Update: Apple's iPod sales fuel record quarter

With sales of its iPod music players continuing to grow at a breakneck pace, Apple Computer Inc. on Wednesday reported the highest revenue and earnings results in the company's history. Apple shipped more than 14 million iPods during its most recent quarter, its first quarter of fiscal 2006, the company said.

Revenue for the quarter, which ended Dec. 31, was US$5.75 billion, up significantly from the year-ago total of $3.49 billion. Earnings for this most recent quarter totalled $565 million, or $0.65 per share.

Wall Street analysts had been expecting earnings of $0.61 per share, on average, according to a survey of 11 analysts by Thomson First Call. Analysts has set quarterly revenue expectations at $5.54 billion, according to Thomson.

Apple CEO Steve Jobs had preannounced some of Wednesday's results at last week's Macworld Conference and Expo in San Francisco, when he revealed the iPod sales number and told attendees that revenue would be $5.7 billion for the quarter.

Sales of the iPod were up 207 percent from the year-ago quarter, and Apple shipped 1.25 million Macintosh computers during the most recent period, up 20 percent from the previous year, the company said.

During a conference call with financial analysts, Apple Chief Financial Officer Peter Oppenheimer gave cautious financial guidance for the quarter ahead and warned that iPod sales were likely to slow. "The iPod was one of the top holiday gifts in this season," he said. "It's natural to think that there would be a drop-off in demand in the March quarter from this exceptional holiday result."

Apple is also facing a possible slowdown in Mac sales as the company moves to new systems based on Intel Corp.'s microprocessor. The first of these systems, two configurations of both the MacBook Pro notebook and the iMac personal computer, were introduced last week.

Though the first three months of the year are typically a slow period for Apple, the company surprised analysts with its predictions for this period, which is the company's second quarter in the fiscal 2006 year. Apple expects revenue of about $4.3 billion and earnings of about $0.38 per share for the quarter, numbers that were more conservative than analysts had been expecting, according to Thomson.

The Cupertino, California, company plans to expand the number of its Apple Retail Stores (http://www.apple.com/uk/retail/) over the next year by adding about 40 locations, Oppenheimer said. "We expect most of them to be [opened] domestically, but we'll continue to open stores in Canada, the UK and Japan as well," he said.

Apple's online music store "operated above break-even" during the first quarter, he added.

Apple's results come after industry bellwether Intel Corp. surprised investors on Tuesday by missing its quarterly estimates, citing slow sales of its desktop processors. Intel's (INTC) stock dropped more than 11 percent Wednesday, closing at $22.69.

Apple (AAPL) shares were down nearly 3 percent before the earnings announcement, closing Wednesday at $82.49.

The lowered second-quarter expectations helped drive Apple's stock further downward in after-hours trading. By Wednesday evening it had slipped by another 6 percent to $76.90 on The Nasdaq Stock Market Inc.'s INET exchange.