Apple reports record-breaking revenues and profits

A day after Apple CEO Steve Jobs jolted the tech world by announcing his third medical leave, the company reported record-breaking revenue and profit for the holiday season.

Apple on Tuesday posted $6 billion in profit and sales of $26.7 billion in the first quarter, which ended Dec. 25. Profit grew a remarkable 78 percent from the same quarter a year ago, while sales, which tend to increase much more slowly than profit, jumped an even more astonishing 71 percent.

By comparison, even fast-growing Google reported its profit grew 32 percent and sales increased 23 percent in its most recent quarter; Apple's results would be spectacular even for a startup a fraction of its size.

"It's in a category of its

own," Gleacher & Co. analyst Brian Marshall said. "This is uncharted territory. There are other companies their size -- HP, IBM -- but they are not growing at 60 percent annually. IBM and HP grew mid-single digits last year whereas Apple grew over 60 percent. It's pretty phenomenal." Above expectations

Apple results far exceeded the expectations of Wall Street analysts, who had anticipated earnings of $5.40 a share on revenue of $24.4 billion for the first quarter.

The highlights of the quarter included: 4.13 million Macintosh computers sold, a 23 percent increase over the year-ago quarter; 16.24 million iPhones sold, an 86 percent jump; and 7.33 million iPads sold.

"It was a

stunner; I mean, they blew out every single number," Needham analyst Charlie Wolf said. "It was just amazing."

"We had a phenomenal holiday quarter with record Mac, iPhone and iPad sales," Jobs said in a statement. "We are firing on all cylinders and we've got some exciting things in the pipeline for this year including iPhone 4 on Verizon, which customers can't wait to get their hands on."

The robust financial numbers for the first quarter softened the blow of Monday's news that Jobs, 55, who has battled pancreatic cancer and had a liver transplant in 2009, would step away from day-to-day operations of Apple for an undetermined time. Jobs, though, said he would remain involved with the company on major strategy.

In a conference call with analysts, Chief Operating Officer Tim Cook, overseeing day-to-day operations while Jobs is on medical leave, brushed off a question about how far out Apple plans its product strategy -- a key concern for many investors imagining Apple without Jobs at the helm some day. Many observers estimate that Jobs' influence on the company's direction and future products extends out two years or so.

"That's part of the magic of Apple," Cook said. "I don't want to let anybody know our magic because I don't want anybody copying it."

Cook tried to instill confidence in investors with Apple's management. "The team here has an unparalleled breadth and depth of talent and a culture of innovation that Steve has driven into the company, and excellence has become a habit," he said.

Apple executives, though, did not address the most pressing question facing the Cupertino company: the health of Jobs, who did not disclose the reason for his medical leave.

With or without Jobs, the company has lost none of its swagger.

"We are not sitting still," Cook said of the iPad, which is expected to face a lot of new competition this year. "We have an incredible first-mover advantage. We have a large number of apps and a huge ecosystem. We are very, very confident about entering into a fight with anyone."

Last year, Apple executives indicated there was a chance the iPad could eat into sales of the company's MacBook laptop business. But after posting the highest quarterly sales of Macs ever, Cook dismissed fears of cannibalization of the company's traditional computing business.

Investors, confident in the Cupertino company at least for the medium-term, responded with relative calm to the latest turn in Jobs' health. Shares of Apple fell more that 4 percent at the open of the markets Tuesday but rebounded as the day progressed, closing 2.25 percent down to $340.65. Shares of Apple nudged up 1.3 percent in after-hours trading, to $345.02

Growing confidence

Not only have investors come to accept the questions around Jobs' medical status, they also have growing confidence in the company's ability to continue to execute exceptionally well, with or without the co-founder sitting in the CEO's office, Kaufman Bros. analyst Shaw Wu said.

"Investors are pretty objective about this," he said. "As long as they keep putting up numbers like they have, the stock is going to work. It's going to be a great investment."

For the current quarter, the normally conservative Apple forecasts earnings per share of $4.90 on revenue of $22 billion -- more than the consensus of analysts, who predict earnings per share of $4.47 on revenue of $20.7 billion, according to Thomson One Analytics.

The unusually aggressive guidance is tied to Apple's release of the iPhone on Verizon's network beginning early next month.

"It's all about the Verizon iPhone," Wu said. "There is a lot of pent-up demand. It's like Christmas in March."

Contact John Boudreau at 408-278-3496.

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