Apple reports best quarter ever, but gets snarly re Palm Pre

For the first time in history, Apple surpassed $10 billion in quarterly revenue during its previous quarter. But a question late in Wednesday's earnings call raised interesting questions about IP and the company's multitouch interface.

Apple not only blew past its own guidance (and Wall Street expectations) for the quarter ending December 27, it sold a record 22,727,000 iPods, 4,363,000 iPhones and 2,524,000 Macs. But a question late in Wednesday's earnings call raised interesting questions about intellectual property and the company's multitouch interface.


The firm reported net profits of $1.61 billion, working out to $1.78 per share -- two cents more per share than Q2 '08 and 38 cents more than the analysts were expecting. Revenue was up 5.8% to $10.2 billion. And cash on hand in Cupertino totals an impressive $28 billion.

IPods were a particular bright spot worldwide. The company carries over 70% of the US, UK and Australian MP3-player markets, with many other nations showing well over 50% share. The iTunes store also had a record quarter, though the company declined to specify the totals or how the Apps Store's 15,000 apps (up from around 5,000) fits into that picture. The Apps Store has, according to the company, racked up 500 million downloads at this point.

The iPhone's working out, too; 4.36 million were sold during the quarter, with a total of 13.7 million sold so far. Sales are down 3% in the US, but elsewhere in the world things are more than fine. If there's any worry, it's that the economy might deter would-be customers for signing up for the bigger phone-service contracts.

But is that a rumble setting up in the smartphone jungle? The company made some cranky sounds about having its intellectual property ripped off -- specifically, a multitouch interface as seen in the likes of the Android and the Palm Pre.

Chief Operating Officer Tim Cook said that "We're very very confident with where we are competitively. We like competition, as long as they don't rip off our IP. And if they do, we'll go after anybody that does." Pressed specifically about the Pre, Cook responded, "I don't want to talk about any particular company. However, we will not stand for having our IP ripped off. And we will use whatever weapons we have at our disposal."

Apple also sells computers. Sales of portable units in the US grew by just 2%, but overseas they sprang ahead 16% year-over-year, with some regions (Canada, Latin America) up 20% or better. It was the second-best quarter in history for Mac sales overall.

And though the market didn't leave the company unscathed -- the 251 Apple Stores reported average sales of $7 million last quarter, down from $8.5 million per store in late '07 -- the guidance for second quarter was not unimpressive. Apple predicts earnings per share of between 90 cents and $1 for the quarter ending in March, and revenue between $7.6 billion and $8 billion.

Whatever, quoth the analysts -- how's Steve? The Jobs question was the very first to be asked, to the audible annoyance of Tim Cook, who unspooled a powerful stream of PR-speak concerning the pursuit of excellence and how it doesn't matter who's in charge. (To answer: No word on the call re Steve's condition, though CFO Peter Oppenheimer did state that Steve Jobs is the CEO of Apple.)

What was not mentioned was a mighty big elephant in the room -- or back in DC, rather, as the SEC on Wednesday announced that it will conduct a review of Apple's disclosures concerning Steve Jobs' health and the recent announcements made about his condition. A review doesn't indicate that the SEC necessarily thinks something shifty happened, or that the Commission believes the company knew something significant that it wasn't revealing, but questions will be asked. Neither Apple nor the SEC will comment further at this time.

A few other nuggets stand out. Apple's numbers confirm the continued decline of the desktop, registering a 25% sales decline year-over-year; on the other end of the scale, the company was derisive of the netbook phenomenon, claiming that the tiny computers are simply too underpowered and hard to use to trouble itself with offering. There'll be 25 more Apple Stores by the end of 2009, half of them located outside the US.

Apple is pretty sanguine about supply costs, looking at favorable pricing for contract-market and even variable-market prices on such components as memory. And finally, no -- there's no date to announce yet for the Snow Leopard OS upgrade.

The market ate up their Apple in after-hours trading. Shares closed at $82.83 at the end of the day, up 4.63; the bright earnings report resulted in a lively post-market session, with shares at 90.00 (up 8.66%) at press time.

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