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Apple Profit Rises 73%; IPhone Meets Most Estimates (Update3)

By Connie Guglielmo

July 25 (Bloomberg) -- Apple Inc. said third-quarter profit soared 73 percent, more than analysts predicted. The shares rose 8.8 percent after orders for Macintosh computers set a record and shipments of the new iPhone met most estimates.

Net income increased to $818 million, or 92 cents a share, from $472 million, or 54 cents, a year earlier, Cupertino, California-based Apple said today in a statement. Sales rose 24 percent to $5.41 billion in the quarter ended June 30, topping analysts' estimates of $5.32 billion.

Mac sales jumped by a third after Apple introduced new laptop models with faster chips, and iPhone purchases totaled 270,000 in the quarter, allaying concerns earlier this week that the phone's debut may have been disappointing. Sales of the iPod media player also topped expectations.

``They sold more iPods than expected and there was some concern there would be a shortfall there. That didn't happen,'' said Romeo Dator, a San Antonio-based portfolio manager at U.S. Global Investors Inc., which has about $4.5 billion under management including Apple shares. ``Mac sales were very strong.''

Apple shares jumped $12.14 to $149.40 in extended trading after the report. They had risen $2.37 to $137.26 at 4 p.m. New York time in Nasdaq Stock market trading. The stock has climbed 62 percent this year.

Profit this quarter will be 65 cents a share on sales of $5.7 billion, Apple said in the statement. Analysts were anticipating profit of 84 cents and revenue of $6.18 billion, according to a Bloomberg survey.

Mac Sales

Apple sold 1.76 million Macs in the quarter. MacBook and MacBook Pro notebooks remained the company's most popular machines, accounting for almost two-thirds of its computer revenue.

IPod shipments rose 21 percent to 9.82 million. New iPod models with the iPhone's 3.5-inch color touch screen are expected in the next few months, said UBS AG analyst Benjamin Reitzes in New York. That may further boost sales, he said.

Chief Executive Officer Steve Jobs, 52, first introduced the iPhone in January, fueling expectations that Apple may be on the verge of a new wave of growth. Once focused only on personal computers, the company released its iPod media player in 2001, a product that has sold almost 110 million units.

Optimism for the iPhone helped Apple surpass a market value of $100 billion for the first time in May. The device combines the features of the iPod with a Web-surfing mobile phone, packaging them in a slim case with a touch screen.

Activation Rates

AT&T Inc., Apple's exclusive mobile-service provider in the U.S., said yesterday it activated 146,000 iPhones in the first two days after the device went on sale June 29. Concern that iPhone sales may be lower than estimated sent Apple's shares tumbling the most in six months.

AT&T Chief Financial Officer Rick Lindner said many of the phones sold weren't immediately activated. As many as 10,000 buyers had trouble signing up for the required two-year service. San Antonio-based AT&T, the largest U.S. phone provider, sold out of iPhones at almost all its 1,800 stores in the first 24 hours.

Jobs's goal is to sell 10 million iPhones in calendar 2008, capturing 1 percent of the market. Reaching that target will depend on winning customers away from Nokia Oyj, Motorola Inc., Palm Inc. and Research In Motion Ltd.

Apple is selling two iPhones: a 4-gigabyte model for $499 and an 8-gigabyte version for $599. That makes it $200 to $400 more expensive than other advanced phones.

The iPhone didn't contribute much to Apple earnings last quarter because the company is spreading out revenue from each sale of the device over two years.

The iPhone and its accessories accounted for revenue of $5 million, Apple said. The company won't begin recognizing revenue from AT&T until this quarter.

To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net