iPhone 3G drives solid returns for Apple

Executives remain optimistic despite economic downturn

Propelled by booming iPhone 3G sales, Apple on Tuesday reported strong sales and profitability for the quarter that ended in September.

Apple posted revenue of $7.9 billion and profit of $1.1 billion, compared to revenue of $6.2 billion and profit of $904 million for the same quarter a year ago.

AT&T, which runs the network on which the iPhone runs, also posted revenue and income increases fueled by iPhone demand.

Apple officials said they weren't economists and couldn't predict how the global financial crisis would affect their sales in the next quarter and beyond. Nevertheless, they remain optimistic about the company's ability to weather the storm, thanks to the popularity of its latest iPhones, Macbook and iPod models. they said.

"We have the strongest product lineup in Apple’s history, the most talented employees and the best customers. And $25 billion in the bank," said Steve Jobs, Apple's CEO. "We may get buffeted around by the waves a little bit, but we will be fine and stronger than ever when the waters calm in the future."

Indeed, Jobs hinted at Apple being able to make acquisitions or increase R&D investments during the downturn, because of its strong cash position. "This downturn may also present some extraordinary opportunities for companies that have the cash to take advantage of them, like Apple does," he said.

The big news of the quarter was Apple's iPhone sales, which topped the sales of Research In Motion's BlackBerry for the first time in the cell phone's 15-month history. Apple sold 6.9 million iPhones, compared to 6.1 million BlackBerries sold over the same three-month period. Many of Apple's sales were international, with the iPhone available in 51 countries.

The iPhone accounted for $4.6 billion in revenue for Apple, or 39% of the company's business last quarter, Jobs said.

The iPhone is now the third-best-selling mobile phone in the world in terms of revenue, behind those from Nokia and Samsung, Jobs said. He called sales of Apple's latest iPhone 3G "truly stunning," and he lauded the fact that Apple has sold 200 million iPhone applications from its AppStore in just 102 days.

Also hot were Apple's Macintosh computers, which hit an all-time high of 2.6 million units sold during the quarter, a 21% growth over the same period last year. Mac sales would have been even higher were it not for a sharp decline in sales to K-12 schools during the quarter, especially in California, Apple officials said. They attributed the slowdown in Mac sales to schools to the fact that state and local government budgets are being hit hard by the economic downturn.

Apple sold 11 million iPods during the quarter, an 8% growth over the same quarter a year ago. iTunes and retail store sales also were up.

Apple reported its results using non-Generally Accepted Accounting Principles. The alternate accounting approach is designed to eliminate the impact of ongoing subscription sales for the iPhone and Apple TV. Using non-GAAP techniques, Apple reported $11.7 billion in adjusted sales and $2.4 billion in adjusted net income.

Like other U.S. technology firms, Apple gave conservative projections for the next quarter. Revenue could come in at $9 billion to $10 billion, and earnings per share could be $1.06 to $1.35, it said.

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