Street Finds a Few Worms in Apple

Apple predicted that its good times will continue in its fiscal third quarter. It forecast earnings of 28 cents a share on $3.25 billion in sales. In contrast, analysts had forecast a profit of 24 cents a share on $3.21 billion in sales.

In the third quarter last year, Apple earned $61 million, or about 8 cents a share, on $2.01 billion in sales.

That the quarter may be flat sequentially has to do with the company's normal seasonality and with a pickup in lower-priced computers for the education market, Oppenheimer said. Also playing into the company's projected third-quarter results are recent price reductions on the company's popular iPod digital music players, he said. Factoring into the projected decline in earnings, the company expects to see an increase in operating expenses, partially due to costs associated with developing the next version of its operating system, he said.

The company's recent growth rate has been far faster than it expected, Oppenheimer said. "We don't think our revenue will continue to grow at these levels forever," he said.

For the full year, analysts are looking for $1.11 in per-share earnings on sales of $13.34 billion. Apple did not provide full-year guidance.

Apple's standout results were fueled by jumps in sales of both computers and iPod digital musical players. The company sold 5.3 million iPods in the quarter, generating $1.01 billion in sales, compared with 807,000 iPods for $264 million in sales in the year-ago quarter.

On a unit basis, the sales also topped Apple's first quarter, which covers the holiday period. In that quarter, the company sold 4.6 million iPods, worth $1.2 billion. The total revenue generated likely declined, because Apple introduced a discount-priced, flash-based digital music player in the quarter.