Apple Reports Record 1Q Profit

A customer looks up information on an Apple's iPhone as she uses an Apple MacBook at an Apple Store in Palo Alto, Calif., Tuesday, Jan. 16, 2007. At left is an Apple iPod. Apple Inc. is expected to provide clarity on how well its products, especially the iPod player, fared during the holiday period when it reports its fiscal first-quarter earnings. (AP Photo/Paul Sakuma) (Paul Sakuma - AP)

Shares of Apple lost $2.15 to close Wednesday at $94.95 on the Nasdaq Stock Market as technology stocks in general tumbled. In extended trading following its report, Apple shares initially jumped by about 4.5 percent, then declined by 1 percent to $94.

Looking ahead to its fiscal second quarter, Apple forecast revenue of $4.8 billion to $4.9 billion and earnings per share of 54 cents to 56 cents. Analysts were projecting revenues of $5.22 billion and earnings per share of 60 cents, according to Thomson.

Apple officials said the March quarter outlook partly stems from expectations of slightly lower gross margins and slower software sales ahead of the company's spring release of its upgrade to the Mac OS X operating system, dubbed Leopard.

Analysts took the company's guidance with a grain of salt.

"Last time they beat their own guidance by 16 percent," Munster said. "And it's undeniable now that they're running away with the digital music market."

Despite new competition from Microsoft Corp.'s Zune player, Apple said its line of iPods managed to hold onto a 72 percent share of the U.S. market in December.

Legal troubles for Apple are mounting, but Wall Street so far has largely shrugged off the impact.

Apple is one of the most prominent among dozens of companies facing federal scrutiny over its past accounting of stock options. It also has been sued by Cisco Systems Inc. over alleged trademark infringement for using the name iPhone for the new cell phone-iPod device it unveiled last week.

Apple's chief operating officer, Tim Cook, called the Cisco lawsuit "silly" during a conference call with analysts Wednesday and said Cisco's trademark registration was "tenuous at best."

"If Cisco wants to challenge us," Cook said, "we're confident we'll prevail."

Investors are optimistic about Apple's future as it reinvents itself as a maker of consumer electronics. The company even changed its name last week _ from Apple Computer Inc. to just Apple Inc. _ to better reflect its broadening portfolio beyond computer products.

After Apple Chief Executive Steve Jobs introduced the long-anticipated iPhone last week, Apple shares briefly reached an all-time high of $97.80 during trading before closing up 4.79 percent at $97 that day.

Apple also unveiled Apple TV, a new set-top box that sends video from computers to the television. Due to be available in February at a price of $299, Apple TV could be a "surprise hit," American Technology Research analyst Shaw Wu said.