Try the new FT.com

July 25, 2007 11:23 pm

Apple surges despite iPhone stumble

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

Apple’s earnings surged by 73 per cent on unexpectedly strong profit margins in the latest quarter, even though the company disclosed that sales of the new iPhone at its launch had fallen well below most analysts’ estimates.

The US technology company also reported strong sales of the iPod, while the “halo effect” from its digital music business helped sales of its computers to grow at two and a half times the rate of the market as a whole.

The shares rose 8 per cent on revenues and earnings that outstripped Wall Street’s optimistic forecasts, though the company issued a cautious outlook for the current quarter.

The company said it and AT&T had sold 270,000 iPhones in the first 30 hours the device went on sale, less than half the level that some Wall Street forecasts had suggested.

Technical glitches meant that only 146,000 had been activated by the end of that period, but those problems had since been overcome, said Peter Oppenheimer, chief financial officer.

Despite a start that fell short of the hype that surrounded the launch, Apple executives stuck by the company’s earlier forecast that sales would hit 10m in 2008, and predicted that 1m iPhones will have been sold by the end of September.

Overall, Apple’s revenues in the latest quarter rose 24 per cent, to $5.41bn, driven by a 36 per cent increase in revenues from its desktop and laptop computers. More than 9.8 iPods were sold in the period, or 21 per cent more than a year before, though revenues from the music player rose only 5 per cent.

Mr Oppenheimer attributed Apple’s jump in profits in part to lower than expected component costs, a shift towards more profitable products, and higher sales through its company-owned stores. As a result, the company’s gross profit margin jumped to 36.9 per cent, up from 30.3 per cent a year before and well ahead of forecasts.

Apple also benefited from a retail strategy that has helped to support its higher-margin sales. Revenues from its stores rose by 33 per cent to more than $900m, the company said.

That helped push net income up to $818m, or 92 cents a share, compared to Wall Street expectations of 72 cents.

However, the company struck a far more wary stance on the current quarter, predicting revenues of $5.7bn and earnings of 65 cents a share. Gross margins would slump to 29.5 per cent, predicted Mr Oppenheimer, blaming the fall on an expected rise in component costs, promotions related to the “back-to-school” sales season and unspecified changes in its product line-up.

Copyright The Financial Times Limited 2017. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

EMAIL BRIEFING

Sign up to #techFT, the FT's daily briefing on tech, media and telecoms.

Sign up now

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE