Apples Mac sales shine, iPhone lags Street estimates

Written by Reuters | San Francisco | Updated: Jan 28 2010, 04:16am hrs
San Francisco, Jan 26: Apple Inc posted better-than-forecast Mac sales and strong growth in Asia and Europe, but iPhone shipments came in just below Wall Street's somewhat heightened expectations.

The stock edged 1% higher in after-hours trading, building on a 2.7% rise on Nasdaq during the day, and provided Apple a boost heading into Wednesday, when it is expected to launch a highly touted tablet computer. International sales made up nearly 60% of Apple's revenue in the quarter, with sales more than doubling in the Asia Pacific and rising 40% in Europe.

Apple said on Monday it shipped 8.7 million iPhones in the holiday quarter, double the year-ago figure but just short of the Wall Street target of roughly 9 million. Apple's iPhones compete with Research in Motions BlackBerry and other smartphones.

But Mac sales continued to show momentum, rising 33% from a year ago to 3.36 million units versus analysts' average estimate of about 3 million. Mac sales were very strong, which more than offset what might be perceived as a ho-hum iPhone number, said Bill Kreher, an analyst with Edward Jones. Maybe some on the Street were getting a little euphoric with their expectations on the iPhone.

Gross margin rose to 40.9% from 37.9% a year ago on a continued shift toward higher-margin products like Macs and iPhones. Apple said its margins benefited from more favorable component costs, higher revenue and better leveraging of its fixed costs.

Margins appear very solid, and it seems like iPhone (results) were OKnormally it's a blowout. That was my only disappointment, said Sushil Wagle, vice-president of the technology group at Riversource Investments.

As Wall Street looks ahead to Apple's new product announcement on Wednesday, the holiday-quarter results have provided the company with a strong start to the week.

Apple, which has surpassed Wall Street targets for earnings per share by at least 15% in the past four quarters, adopted new accounting standards for its fiscal first quarter that generated some initial confusion among investors, as they rendered Wall Street's estimates for the period unusable. The company posted net income of $3.38 billion, or $3.67 a share in the fiscal first quarter ended December 26, up nearly 50% from $2.26 billion, or $2.50 cents a share, in the year-ago period. Revenue surged 32% to $15.68 billion from $11.9 billion.

Under new accounting standards that affect products that combine software and hardware, Apple will be able to recognize substantially all of the revenue from the iPhone and Apple TV when they are sold.