Thursday, April 26, 2007

Apple defends Jobs as profits surge

Board expresses "complete confidence" in "Steve's integrity" in wake of fresh options claims...

By Tom Krazit

Published: Thursday 26 April 2007

Apple yesterday reported financial results far ahead of Wall Street's expectations, and the company's board of directors defended CEO Steve Jobs' role in Apple's stock options backdating scandal.
Revenue for Apple's second quarter, which ended 31 March, was $5.26bn, up 21 per cent compared with revenue of $4.36bn in the same quarter last year. Profit was up nearly 88 per cent at $770m, or 87 cents per share, compared with profit of $410m, or 47 cents per share, last year.
Wall Street analysts surveyed by Thomson First Call had been expecting revenue of $5.17bn and profits per share of 64 cents.
Peter Oppenheimer, Apple's chief financial officer, said during a conference call following the release of the numbers: "We are pleased to report strong financial results and the best March quarter in Apple's history."
Before revealing its financial performance, Apple's board of directors issued a statement confirming its support for Jobs in the wake of allegations made by Fred Anderson, the former chief financial officer at Apple.
Anderson issued a press release saying he warned Jobs that selecting options grant dates other than the actual date the board of directors approved the grant could force Apple to record an expense. Federal authorities and the company have conducted investigations into Apple's stock options practices and the Securities and Exchange Commission (SEC) filed suit against Anderson and former general counsel Nancy Heinen earlier this week, for their roles in the options scandal.
The statement said: "We are not going to enter into a public debate with Fred Anderson or his lawyer. Steve Jobs co-operated fully with Apple's independent investigation and with the government's investigation of stock options grants at Apple. The SEC investigated the matter thoroughly and its complaint speaks for itself, in terms of what it says, what it does not say, who it charges, and who it does not charge. We have complete confidence in the conclusions of Apple's independent investigation, and in Steve's integrity and his ability to lead Apple."
It was attributed to Bill Campbell, Millard Drexler, Albert Gore Jr, Arthur Levinson, Eric Schmidt and Jerry York, Apple's directors other than Jobs, who is the chairman of the board.
As was expected, Oppenheimer steered clear of questions about Jobs, the board's statement and the stock options mess during the conference call, preferring to focus on sales of Macs and iPods during the quarter. Mac shipments were up 36 per cent to 1.5 million units, and iPod sales rose 24 per cent to 10.5 million compared with the previous year.
The sharp rise in profits was attributed to great deals during the quarter on commodities such as memory and chips, Oppenheimer said. Apple doesn't expect the favourable pricing environment to last the whole year, however.
MacBook and MacBook Pro shipments were the primary engine behind Mac sales, with unit shipments up 79 per cent compared with last year, and revenue up 83 per cent. More than 50 per cent of people who bought a Mac in Apple's retail stores were new Mac buyers, Oppenheimer said. The stores themselves continued to help Apple's overall sales, with revenue through the stores up 34 per cent.
Apple predicted that its third-quarter revenue would be $5.1bn, lower than Wall Street forecasts for the next quarter. The company does tend to subscribe to the "under-promise, over-deliver" school of guidance theory, however. And investors seemed unconcerned about the lower-than-expected outlook, driving the company's stock up 6.45 per cent, or $6.15, to $101.54 in after-hours trading on the profit news.
Tom Krazit writes for CNET
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