Originally posted by smakawhat:
Stock down $2.34 for the day....
October 12, 2005
Apple's Profit Quadruples, Yet Stock Falls By LAURIE J. FLYNN
SAN FRANCISCO, Oct. 11 - Apple Computer reported Tuesday that its earnings quadrupled in its fourth quarter on strong demand for both iPods and Macs. But overall sales of iPods fell short of analysts' high expectations, causing Apple shares to plunge in after-hours trading.
Apple's report came a day before a product announcement that has the industry speculating about the company's next direction. Much of the speculation has focused on the possibility of an iPod that can play video, accompanied by music video sales through Apple's iTunes service.
And while iTunes continues to dominate online music sales, the competitive pressure grew on Tuesday as Microsoft agreed to promote the Rhapsody music service, a rival to iTunes, after settling an antitrust suit by Rhapsody's owner, RealNetworks. [Page C2.]
Apple shares rose $1.22, to close at $51.59, before its financial report was released, only to drop 10.5 percent after hours, to $46.18 - despite the company's emphasis on what Steven P. Jobs, the chief executive, called "the best year in Apple's history."
It said net income for the fourth fiscal quarter, ended Sept. 24, rose to $430 million, or 50 cents a share, including a 12-cent benefit from several tax-related items. That compared with $106 million, or 13 cents a share, in the quarter a year earlier. The earnings outpaced analysts' consensus forecast of 37 cents a share. But Apple's revenue fell short of expectations, at $3.68 billion, a 57 percent increase from a year earlier. Analysts, though, had been expecting sales of $3.73 billion.
For the fiscal year, Apple's revenue increased 68 percent, to $13.93 billion. Net income for the year rose 384 percent, to $1.335 billion.
Peter Oppenheimer, the chief financial officer, said Apple benefited in the quarter from a combination of strong Mac sales, a healthy back-to-school season and continued brisk demand for the iPod.
The fourth quarter reflected Apple's introduction of the iPod Nano, a pencil-thin model that replaced the popular iPod Mini, which had been the company's best-selling music player.
Timothy D. Cook, the executive vice president for worldwide sales and operations, called the demand for the iPod Nano "staggering," and said Apple sold more than a million units in the 17 days of the fourth quarter that it was available.
But executives acknowledged that Apple could have sold many more iPod Nanos. "We ended the quarter with an enormous backlog in iPod Nanos," Mr. Cook said. "At this point, I can't project when supply will meet demand."
Apple's revenue from iPod sales in the fourth quarter was $1.21 billion, up from $537 million a year earlier. The company, which has roughly 75 percent of the worldwide share of portable music players, shipped a total of 6.5 million iPods in the quarter, an increase from two million in the quarter last year.
Analysts, though, had predicted that Apple would sell 7 million to 7.2 million units. A Goldman Sachs report forecast sales of about 7.8 million iPods in the quarter.
Charles R. Wolf, an analyst with Needham & Company, said the highlight of the quarter was growth in Mac sales, along with strength in the education market. In the quarter, Mac shipments increased 48 percent, to 1.2 million units, while revenue for the company's computer business increased 31 percent, to $1.61 billion.
"They're growing at three to four times the personal computer market," Mr. Wolf said.
He added, though, that Apple had a notable decline in sales of the iPod Shuffle in the period, as distinct from sales of its other iPods.
Barry Jaruzelski, a consultant with Booz Allen Hamilton, said: "It may not be the sort of caffeinated growth rates we've seen, but it still was a good performance. They've gone from being a computer company to a consumer electronics company."
Apple said that the number of customers visiting its stores grew sharply in the quarter and that it now has 124 stores open. Average revenue for each store increased to $5.7 million, from $4.6 million, the company said.
Looking ahead, Apple said it expected to report a 35 percent increase in revenue this quarter, to $4.7 billion, from the fiscal first quarter last year. Apple's first quarter includes the holiday buying season, as well as the first full quarter of sales of the iPod Nano.
