Apple Keeps Humming

Updated from 4:45 p.m. EST

SAN FRANCISCO - Apple(AAPL) blew past Wall Street's expectations for the second quarter on strong sales of its Mac computer line.

Apple posted a second-quarter profit of $1.05 billion, or $1.16 a share, compared with profit of $770 million, or 87 cents a share, the year-before.

Revenue climbed 43% to $7.51 billion from $5.26 billion a year ago.

Analysts polled by Thomson Reuters were expecting earnings of $1.07 a share on revenue of $6.96 billion.

Shares of Apple, which have climbed more than 10% in the past two weeks, were off 14 cents in after-hours trading to $162.89.

About 10.64 million iPods were sold in the quarter, representing a 8% revenue growth from a year ago but just 1% unit growth and in tune with Wall Street expectations of 10.6 million devices. Still the iPods showed the same seasonal rate of decline compared to a year ago, said Apple.

Apple shipped 2.28 million Macs, posting a 54% revenue growth from the year-before, topping analysts' expectations of 2.06 million. Macs now account for about 59% of Apple's overall revenue.

Quarterly iPhone sales came in at 1.7 million devices, said Apple. That's better than analysts' expectations of about 1.5 million units sold.

So far, about 200,000 Software Developer Kits for the iPhone have been downloaded since its launch on March 6 and iPhone 2.0 software will be released in June, said Apple.

Gross margin fell to 32.9% from 35.1% in the year-ago quarter. Apple attributed the slide in part to softer sales of its Leopard operating system, which launched in October. New operating systems post the highest sales when they debut, said Apple, and Leopard, in its second quarter, slowed down.

The price cut in the low-end iPod shuffle and other price cuts internationally also helped drive down margins, said Apple.

Music product services accounted for about 36% of total revenue during the second quarter, said Apple.

International sales accounted for 44% of the quarter's revenue.

For the third quarter, Apple, known to offer conservative guidance, said it expects revenue of $7.2 billion and earnings of $1 a share. Analysts are expecting revenue of $7.15 billion and earnings of $1.10 a share.

The guidance from Apple, considered one of the four horsemen of technology, along with Google(GOOG), Research In Motion(RIMM) and Amazon.com(AMZN), should help allay recent investor concerns that an economic slowdown and a weakening in consumer spending could take a toll on the company's sales.

Apple remains confident it is on track to reach its goal of 10 million iPhones in calendar 2008, Tim Cook, chief operating officer of Apple told analysts on the conference call.

In the current quarter, Apple expects gross margin to increase to 33% from 32.9% in the previous quarter, since component pricing is expected to remain favorable.

Apple blamed the recent shortages of iPhones in company stores on the greater-than-expected demand for the phones. "We expected iPhone to decline more on a sequential basis than it did," said Cook. "iPhone sales beat our unit expectations and towards end of quarter we experienced a stock-out."

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