Apple soars on sales success of new iPad

Published on Tuesday 20 July 2010 22:11

CONSUMER technology giant Apple has smashed Wall Street expectations after profits surged on strong demand for new products including the iPad.

The company, which sold almost as many of its new iPad tablets as Mac computers, said revenues jumped 61 per cent to $15.7 billion (10.3bn) in its second quarter. Profits rose 78 per cent to $3.25bn.

With the company lifting its revenues guidance for the current quarter, Apple shares rose more than 3 per cent in after-hours trading in New York and continued to rise yesterday.

Apple said it sold 8.4 million iPhones, an increase of 61 per cent from last year, even though the company stopped shipping more of the previous-generation iPhones after the updated model, the iPhone4, was announced in June. It sold 1.7 million units of the iPhone4 during the last three days of the quarter.

It also sold about 3.3 million iPads during its first three months on the market. This compared with 3.5 million Macs after sales of the computers rose 33 per cent due to record orders from schools and colleges.

But it was a revenue projection sharply ahead of Wall Street's targets that stole the limelight. Apple's projected $18bn in revenue for the current quarter exceeded Wall Street's prediction of about $17bn - an unusually optimistic forecast for a company notorious for its conservative outlook.

Yair Reiner, an analyst at Oppenheimer & Co, said: "This is one of the few times in recent memory that Apple's guidance has been ahead of the Street, at a time when investors were getting concerned the iPhone 4 antenna issues could hamper sales.

"Apple's sending a strong signal it sees things differently."

The so-called "Antennagate" saga has weighed on Apple's shares and outlook. A defiant chief executive Steve Jobs has called poor smartphone reception an industry-wide problem, but rival chief executives and experts dispute that claim.

Complaints about the iPhone 4 surfaced soon after its 24 June release, with users saying its wireless signal weakens drastically when the device is held in a certain way.

The company is offering free iPhone cases to those experiencing reception problems, but some analysts say it remains to be seen whether the matter has been put to rest.

Apple chief operating officer Tim Cook repeatedly declined to say whether the "Antennagate" controversy had impacted sales of the iPhone 4, but called demand for the device "absolutely stunning."

He added: "Let me be very clear on this. We're selling every unit we can make."

Apple said both the iPhone and the iPad are flying off store shelves as fast as the company can make them. But the company wouldn't speculate as to when it might be able to build enough to satisfy demand.

Research group iSuppli now expects Apple to sell nearly 13 million iPads this year.

Bill Kreher, an analyst at Edward Jones, said: "These numbers will go a long way to make people forget about any antenna issues.

"As media tension wanes, investors will start to focus more on long-term earnings power."

Colin Gillis, an analyst at BGC Capital Partners, added: "As good as the quarter was, the guidance was beyond robust. It was going to take a monster quarter to accelerate shares, and we got it."