Apple Posts Surprisingly Strong Holiday Sales

In sharp contrast to Microsoft, Apple on Wednesday posted strong earnings and revenues for the fourth calendar quarter of 2008, earning a record profit of $1.61 billion on revenues of $10.17 billion. While its Mac and iPod businesses were up only modestly, Apple saw a surprisingly strong year-over-year jump in iPhone sales.

"Even in these economically challenging times, we are incredibly pleased to report our best quarterly revenue and earnings in Apple history," said Apple CEO Steve Jobs. He noted that Apple's revenues exceeded $10 billion for the first time in the quarter.

While the overall PC business was flat in Q4 2008, Apple saw 9 percent jump in its Macintosh business. Mac sales were 2.5 million units, up from 2.3 million in the same quarter a year ago, but down from the previous quarter, when the company sold 2.6 million units. Apple now controls just 3.2 percent of the worldwide PC market, and about 5.8 percent of the US PC market.

Apple's iPod business continues to be strong, but sales are flat: The company sold 22.7 million iPods in the quarter, representing 3 percent growth over the same quarter a year ago.

The standout this month was the iPhone, with which Apple recognizes revenue and cost of goods over a period of time, as required by industry regulations. The company sold 4.4 million iPhones, a whopping 88 percent improvement over the same quarter a year ago.

Apple's earnings, while strong, also highlight the cyclical nature of the company's "event marketing" approach. Products like the Mac and iPod had much bigger gains in the previous quarter because of major product refreshes that occurred at that time. And the iPhone's strong gains this quarter can be explained by the lackluster reception the product was getting a year ago when it was heavily overpriced and, lacking 3G capabilities, underpowered. (After Apple introduced the iPhone 3G in mid-2008, sales rose over 600 percent year-over-year.)

Apple has also bet strongly on notebook computers, and that bet has paid off: The company sold 1.8 million notebooks in the quarter, but just 728,000 desktop machines. (Desktop sales were down 25 percent YOY, higher than the industry average of 16 percent. But Apple's notebook sales jumped by 34 percent.) Apple says it is watching the netbook category but is not interested in trimming performance, features, or prices to meet the needs of that low-end market.

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