Apple's Rainy Season

The relative success of the company's iPod line vs. the Macintosh line apparently had an impact on its gross profit margin. Although the company does not break out the profitability of individual products, analysts generally believe Apple makes more money on its computer sales than its iPods. Apple's gross margin -- the difference between what it charges customers for its products and its direct costs of making and distributing them -- fell to 27.2% of sales in the quarter from 28.5% a year earlier.

Part of that decline had to do with the effect of stock options, which Apple just began expensing this fiscal year. That issue aside, the company expects gross margin to improve to about 27.8% of sales in its fiscal second quarter, with fewer iPod sales and lower component costs, Oppenheimer said.

Still, the narrowing of gross margin in the holiday quarter had little effect on the company's bottom line, as Apple controlled costs elsewhere. The company's operating income swelled to 13% in the quarter from 11.5% in the year-earlier period.

Another success story for Apple was with its retail stores. As previously announced by Jobs at Macworld, sales through its stores topped $1 billion in the quarter, up from $571 million in the year-ago period.

And Apple is apparently bullish on the future of its retail initiative. The company expects to open a total of 40 new stores this fiscal year, which would bring its total to about 164 stores. That would be nearly double the 86 stores it had at the end of fiscal 2004.