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Apple posts lower Q2 profit

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CIOL Bureau
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SAN FRANCISCO: Apple Computer has reported its net income fell 65 percent from a year ago as revenue was little changed, but it hit its own revenue target and profits were at the high end of Wall Street"s expectations.



Revenue rose from the prior quarter"s $1.47 billion, aided in part by healthy sales at Apple"s network of more than 50 stores around the country. For its fiscal second quarter ended March 29, Cupertino, California-based Apple posted net income of $14 million, or 4 cents a share, compared with year-ago net income of $40 million, or 11 cents a share.



Sales fell to $1.48 billion from $1.50 billion a year ago. The mean earnings estimate from analysts polled by Thomson First Call was for a profit of 2 cents a share, within a range of 1 cent to 4 cents, on sales of $1.46 billion.



Executives declined to comment on reports that Apple was in talks to acquire Vivendi"s Universal Music Group for as much as $6 billion. Chief Financial Officer Fred Anderson said in a statement the company hit its revenue target, inventories in distribution channels were at less than 4-1/2 weeks, and the company"s cash increased to more than $4.5 billion.



Looking ahead, Anderson said he expects revenue to be "relatively flat with the March quarter" and he expects a "slight profit" for the quarter. Analysts currently expect Apple to report, on average, a profit of 5 cents a share, within a range of 2 cents to 8 cents, on revenue of $1.5 billion.



Shares of Apple rose as high as $13.28 on Instinet after closing at $13.24 in regular trading on the Nasdaq, later falling to $13.23. In an interview, Anderson said the lower net income was partly due to increased spending in research and development and in opening new retail stores, plans that it had already related to Wall Street and investors. "That"s investing for growth," Anderson said.



Unit shipments of Apple computers were 711,000 in the quarter, down slightly from 743,000 in the preceding period, while average selling prices rose slightly.



What’s up with Vivendi ??



The Los Angeles Times reported last week that Apple, which is notoriously tight-lipped, was in talks with Vivendi to buy the unit, the world"s largest recording label, for $5 billion to $6 billion. A source later confirmed the talks to Reuters.



But Anderson declined to comment on the report beyond a statement released earlier on Wednesday by Apple quoting Chairman and Chief Executive Steve Jobs as saying the company had not made an offer to invest in or acquire any large music company, including Vivendi"s Universal Music Group.



Anderson also declined to comment during the conference call when asked about Apple"s forthcoming online music subscription service, which could debut as soon as next week. "I don"t have any comment on future products," he said. Asked to discuss Apple"s internal policy and goals regarding its large cash balance, Anderson said: "We"re very focused as a company on conserving cash."



The same analyst asked Anderson to discuss, generally, Apple"s internal policies for acquisitions. "I don"t want to go into comments on acquisitions or investments," Anderson said, while noting that Apple has made small acquisitions in recent years, particularly software companies.



After articles appeared reporting the talks, investors sent Apple shares down, on concern that such a deal could deplete much of Apple"s cash hoard and thrust it into an industry has has struggled as online downloading of music and piracy have surged in popularity.



Apple ended the quarter with $4.52 billion in cash and short-term investments, up from $4.46 billion at the end of its December quarter. Apple stores had $135 million in sales during the quarter, Anderson said, adding that about half of its retail customers continue to be new to the Macintosh platform.



About 70 stores will be open by the end of this calendar year, Anderson said. Some 42 percent of the computers Apple shipped were laptop computers, which is higher than the industry average, said Martin Reynolds, an analyst with Gartner Group. "With 42 percent, they"re definitely on a roll and generally notebooks are more profitable than desktops," Reynolds said.



© Reuters

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