Red-hot Apple sales shock market

CATHERINE McLEAN

Globe and Mail Update

Most consumer electronics giants can hope for one cool product at a time. But Apple Inc. continues to buck that trend with not one, not two, but three red-hot product lines that are so popular with consumers that the company continually beats analysts' expectations.

In the fourth quarter that ended last month, Apple sold 10.2 million iPod musical devices and 1.12 million iPhones, as well as shipped a record 2.16 million Mac computers, ringing up $6.2-billion (U.S.) in revenue, a 29-per-cent gain from the previous year.

No surprise then, that Apple chief executive officer and co-founder Steve Jobs brags the current product portfolio is the best ever. It's a far different story from a decade ago, when an acquisition brought him back into the fold.

Sure, there was a devoted crowd of Mac users back then but other products couldn't find a market and sales were sliding.

One analyst warned that Apple's time was running out.

When the company's CEO quit in the summer of 1997, Mr. Jobs stepped back into his roll as king of Apple. Since then, the company has climbed its way back to the top.

"It's a magical transformation," said Kaan Yigit, president of consulting firm Solutions Research Group Inc. in Toronto.

Apple rolled out cute, pastel-coloured Macs, and introduced the iPod, an MP3 music player that was actually easy to use.

It has already sold 1.39 million iPhones, its latest hit, since the product's initial June launch.

"It took us over two years to reach a comparable number for the iPod," Apple's chief operating officer Tim Cook said on a conference call.

Apple's secret is that it is does a better job than many rivals in two crucial areas: customer experience and design, Mr. Yigit explained. He pointed to a study conducted by his firm on musical players. Three-quarters of iPod users were very pleased, compared with an average of 46 per cent for consumers that used other devices.

"That's unheard of in my business," Mr. Yigit said. "We don't see two-to-one ratios."

Apple expects demand will continue to be robust during the important holiday season. It plans to launch its iPhone in Europe, and recently introduced a new product called the iPod Touch.

"We're looking forward to a strong December quarter as we enter the holiday season with Apple's best products ever," Mr. Jobs said Monday in a statement.

Still, it's not like Apple always gets it right. It recently angered some iPhone owners when it slashed the price by $200, making them feel ripped off for buying it early. A day later, the company said those customers would get a $100 credit at an Apple retail or online store.

And after such a great run, Mr. Yigit believes it could become challenging for Apple to keep producing bestsellers. "The expectations are becoming so ridiculous," he said.

For now, though, meeting enthusiastic expectations aren't a problem. Apple reported fourth-quarter profit jumped 67 per cent to $904-million or $1.04 a share from $542-million or 63 cents in the year-earlier period.

That was far more than the profit of 85 cents that analysts expected, according to a survey by Bloomberg.

"They knocked the cover off the ball," said analyst Roger Kay.

Apple stock soared by seven per cent on the earnings report, which was released after the close of markets.

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