EARNINGS : Apple’s 1st-Quarter Profit Up 21% on Healthy Margins
Apple Computer Inc., in an indication that its new focus on low-priced computers will not hurt profit margins as much as analysts feared, reported a 21% jump in earnings for its fiscal first quarter ended Dec. 28.
Net income at the Cupertino, Calif.-based company totaled $150.5 million, up from $124.8 million in the year-ago period. Revenue grew 12% to $1.68 billion, up from $1.49 billion.
In a recent briefing, Apple Chairman John Sculley said the new Macintosh Classic, the low-priced version of Apple’s flagship Macintosh that was introduced last October, would have the best first-year sales of any Apple computer. He added that demand was strong for the new color Macintosh LC as well.
Apple has been unable to keep up with demand for the Classic but hopes to have the order backlog cleared by March.
When Apple announced the new models, which effectively cut the price of the Macintosh in half, analysts applauded the move but worried that it would hurt profit margins. The company has traditionally pursued profits rather than market share, but Sculley has reversed that strategy in a push to dramatically broaden the base of Macintosh customers.
The results announced Thursday, however, show gross margins of 51.4%, only slightly below the 52% registered a year ago. Apple said foreign sales had benefited from a favorable exchange rate, and without that boost the margins would have been 48% and income would have been down 11%.
Steven Ossad, an analyst at Montgomery Securities in San Francisco, said the results were “a lot better than I expected. The margins stayed up very well.”
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