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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Facebook documents reveal strong profits: source

Facebook CEO Mark Zuckerberg speaks during a news conference at Facebook headquarters in Palo Alto, California May 26, 2010.

Credit: Reuters/Robert Galbraith

By Matthew Goldstein and Alexei Oreskovic

NEW YORK/SAN FRANCISCO | Thu Jan 6, 2011 8:59pm EST

NEW YORK/SAN FRANCISCO (Reuters) - Facebook is generating profits at a faster-than-expected rate, and will likely attract so many investors this year that it will have to disclose financial data similar to a publicly traded company by April 2012, according to a document distributed by Goldman Sachs.

The move could set the stage for a much-anticipated Facebook initial public offering in 2012, though there is no guarantee that the social networking company would choose to sell shares to the public simply because it is required to open its books to the public.

Facebook, the world's No. 1 Internet social network, earned $355 million in net income in the first nine months of 2010 on revenue of $1.2 billion, according to a source who received the documents that Goldman Sachs provided to its clients on Thursday.

Goldman began hand-delivering copies of the 101-page private placement memorandum for a $1.5 billion Facebook offering to its wealthy customers a little after lunchtime in New York, according to the source.

The Goldman customer said he received a separate six-page financial statement containing information on the social networking company.

The document provides some of the most detailed financial information yet about Facebook, which Goldman recently valued at $50 billion in a separate, $450 million funding.

That valuation is high, but not outrageous based on the glimpse into the company's financial performance and the growth that it implies, said Ryan Jacob, of the Jacob Internet Fund.

"It just shows you that these businesses can generate 30 percent to 40 percent, potentially, operating margins," he said. "They probably did at least $500 million in net income in 2010."

Wedbush Securities analyst Lou Kerner, who owns Facebook shares, said, "The revenue kind of are in line with our expectations."

"The surprise was on the profitability. I think it highlights that Facebook is likely to have margins that are going to exceed Google's margins," he said.

The memo said Facebook is likely to have more than 500 shareholders this year, according to another person who reviewed the documents, and that the company may begin filing public reports of its financial performance by April 2012.

(Not everyone thinks Facebook's valuation is justified. For a Reuters Insider video, "Facebook Financials Don't Back Valuation," click here [ID:nRTV176273]))

THE BIG 500

United States securities regulations require companies with more than 499 shareholders to disclose financial information.

Facebook, which was founded in a Harvard dorm room in 2004, has more than 500 million users and is challenging big Web businesses like Google Inc and Yahoo Inc for users' time online and for advertising dollars.