Leopard, but did note that there is no specific launch date yet.
• Mac sales in Apple stores in the quarter were 515,000 and about half of those were sold to first-time Mac owners.
• Speaking of Apple stores, there are now 251 in 10 countries, with the first one in Germany opening in the quarter. The company has plans to open an additional 25 stores in 2009 - about half internationally.
• There have been more than 500 million downloads of applications for the iPhone and iPod Touch. The Application store now has more than 15,000 applications. The company would not disclose the breakdown of paid versus free apps downloaded.
• At the end of the quarter, the company had more than $28.1 billion in cash, up from $24.5 billion at the end of the September quarter.
• The company said it will continue to "invest through the downturn" in areas such as engineering, marketing and customer experiences.