iPhone Boosts Apple; Execs Float Netbook Idea

Apple reported a second-quarter profit of $1.21 billion on revenue of $8.16 billion, versus a profit of $1.05 billion a year ago, when Apple reported revenues of $7.51 billion. Apple still expects chief executive Steve Jobs will return at the end of June, Peter Oppenheimer, Apple's chief financial officer, said during a conference call Wednesday afternoon. Apple also resuscitated thoughts of a netbook.

Apple reported iPhone sales of 3.79 million units, a sharp 123 percent increase from a year ago. Apple Macintosh unit sales fell by three percent versus a year ago to 2.22 million units, while iPod sales grew by three percent to 11.01 million units, a new record for the March quarter.

Unexpectedly strong sales of both iLife and iWork also contributed positively to Apple's gross margin of 36.4 percent, up from 32.9 percent for the same period a year ago.

"We are extremely pleased to report the best non-holiday quarter revenue and earnings in our history," Oppenheimer said, both in a prepared statement, and again on the conference call.

Apple's App Store is expected to sell its 1 billionth app on Thursday, bringing to a close a contest that began earlier this month. All told, there are now 35,000 apps available, Oppenheimer said, up from 15,000 apps a quarter ago.

Associated iPhone revenue grew to $1.52 billion, up over 300 percent from the same period a year ago. Apple's iPhone OS 3.0 will launch this summer, with push, MMS support, and cut-and-past features. Although subsidy payments from AT&T have apparently ceased, Apple chief operating officer Tim Cook called AT&T the "best wireless provider in the USA". "We have a very happy relationship with them and plan to maintain it," he added.

Apple hopes to sell the iPhone in China within the next year, Cook added.

Apple executives pooh-poohed the drop in Mac shipments, noting that both the education market and professionals have been tightening belts during the economy. Cook nearly chastised an analyst for asking about the numbers: "Cycles come and cycles go; what we're about is making the best computers in the world."

Instead of concentrating on a number, Apple wants to make computers it's proud of, Cook said. "We believe if we do that, over time, we will gain share," he said.

Interestingly, Cook didn't shoot down the idea of an Apple netbook. "If people want a small computer for Web browsing... they might want to buy an iPod touch or an iPhone, he said.

But Cook also hinted that Apple's researchers might have some ideas that they could bring to market. "If we can find a way to deliver an innovative product that really makes a contribution we'll do that, and we have a few interesting ideas in that space," Cook said.

In March, patents surfaced that suggested Apple was working on a touchscreen netbook.

Cook was again asked about veiled threats to sue a PDA competitor, thought to be Palm, about a device that would mimic the iPhone. This time, however, Cook was a bit more circumspect. Cook, who said he believed Apple was leading by years over rivals, said that Apple welcomed competition as long as "other companies invent their own stuff".