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Apple defies economic crunch

Posted: 23 Jan 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Apple sales? economic crisis? iPod revenue?

Despite the economic recession, Apple Inc. posted a six percent sales increase in its latest quarter and record sale for its iPods. The company posted strong profits, in part buoyed by the fact prices for components such as DRAMs, LCDs and NAND flash dropped nearly to variable cost, said chief operating officer Tim Cook.

Apple recorded revenue of $10.17 billion and net profits of $1.61 billion in its quarter ending December 31. That compares to revenue of $9.6 billion and net profit of $1.58 billion in the same quarter of 2007.

The company sold 22.7 million iPods in the quarter, the most in any three-month period to date with all its growth coming from outside the United States. Apple also saw sales of Macintosh computers rise nine percent from last year to 2.5 million units and iPhone sales to hit 4.36 million units.

Apple defied gravity, particularly in the PC market, which International Data Corp. estimated contracted in the last quarter of 2008. Apple's computer sales were fueled by new portables launched in October.

Defying gravity
Portables made up 71 percent of Apple's computer sales in the quarter. The growth came despite the fact the company's desktop sales dove 54 percent in the period, partly because the company has not refreshed its product line since 2007. IDC said industry-wide desktop sales fell about 16 percent in the quarter.

The solid performance has helped Apple stash away a war chest that now amounts to some $28 billion in cash. Apple execs made no comment on questions of how they use the cash for investments or acquisitions.

"Our outstanding results generated over $3.6 billion in cash during the quarter," said Peter Oppenheimer, Apple's chief financial officer in a prepared statement. "Looking ahead to the second fiscal quarter of 2009, we expect revenue in the range of about $7.6 billion to $8 billion.

"It was a very solid quarter all around," said Brain Marshall, a financial analyst with Broadpoint.AmTech. "They beat expectations and March guidance is lower than street numbers but well above whisper numbersso it's positive all around," he said.

The company attributed about half the growth it saw in gross margins to a collapse in prices for commodity components such as DRAMs, LCDs and NAND flash.

"Some [of these] commodities are at or near their variable cost, so further reductions in those costs are not likely but we do expect to see continued favorable pricing for DRAMs, LCDs and NAND flash," said Cook. "[Future price] falls will not be like they were in our [December quarter]" he added.

"That's been the wind at their back for awhile now," said Marshall.

Cook also downplayed the impact on Apple of the ongoing health problems of its CEO, Steve Jobs.

"There is an extraordinary breadth and depth of tenure in the Apple executive team that is leading 35,000 employeesand they are wicked smart," Cook said. "Regardless of who is in the [CEO] job, [Apple's] values are so embedded in the company that we will do well, and I strongly believe Apple is doing the best work in its history," he added.

A perceived lack of candor from Apple Inc. about the health of its chief executive Steve Jobs has triggered an investigation by the Securities and Exchange Commission, according to a report by the Bloomberg news agency.

- Rick Merritt
EE Times

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