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Apple reported first-quarter profit of $6 billion

IPhones and iPads continue to drive Apple earnings

By Nancy Gohring, IDG News Service
January 18, 2011 04:59 PM ET

IDG News Service - Apple on Tuesday reported record revenue for the first quarter, reaching $26.74 billion, driven by sales in iPhones, Macs and iPads.

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Revenue was up 71 percent. Net profit was up 78 percent to $6 billion, or $6.43 per diluted share.

The company sold 4.13 million Macs during the quarter, which ended Dec. 25, up 23 percent year over year. IPhone sales continued at a healthy clip, improving by 86 percent over last year to 16.24 million.

Apple sold 7.33 million iPads during the quarter, an increase of more than 3 million sequentially. 

In a statement, CEO Steve Jobs called the holiday quarter "phenomenal," with record Mac, iPhone and iPad sales. Jobs announced Monday that he is taking another medical leave of absence from the company, and Apple executives said no more about his condition on Tuesday's earnings call.

The tablet market has belonged to Apple, but that could change as new tablets running the Android OS hit the market. According to IDC, Apple had an 87.4 percent share of the worldwide market in the third quarter, the most recent that IDC has accounted for. However, growth this year and beyond will come from devices based on Android and other OSes, IDC said.

Nonetheless, Apple claimed to be not too worried about the competition. Some of the tablets on offer are odd sizes, "so you wind up with a scaled-up smartphone, which is a bizarre product in our view," said Apple Chief Operating Officer Tim Cook. 

Others have poor battery life or have awkward input methods. "Those are not tablets we have any concern about," he said.

More tablets are expected to hit the market soon, many based on a version of Android designed specifically for tablets. But Apple has a first-mover advantage, including a large App Store, it said. "We're very confident with entering into a fight with anyone," Cook said.

Sales of the iPad could have some negative impact on Mac sales, but Cook isn't concerned about that. "I think there is some cannibalization, but I also think there's a halo effect," he said, meaning that when a person buys one Apple product, they often end up buying additional Apple products. 

It would be hard to say the iPad has had a negative impact on Mac sales so far. Cook noted that while the number of Macs sold was up by 23 percent, the overall market for computers grew only 3 percent. In Asia Pacific, Mac sales were up 67 percent, more than 10 times the market growth rate there, he said. In the U.S. and Europe, Mac sales were up by double digits while the overall markets there contracted. 

"If this is cannibalization, it feels pretty good," he quipped.

Apple is pleased with the headway it's making into the enterprise. The iPad went on sale in April and is being used or piloted in about 80 percent of Fortune 100 companies, he said. "This is unheard of, at least in my dealings with enterprises over the years," he said. Enterprises are known for a more cautious approach, waiting for new products to be proved in the market before using them. 

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