Sevenfold leap in iPhone sales lifts Apple

Apple reports $1.23bn profit in the latest quarter, after investors push the firm's stock 75 per cent higher this year.

Apple sales of Macintosh computers climbed to 2.6 million, 4 per cent higher than last year. But sales of iPods fell 7 per cent to 10.2 million.

Steve Jobs was "thrilled" with the numbers. The Apple chief executive could not hide his delight after the California-based technology giant reported US$1.23 billion (Dh4.52bn) profits in its latest quarter, up 13 per cent on the same period last year, thanks to surging sales of iPhones and Macintosh computers. Apple also revealed sales for the period increased by 12 per cent, defying the global recession, to $8.34bn from $7.46bn.

"We're making our most innovative products ever and our customers are responding," Mr Jobs said. "We're thrilled to have sold over 5.2 million iPhones during the quarter and users have downloaded more than 1.5 billion applications from our App Store in its first year." Sales of iPhones rocketed more than sevenfold in the third quarter over the same period last year, while sales of Macintosh computers climbed to 2.6 million, 4 per cent higher than last year.

But sales of iPods, the company's MP3 music player, fell 7 per cent to 10.2 million. Peter Oppenheimer, Apple's chief financial officer, said: "We're extremely pleased to report record non-holiday quarter revenue and earnings and quarterly cash flow from operations of $2.3bn. "We are very proud of this result, particularly given the economic climate around us." Andy Hargreaves, an analyst at Pacific Crest Securities, said: "The numbers are great. Their gross profits continue to surprise people and there is a return to product momentum, a return to growth in the Mac business. And then the iPhone is doing tremendously well and that is a potent combination."

Although the iPhone is often thought of as a consumer device, Apple said nearly one in five Fortune 100 companies have bought at least 10,000 units and it is unable to make enough iPhone 3GS models to meet demand. The smartphone segment continues to grow more crowded with competitors, but Tim Cook, Apple's chief operating officer, said the company was "years ahead of other people" in its competitive position.

Ronald Gruia, an analysis at Frost and Sullivan, said: "The iPhone is the biggest driver right now, because the profitability is really high. It's been an absolute success." However, there had been some concern about margin pressure, given Apple's price cuts on its products and higher component costs. Although sales of Mac computers increased, revenue in the division fell 8 per cent compared with a year ago as average selling prices came down, a trend seen throughout the PC industry.

Apple still posted a gross margin of 36.3 per cent, above the 34 per cent some analysts predicted, barely changed from 36.4 per cent in the last quarter and up from the 34.8 per cent announced a year ago. Shaw Wu, an analyst at Kaufman Brothers, said: "Apple continues to execute in this tough environment. They do the hardware, software and service, and that really allows them to have a leg up against competitors."

Investors have pushed Apple's stock about 75 per cent higher this year, well ahead of other big technology companies' shares. The results demonstrated the consumer appeal of Apple's products despite a troubled economy that has dented sales at competitors selling less expensive products. But as iPod sales slow, analysts see alternative catalysts on the horizon, with the expected launch of an iPhone in China and a rumoured tablet PC or internet device in the works.

* with Agence France-Presse and Reuters [e-mail]