Advertisement
YOU ARE HERE: LAT HomeCollectionsBusiness

Apple profit shatters expectations

Briefly taking the spotlight from Steve Jobs' announcement that he was taking a third leave of absence, Apple reports first-quarter earnings of a whopping $6 billion.

January 19, 2011|By Jessica Guynn and Tiffany Hsu, Los Angeles Times

Reporting from San Francisco and Los Angeles — Apple found a way to divert attention from Chief Executive Steve Jobs' health Tuesday — a blowout $6 billion in profit.

A day after Jobs stunned investors and employees alike by announcing he was taking medical leave for the third time in seven years, Apple Inc. crushed analysts' estimates with record first-quarter revenue and earnings.

The company's stock rallied on the report, buoyed by impressive sales of iPhones, iPads and a pipeline of consumer gadgets. Shares fell a less-than-anticipated 2.2% to $340.65 in regular trading and regained ground in extended trading to $344.70, after it announced financial results.

In a conference call with analysts, Chief Operating Officer Tim Cook, who is filling in for Jobs during his medical leave, said, "In my view, Apple is doing its best work ever. We feel very, very confident about the future of the company."

Apple's first-quarter profit surged 78% to $6 billion, or $6.43 a share as sales soared 71% to a record $26.74 billion, the Cupertino, Calif., company said.

All of Apple's key products exceeded sales expectations. The company sold 16.2 million iPhones in the quarter, up 86% from a year earlier. It also sold 7.33 million iPads, which went on sale last April. Macintosh computer sales jumped 23% to 4.1 million units.

Bolstered by the strong results, Apple said it would exceed analysts' projections for the second fiscal quarter, with earnings of $4.90 a share on revenue of $22 billion, compared with Wall Street estimates of $4.47 a share on $20.8 billion in sales. The rosy forecast was unusual because Apple likes to issue conservative forecasts.

In a prepared statement, Jobs said: "We are firing on all cylinders."

Jobs' unexpected announcement Monday that he was stepping away from day-to-day operations to focus on his health has raised anxieties about the future of innovation at Apple and the leadership of the world's most valuable technology company.

Investors are nervous that no one else can exert Jobs' influence or slide into his many roles at Apple as product visionary, company pitchman and chief negotiator. They listened closely for any clues about the seriousness of the unspecified medical issue that is sidelining him. But Apple, known for its cloak of corporate secrecy, didn't let any new information slip.

"This was a very positive report that should help calm some investors' fears about what the future holds for Apple," said Michael Yoshikami, chief investment strategist at YCMNet Advisors in Walnut Creek, Calif., who owns the stock. "But if Steve Jobs leaves the company on a permanent basis, it will create a visionary hole in the company. And it's not clear at this point who would fill that hole."

In a statement Monday, Jobs did not say when he would return, setting off a firestorm of speculation that his condition could prevent him from retaking the helm in 2011, or at all. Concern about Jobs' health had intensified in recent weeks as he appeared gaunt after treatment for a rare form of pancreatic cancer and the liver transplant he had nearly two years ago.

The announcement was big news in Silicon Valley, where Jobs is revered as the top entrepreneur and technologist of his generation. Facebook CEO Mark Zuckerberg posted a public message to Facebook from his iPhone expressing hopes that Jobs would "get better soon."

A person close to the Apple co-founder expects him to remain very involved in the company's strategy and the development of its products. The person, who spoke on condition she not be identified because she wants to maintain the relationship, said it was significant that he had decided to hang on to his CEO title. "This does not mean that Steve is not coming back," she said.

"Steve Jobs has done an excellent job of institutionalizing his values and beliefs into the company," Kaufman Bros. analyst Shaw Wu said. "His spirit is embedded in the culture."

Analysts and former employees say Jobs over the years surrounded himself with a team of executives whose skills complement his own.

"Steve will be first to tell you that he is not a one-man company. Apple's success is drawn on the hard work of a top-notch executive staff and hundreds if not thousands of Apple employees who work their butts off to bring great products to market," said Tim Bajarin, who follows Apple for Silicon Valley research firm Creative Strategies Inc.

Cook said Apple sees "enormous opportunities" as it begins to penetrate the tablet computer market. Apple is known for seizing on existing devices, such as MP3 music players, and transforming them into must-have gadgets, like the iPod. Even as competition has increased, rivals lag Apple by at least two years, analysts said.

Advertisement
Los Angeles Times Articles
|
|
|