Apple Posts Profit Of US$63 Million, Sales Of US$2 Billion

by , 5:15 PM EST, January 14th, 2004

Apple has reported its best results in years with the release its numbers from the December quarter, Q1 of Apple's fiscal year. The company announced a profit of 17 cents per diluted share, or US$63 million, on sales of US$2.006 billion, up some 36% over last year's US$1.47 billion. The company hasn't announced sales over the US$2 billion mark since the December quarter of 1999, four years ago, when Apple posted sales of US$2.34 billion. Apple had projected sales of US$1.9 billion for the quarter.

Apple says that US$3 million in profits came from an after-tax investment profit, which says that US$60 million came from operations. Dell is the only other PC vendor to earn a profit from its PC operations.

Looking forward, Apple expects to post sales of US$1.8 billion for the current March quarter. That, too, would represent a significant increase from recent years. Earnings for the quarter are being projected at being from 8 cents to 10 cents per diluted share.

In addition, Apple also shipped 829,000 Macintosh units, which is up 12% from the same period a year ago. It remains to be seen if that increase will be enough to have earned Apple a higher market share. Gross margins for the company were 26.7%, down from last year's 27.6%.

Perhaps the biggest profit center for Apple was the iPod, which, as previously announced at Macworld, saw more than 730,000 units sold. That figure represents an increase of 235% over the previous year. According to Merrill Lynch analyst Steven Milunovich, iPods accounted for some US$69 million in profits for Apple in all of fiscal 2003, with much of that coming in this last quarter.

Apple was also able to increase its cash holdings yet again this quarter. The company now holds some US$4.8 billion in cash and short-term holdings. That represents an increase of US$225 million from the previous quarter.

We will have more information on the quarterly results with a detailed report on Apple's financial conference call later today.

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The Mac Observer Spin:

This is a terrific quarter for Apple. Absolutely massive, in fact. We've seen a big increase in unit shipments of Macs (though the iPod stole the show), and that's important. Apple needs to gain market share, not just so that TMO's editor-in-chief can win The Bet with TMO columnist John Kheit, but so that the market place perceives the company as healthy and vital. Apple's successes in the music world, coupled with the G5 and Apple's successful portable line, might be helping Apple in this department, but we are awaiting market share numbers for not only this quarter, but the September quarter, as well. Hopefully those will surface Soon™.

So far, the initial headlines coming from the mainstream world are positive. In the recent past, the mainstream has often chosen to focus on a negative aspect of Apple's financial results. It will be interesting to gauge the market's reaction this time around.

One more thing about these results: Apple's profit was relatively small in comparison to its sales. For instance, when Apple posted sales of US$2.34 billion for Q1 of 2000 (the December quarter of 1999), its profits were US$178 million, not counting non-recurring charges and profits. Likewise, in Q1 of 1999 (December quarter of 1998), Apple posted sales of US$1.7 billion, with a profit of US$123 million, not counting non-recurring profits.

Compare that to a profit of US$60 million on sales of US$2 billion, and our first question is where'd all that money go? Well, it likely went to R&D, as Apple is one of the only PC company on the planet doing any R&D on things such as new products and technologies. Wall Street is likely to punish Apple for that, and to criticize the company's small profits. The Street has often taken a short-term view on things like R&D, so we'll see what happens. We'd rather see Apple investing in the future.