Apple up, Rico happy

Bloomberg.com has an article by Connie Guglielmo about the profitability of Apple:

Apple Inc. reported third-quarter sales and profit that exceeded analysts’ estimates after wooing customers with a faster iPhone and less-expensive Macintosh notebook computers. Profit rose to $1.23 billion, or $1.35 a share, from $1.07 billion, or $1.19, a year ago, Apple said today in a statement. Sales gained 12 percent to $8.34 billion in the quarter ended June 27. Analysts on average predicted profit of $1.17 and sales of $8.21 billion, according to a Bloomberg survey.
Apple added the faster iPhone 3GS, cut the price of its older iPhone 3G to $99, and updated its MacBook notebooks to entice shoppers. The Mac and iPhone account for more than half of Apple’s sales. Chief Executive Officer Steve Jobs returned from medical leave last month and is trying to spur sales growth amid the recession.
“Their business continues to hold up really well in this tough economy,” said Shaw Wu, an analyst at Kaufman Bros. in San Francisco. He recommends buying the shares and doesn’t own them. “The Mac sales were huge.”
Apple, which usually gives forecasts that miss analysts’ estimates, said sales in the back-to-school quarter will be $8.7 billion to $8.9 billion. Profit will be $1.18 to $1.23 a share. Analysts predict sales in the fourth quarter, which ends in September, of $9.03 billion and profit of $1.29 a share.
Apple, based in Cupertino, California, advanced $4.96, or 3.3 percent, to $156.47 in extended trading after closing at $151.51 on the Nasdaq Stock Market. The shares have advanced 78 percent this year.
Apple sold 5.2 million iPhones in the quarter and 2.6 million Macs. Sales of iPod media players fell to 10.2 million units. Gene Munster, an analyst with Piper Jaffray & Co. in Minneapolis, estimated sales of 5 million iPhones, 2.2 million Macs and 10.2 million iPods. Gross margin, the percentage of sales remaining after taking out production costs, was 36.3 percent. In April, Apple forecast a gross margin of about 33 percent, down from 36.4 percent in the first quarter. Munster projected 33.5 percent. “They had a phenomenal quarter and they guided less conservatively than they historically do,” Munster said.
The iPhone 3GS went on sale June 19 and starts at $199 for a 16-gigabyte model. Apple said it sold more than 1 million in the first weekend.
Apple halved the price of the iPhone 3G, with 8 gigabytes of memory, to woo recession-wary shoppers. The iPhone lets users surf the Web, listen to music and access e-mail, and competes against Research In Motion Ltd.’s BlackBerry and Palm Inc.’s Pre. Apple’s price cut is “a big catalyst” for sales, Wu said.
Sales may continue to rise in coming months as Apple begins offering the iPhone 3GS in more countries after releasing it in eight on opening day. Apple has also said it will start selling the device in China within a year.
The company’s head start in offering mobile applications is also stoking demand for the iPhone, raising a barrier against rivals’ attempts to attract customers. The App Store offers 65,000 free and paid programs, up from about 800 when Jobs started the online site a year ago.
Apple said last week that customers have downloaded more than 1.5 billion applications. Jobs, who had a liver transplant during his five-and-a-half month leave, said last week that the store’s popularity makes it “very hard for others to catch up.”
Price cuts for the Mac could weigh on profit margins in coming quarters as average selling prices fall, said Toni Sacconaghi, an analyst at Sanford C. Bernstein in New York. In June, the company revised its MacBook Pro line by adding longer battery life and cut prices by as much as $300 on some models.
Apple has been running a back-to-school promotion for its 13-inch MacBook Pro that also helped spur sales, said Munster. MacBooks account for about a quarter of Apple’s sales.
The company is the fourth-largest PC maker in the U.S., behind Dell, Hewlett-Packard, and Acer Inc., according to Stamford, Connecticut-based research firm Gartner Inc. Apple’s U.S. market share widened to 8.7 percent in the calendar second quarter, from 8.4 percent a year ago, Gartner said.
New products and promotions may mean more to investors than Jobs’s health, Wu said. Jobs is working from home a few days a week and in the office the other days, Apple said last month.
During his absence, Jobs turned over day-to-day management to COO Tim Cook and a group of executives, who oversaw product introductions and delivered better-than- expected earnings during his leave. “The stock would not be where it is if his health was a primary concern,” said Wu. “At the forefront is the products— how many Macs are they selling, how many iPhones? Investors are really more focused on company fundamentals.”

Rico says sure, you can buy a Windows POS, but why?