Apple Earnings: Mac Soars, iPod and iPhone Stall

Apple on Wednesday announced financial results for its fiscal second quarter, the first calendar quarter of 2008. The company posted earnings of $1.05 billion on revenues of $7.51 billion, both up sharply from the same quarter a year ago. Apple credits continued strong sales of Macintosh computers and high retail store traffic for the surge. Meanwhile, iPod sales were flat, while iPhone sales were far lower than most expectations.

"We're delighted to report 43 percent revenue growth and the strongest March quarter revenue and earnings in Apple's history," Apple CEO Steve Jobs said in a prepared statement. "With over $17 billion in revenue for the first half of our fiscal year, we have strong momentum to launch some terrific new products in the coming quarters."

The Macintosh continues its strong performance in the market, despite a weakening economy. Apple sold 2.3 million Macs in the quarter, up 51 from percent from the same quarter a year ago. Years of strong sales have helped Apple eek up the market share chart, most notably in the United States, where the Mac now commands as much as 6 percent of the market for PCs.

Sales of the company's portable devices weren't as strong. Apple iPod sales were flat year-over-year at 10.6 million units, suggesting that the company has saturated a mature market. But iPhone sales were even more alarming: Apple sold just 1.7 million iPhones in the quarter, far fewer than most had expected. Apple will need to make some changes to the iPhone in order to reach its previously announced goal of 10 million units sold in its first year on the market. Analysts have recommended lowering the price of the expensive device, creating a new version that is compatible with more modern 3G wireless networks, and adapting the iPhone business plan in Europe to the unique needs of that market.

Apple also revealed this week that it has purchased a tiny Silicon Valley chipmaker called PA Semi, which has been developing low-power microprocessors. Speculation abounds that Apple will use the technology in future generation iPhone and iPod devices. It's unclear, however, how that decision will fly with Apple's biggest partner, Intel, which creates most of the microprocessors used in Apple's products. Intel recently shipped its own low-power microprocessor, the Atom.