Apple Reports Record Sales, Profits As iPad, iPhone Sales Mushroom

Apple Inc. (Nasdaq: AAPL), the world's most valuable technology company, reported second-quarter financial results Tuesday that blew past analyst expectations.

The Cupertino, California company said net income was $11.6 billion, or $12.30 a share -- more than $2.30 ahead of estimates -- as revenue soared to a record $39.2 billion.

We're thrilled with sales of over 35 million iPhones and almost 12 million iPads in the March quarter, said CEO Timothy Cook. The new iPad is off to a great start.

As well, Apple estimated momentum will continue. Earnings should be $8.68 a share on revenue around $34 billion in the current quarter, the company announced. The forecast falls shy of analyst estimates for earnings of $9.96 a share on revenue around $37 billion, though.

Analysts had raised concerns about new product demand for the iPhone 4S now that some of Apple's wireless carriers have complained about the high upfront costs they have to pay. Capacity constraints at chip designers including Qualcomm Inc. (Nasdaq: QCOM), the biggest designer of mobile chips, as well as new competition from vendors in the tablet market coming from rivals using Ultrabook and Ivy Bridge chips from Intel Corp.(Nasdaq: INTC), the No. 1 chipmaker, also raised worries.

Still, analysts were expecting Apple to report net income surged 55 percent to $10 a share as revenue jumped 33 percent to $36.64 billion.

Apple's shares have had a nearly unprecedented runup this year, bursting past the $500 and $600 levels before a current correction. The problem has been faced in the past by high-flying technology companies including Microsoft (Nasdaq: MSFT), the world's biggest software company, and Cisco Systems (Nasdaq: CSCO), the No. 1 maker of Internet equipment.

Although not required to, Apple's reports have usually included breakdowns of shipments for its top products, the iPod, MacPro, iPhone, iPad and some information about iCloud downloads.

Analyst Peter Misek of Jefferies expected the company to report shipments of 4.7 million MacPros, 7.1 million iPods, 33.2 million iPhones and 12.4 million iPads -- all down significantly from the last quarter, which included holiday gift-buying.

The actual numbers exceeded the estimates, except for the iPad.

Cook, who was probably America's best-compensated CEO last year when he was awarded a million Apple restricted stock units tied directly to the share price -- valued now around $560 million - and Chief Financial Officer Peter Oppenheimer will also be asked questions about the future including:

• Apple's response to the antitrust suit filed last week by the U.S. Department of Justice alleging price-fixing for e-books. Apple has denied the charges and refused to settle with a fine, unlike other defendants, including News Corp.'s (NYSE: NWS) HarperCollins unit and CBS Corp.'s (Nasdaq: CBS) Simon & Schuster.
• Costs to remediate labor conditions at the China plants of Taiwan's Hon Hai Precision Industries, known as Foxconn, where the Fair Labor Association found some abusive practices, including excessive overtime. Apple has promised to remediate them but may have to lift some of its already high prices.
• Shipping dates. They will be asked but probably won't tell shipping dates for any successor to the iPhone 4S, as well as the third version of the iPad, which just started shipping, as well as Apple TV.
• Uses of the cash. Cook and Oppenheimer already announced Apple will reinstitute a dividend and share buyback in the company's fourth quarter, which starts in July. Apple said cash and investments rose to $110.1 billion from Dec. 31, when they reached a record $97.6 billion.

Apple shares closed at $560.28, down 2 percent, or $11.42, continuing a slide that began after the stock hit an all-time high of $644 on April 10. Since then, shares have fallen nearly 14 percent, or 4 percent more than a correction in the share price. But they surged more than $40, to $600.84, right after the results were announced.

At Tuesday's values, Apple's market capitalization is $522 billion placing it $118 billion ahead of No. 2, most valuable company, Exxon Mobil Corp. (NYSE: XOM).