Apple reports strong earnings, despite uncertain future

As the iconic chief executive of Apple takes a medical leave of absence from the world's most valuable tech company, here's a look at some of the key products and ideas launched under his leadership.
Washington Post Staff Writer
Wednesday, January 19, 2011; 12:35 AM

The health of Apple chief executive Steve Jobs might be in question, and his successor's identity remains unknown, but the company's financial fortitude appears as sturdy as ever.

Fueled by sales of its Macs, iPhones and iPads, the technology giant far surpassed Wall Street analysts' expectations by reporting Tuesday that it earned $6 billion in the last three months of last year, nearly double from the corresponding quarter in 2009. The company also posted surprisingly high sales of nearly 7.3 million iPads, the company's pioneering tablet device that was a hit during the holiday season.

During an earnings call, the company gave no update on Jobs, who said Monday that he was going on medical leave. He has been battling pancreatic cancer and has had a liver transplant. Apple said Jobs will remain chief executive, while chief operating officer Tim Cook, a veteran from IBM and Compaq, has assumed day-to-day control.

But the condition of the company's chief visionary was clearly on the minds of analysts. They said Apple has a top-notch team of executives, but few minds in the world can come up with breakthrough products like Jobs.

If Jobs should leave the company, Apple is going to have a "terrific financial performance for a number of years," said Charles Wolf, an analyst with Needham & Wolf. "But if his absence is for a long period, it will take away the upside of the company."

The technology industry might feel his absence as well. Virtually all of Jobs's innovations - the computer mouse, iPod, iPhone and more recently the iPad - meant profits not just for Apple but its competitors as well.

Monday's announcement that Jobs is taking a medical leave of absence for an undetermined length of time dragged down Apple's shares Tuesday. The stock fell sharply at the opening bell by as much as 8 percent but pared back some losses to end the day down 2.3 percent. After Apple's earnings announcement, shares jumped as much as 1.3 percent in late trading.

"Initially, the Jobs announcement had a lot of impact on trading, but longer term investors were seeing past that," said Dave Lutz, head of trading and strategy at Stifel Nicolaus in Baltimore.

Wolf said one number in Tuesday's earnings announcement would be most important: iPad sales. Apple sold more than 7 million iPads, beating analysts' expectations of about 6 million. The product is expected be a source of new growth for the company.

Apple sold more than 16 million iPhones, though that is expected to be eclipsed by significant proportions in the next quarter since the company will start selling handsets equipped with Verizon Wireless beginning next month.

The company also said that 4.1 million Macs were sold, 23 percent more than a year earlier. And in the one exception to its success, the number of iPods sold dropped to 19.5 million, down about 7 percent.

Apple executives said revenue has soared because the company has penetrated more emerging markets in China, Brazil, Russia and India. "Revenue from greater China was $2.6 billion, and we did a little over $3 billion in Korea," said Cook, who hosted the earnings call in Jobs's absence.

Apple executives also boasted that revenue at their 300-plus retail stores around the world doubled to nearly $4 billion, and that its four stores in China posted the highest traffic and revenue in the world.

"We identified China as a top priority and the results have been staggering," Cook said.

Surveying the tablet market, Cook conducted a pointed and lengthy critique of competing devices, sounding confident that the iPad has yet to be threatened seriously. The tablets with Windows operating systems, he said, "are big and heavy and expensive."

"They have a weak battery life and they require a keyboard or a stylus, and from our point of view, our customers are, frankly, not interested in them," he said.

"Then you have the Android tablets, and the operating system wasn't really designed for tablets - Google has said that - so you wind up having a size of the tablet that is less than what we think is a reasonable one and that doesn't provide a real tablet experience," he said. "These are not tablets we have a concern about. We have an incredible first-mover advantage. . . . We're very confident entering into a fight with anyone."

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