Apple Earnings Up, but Stock Falls on Outlook
Published: January 23, 2008
Apple beat Wall Street expectations with its earnings report Tuesday, but its shares fell more than 11 percent in after-hours trading as investors fretted over its prospects.
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David Paul Morris/Getty Images
The Macworld Expo this month in San Francisco. Revenue from Mac computers is up 47 percent.
Apple earned $1.58 billion, or $1.76 for each diluted share, in the first quarter of fiscal 2008, compared with $1 billion, or $1.14 a share, in the period a year earlier. Revenue was $9.6 billion, up from $7.1 billion.
But while Apple executives paraded those as record-setting figures, investors focused on projections for the next quarter, which were lower than what analysts had expected. Apple said it expected revenue of about $6.8 billion for the second quarter, or diluted earnings of 94 cents a share. Wall Street was forecasting profit of $1.09 a share on revenue of $7 billion.
Peter Oppenheimer, Apple’s chief financial officer, gave two reasons for the lower forecast: a decline in software sales and the normal slowdown in business after Christmas.
When asked whether the lumbering economy could be a factor in Apple’s earnings outlook, Mr. Oppenheimer said: “We’ll leave the economic forecasting to others.” Instead, he said, “our focus is on managing our business.”
A slowdown in the economy is likely to hurt technology companies like Apple, which are dependent on consumers shelling out hundreds of dollars for their products. Just last week, Sprint Nextel announced that it was losing customers more quickly than expected, raising fears that spending on cellphones and other devices was slowing across the industry. Intel was also cautious about its financial outlook last week, in part because of concerns about a recession.
A. M. Sacconaghi Jr., a senior analyst at Bernstein Research, said one reason for concern about Apple was that domestic sales of the iPod were less robust than the company had expected.
Indeed, Mr. Oppenheimer of Apple said that sales of the iPod in the United States were little changed in the quarter, although iPod sales abroad were quite strong. (Over all, Apple saw a 5 percent increase in iPod sales in the first quarter compared with the period a year earlier.)
What is worrisome, Mr. Sacconaghi said, is whether the flat domestic iPod sales are a harbinger of things to come for other Apple products.
“That’s the big question,” he said. “If they feel it here, could they feel it in other products and other parts of the world?”
Apple shares fell $5.72, or 3.5 percent, to close at $155.64. They were down more than $17 in after-hours trading.
The iPhone remained a bright spot for the company. Apple sold 2.3 million in the quarter, according to Mr. Oppenheimer, and is on track to sell 10 million in 2008, as projected.
Apple shipped 2.3 million Macintosh computers, and revenue from Macs grew 47 percent from the year-ago quarter.
Mr. Sacconaghi said sales of Mac computers could start showing lower year-over-year growth. IPod sales could suffer, he said, because the company has been slow to update its cheaper iPod models, and holiday sales of MP3 players at the retailer Best Buy were down.
At the Macworld Expo last week, Steven P. Jobs, Apple’s chief executive, made several announcements about new products or expanded services, including a new ultralight computer called the MacBook Air that, while elegant, has limited memory. Mr. Jobs also announced a deal with all of Hollywood’s major studios to allow digital movie rentals through the iTunes Store.
http://www.nytimes.com/2008/01/23/technology/23apple.html?em&ex=1201237200&en=bffa10625a9627be&ei=5087%0A
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