iPod Makes Apple Shine

The iPod is making sweet music for Apple Computer, Inc.

The Cupertino, CA company reported that sales of the portable music player lifted revenue 29% and more than tripled profits for the fiscal second quarter ended March 27. Apple posted net income of $46 million compared with $14 million for the same period a year earlier. The investment community responded by pushing up the value of Apple stock by 10%, to $29.16/share as of Wednesday, April 14.

The most recent quarter marks the first time that Apple has sold more iPods than computers—807,000 music players vs 749,000 computers (including 174,000 Power Macs)—and signifies the company's ongoing evolution from a computer and software provider to a digital entertainment company.

"We've done very well in innovating and creating new businesses, creating a $1 billion business in a few years," said founder and CEO Steve Jobs. The first iPod was introduced in 2001; Apple launched its iTunes Music Store in 2003.

Apple's quarterly computer sales rose only 5% relative to the same period the previous year, laggard performance compared to the 15% growth for the computer industry overall. There is some evidence that iPod buyers were so pleased with their purchases that they bought Apple computers, too, company finance officer Peter Oppenheimer stated.

The company also predicts a rosy third quarter, but expects profits from iPod sales to decline toward the end of the fiscal year. Apple has had difficulty meeting demand for the iPod Mini, and has had to hold back shipments to some markets because of short supplies. Gross margins on iPod products are approximately 27%, according to the financial press.