UPDATE 5-Apple’s Mac sales shine, iPhone lags Street view

* iPhone sales 8.7 mln versus Wall St target of 9 mln

* Strong international sales

* Improved gross margin helped by component costs

* Accounting changes stoke confusion among some analysts

* Apple shares up 1 percent after hours
(Recasts; adds executive, analyst comments)

By Gabriel Madway

SAN FRANCISCO, Jan 25 (BestGrowthStock) – Apple Inc (Read more about Apple stock future.) (AAPL.O: ) posted
better-than-forecast Mac sales and strong growth in Asia and
Europe, but iPhone shipments came in just below Wall Street’s
somewhat heightened expectations.

The stock edged 1 percent higher in after-hours trading,
building on a 2.7 percent rise on Nasdaq during the day, and
provided Apple a boost heading into Wednesday, when it is
expected to launch a highly touted tablet computer.
[ID:nN16364236]

International sales made up nearly 60 percent of Apple’s
revenue in the quarter, with sales more than doubling in the
Asia Pacific and rising 40 percent in Europe.

Apple said on Monday it shipped 8.7 million iPhones in the
holiday quarter, double the year-ago figure but just short of
the Wall Street target of roughly 9 million. Apple’s iPhones
compete with Research in Motion’s (RIM.TO: ) BlackBerry and other
smartphones.

But Mac sales continued to show momentum, rising 33 percent
from a year ago to 3.36 million units versus analysts’ average
estimate of about 3 million.

“Mac sales were very strong, which more than offset what
might be perceived as a ho-hum iPhone number,” said Bill
Kreher, an analyst with Edward Jones.

“Maybe some on the Street were getting a little euphoric
with their expectations on the iPhone.”

Gross margin rose to 40.9 percent from 37.9 percent a year
ago on a continued shift toward higher-margin products like
Macs and iPhones. Apple said its margins benefited from more
favorable component costs, higher revenue and better leveraging
of its fixed costs.

“Margins appear very solid, and it seems like iPhone
(results) were OK — normally it’s a blowout. That was my only
disappointment,” said Sushil Wagle, vice president of the
technology group at Riversource Investments.
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For a Reuters Breakingviews column on Apple, see
[ID:nN25192786]

For a FACTBOX detailing a breakdown of Apple’s quarterly
performance and sales numbers, please click [ID:nN25204988]
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BIG WEEK BEGINS

As Wall Street looks ahead to Apple’s new product
announcement on Wednesday, the holiday-quarter results have
provided the company with a strong start to the week.

Apple, which has surpassed Wall Street targets for earnings
per share by at least 15 percent in the past four quarters,
adopted new accounting standards for its fiscal first quarter
that generated some initial confusion among investors, as they
rendered Wall Street’s estimates for the period unusable.

The company posted net income of $3.38 billion, or $3.67 a
share in the fiscal first quarter ended Dec. 26, up from $2.26
billion, or $2.50 cents a share, in the year-ago period.

Revenue surged 32 percent to $15.68 billion from $11.9
billion.

Under new accounting standards that affect products that
combine software and hardware, Apple will be able to recognize
substantially all of the revenue from the iPhone and Apple TV
when they are sold. Such revenue was previously recognized over
two years. [ID:nN23415020]

Apple forecast earnings for the current quarter of $2.06 to
$2.18 a share on revenue of $11 billion to $11.4 billion. Its
expected gross margin of 39 percent will be impacted by less
favorable component costs, the company said.

Apple’s stock has more than doubled over the past 12 months
and hit an all-time high of $215.59 on Jan. 5 on mounting
excitement over its new product. Analysts expect it to be a
3G-enabled, 10-inch touchscreen device good for consuming all
sorts of media.

On a conference call with analysts, Apple was coy about the
product.

“I wouldn’t want to take away your joy of surprise on
Wednesday when you see our latest creation,” Chief Operating
Officer Tim Cook said.

Growth in iPods, one of the Apple’s three main products
line, has been slowing for some time and the company hopes the
tablet can help pick up some of the slack, analysts say.

“The iPod is getting a little long in the tooth so they
need to find another hot new product to hang their hat on,”
said Gartner Research analyst Van Baker.

Apple rose to $204.90 after closing at $203.08 on Monday.

Investing Advice

(Writing by Edwin Chan; Editing by Richard Chang)

UPDATE 5-Apple’s Mac sales shine, iPhone lags Street view