Lack of a new iPod model hits Apple

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A lack of new iPod models in the first quarter of this year and the impact of its shift to using Intel processors in all of its computer models led to lower sales at Apple in the first quarter than most analysts had expected.

However, the company’s earnings were stronger than forecasts had suggested thanks to falling component costs, rising software sales and lower expenses than had been expected from the shift to Intel. The jump in its profit margins contributed to a rise of more than 4 per cent in Apple’s shares in new York on Thursday, despite the disappointment over its sales volumes.

For the iPod, the first quarter represented one of the first recent periods when Apple has not had new versions of the music player to help lift sales, raising questions about the extent to which sales of the popular player are maturing.

Apple said it had sold 8.5m iPods in the first quarter, a 60 per cent increase from a year before, but down from the 14.1m sold in the final quarter of last year and around 1m fewer than Wall Street had expected.

Apple executives blamed the decline partly on the 14-week quarter that had boosted sales at the end of 2005, as well as a decision to lift inventory by 550,000 ahead of the current quarter.

Adjusting for those factors, the fall-off was less than the 40 per cent seasonal decline that was typical of consumer electronics products in the first quarter of the year, suggesting the market had not matured, the company added.

Meanwhile, the company said it had sold 1.112m Macs, a 4 per cent growth from the year before. It issued a cautious forecast of sales in the coming quarter, partly because professional buyers in particular are expected to delay purchases of the new Intel-based Macs until some of the most widely-used software applications have been rewritten for the new machines.

Also, the run up to the educational sales season meant that average selling prices of both Macs and iPods were likely to fall in the current quarter, executives added.

Sales for the quarter rose 35 per cent from a year ago, to $4.36bn, while net income increased 41 per cent to $410m, or 47 cents a share. Wall Street had expected revenues of $4.52bn and earnings of 43 cents a share. Lower prices for LCD screens and flash memory chips in particular had helped margins, the company said.

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