Apple Computer Inc. said second-quarter profits rose 41 percent, buoyed by rising sales of iPod music players and Macintosh personal computers.
Net income rose to $410 million, or 47 cents a share, from $290 million, or 34 cents, a year earlier, the company, based in Cupertino, Calif., said Wednesday in a statement. Sales increased 34 percent to $4.36 billion in the period ended April 1.
Shares of Apple jumped after the report on relief that the company's earnings weren't held back by slowing iPod growth and the switch to Intel Corp. chips in the Mac. While iPod shipments rose 60 percent from a year earlier, they fell from the previous quarter for the first time in more than three years. Apple shares had fallen 7.8 percent in the past two weeks on concern growth that propelled the company to record profits may have stalled.
"It was a giant sigh of relief," said James Grossman, a fund manager at Thrivent Financial for Lutherans in Appleton, Wis. The firm oversees $65 billion, including Apple shares. "It panned out a little better than some expected."
The stock rose $2.91, or 4.4 percent, to $68.56 in extended trading after declining 57 cents to $65.65 in Nasdaq Stock Market composite trading. The shares have lost 23 percent since a Jan. 13 peak on concern customers would hold off buying computers until all Mac models are fitted with faster processors from Intel, a switch Chief Executive Officer Steve Jobs has promised to complete by year-end.
Shipments of iPod, Apple's fastest-selling product, rose to 8.5 million units from 5.3 million a year earlier. Mac shipments climbed to 1.1 million from 1.07 million.
"Everyone will point to the iPod," said Thrivent's Grossman. "We're going to focus in on the Mac units. They did a terrific job selling 1.1 million units."
IPod estimates ranged from 8.8 million to 10.5 million units, according to 10 analysts polled by Bloomberg. They expected Mac shipments of between 975,000 and 1.3 million units.
Apple Chief Financial Officer Peter Oppenheimer said the company had a "limited" amount of time to ship MacBook Pro notebooks, one of three models with Intel chips released last quarter. Apple currently has enough inventory to fill orders, he said in an interview.
Besides the MacBook Pro, Apple released Intel versions of the iMac and Mac mini desktop PCs. Some customers may hold off buying until Apple releases an Intel-version of its popular iBook consumer notebook, which some analysts expect this quarter. Other customers may hold off until popular software, including Adobe Systems Inc.'s Photoshop, are rewritten for the Intel chips, Chief Operating Officer Timothy Cook said.
"You can own (Apple shares) safely for the second half of the year, when things should pick up," Piper Jaffray & Co. analyst Gene Munster said.
Profits this quarter will be 39 cents to 43 cents a share, including 4 cents for stock-based compensation costs, on sales of $4.2 billion to $4.4 billion, Apple said. The figures factor in a continued "pause" in Mac sales, as well as lower average selling prices for Macs and iPods, Oppenheimer said on a call with analysts. Analysts had expected 47 cents on sales of $4.73 billion, the average of 20 estimates in a Thomson Financial poll. Thomson didn't disclose what costs are excluded in the estimates.
Second-quarter earnings per share included 3 cents in stock compensation costs, the company said. Net income results for the year-earlier period don't reflect those costs.
The average selling price of the iPod was $201 in the second quarter, while Macs sold on average for $1,414 each. Average selling prices may decline this quarter as Apple sells discounted machines to educational customers and lower-priced Nano and Shuffle music players, Oppenheimer said.
The gross margin on iPods was above 20 percent in the quarter, Apple said, boosted partly by favorable pricing on flash-based memory.
In January, Apple forecast second-quarter profits, including costs for stock options, of 38 cents on sales of $4.3 billion in the period ended April 1. Citigroup Inc. analyst Richard Gardner expected 45 cents on sales of $4.53 million, above the 43 cents and $4.52 billion anticipated by analysts polled by Thomson.
Sales may get a boost this quarter if Jobs, 51, releases a new version of the video iPod with a larger screen or cuts prices on the pencil-thin Nano, said Bear Stearns & Co.'s Andrew Neff in New York, ranked by StarMine Corp. as one of the most accurate analysts at predicting personal computer company earnings.
Mac sales rose 5 percent to $1.57 billion and accounted for 36 percent of revenue. Ipods sales jumped 69 percent to $1.71 billion. IPod orders and sales of music and videos through Apple's iTunes online music store accounted for 50 percent of revenue. ITunes operated at break even, Oppenheimer said.
More than 1 billion songs, at 99 cents each, have been sold since iTunes opened in 2003 and more than 15 million videos, at $1.99 each, since Jobs added that content to the site in October.
Apple is looking to new software called Boot Camp to help convince buyers to switch from PCs that run Microsoft Corp.'s Windows operating system software. Boot Camp, unveiled this month, runs Windows XP on Intel-based Macs, the first time Apple has allowed Microsoft's program to run on its machines.
Boot Camp may help Apple expand its PC market share, which rose to 4 percent last year from 3.3 percent in 2004, according to IDC, based in Framingham, Mass. The company ranks behind Dell Inc., Hewlett-Packard Co. and Gateway Inc. in the United States.
Apple is in the process of acquiring 50 acres of property near its headquarters and expects to create a second campus to accommodate as many as 3,500 employees within four years, Oppenheimer said.
Contributing: Jonathan Thaw