Apple: All Systems Go

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Chief Financial Officer Peter Oppenheimer and Chief Operating Officer Tim Cook hinted to analysts that the profit-margin reduction could come because of upcoming products, likely lower-priced Macs. "We are continuing to focus on delivering state-of-the-art products at price points that our competitors can't match, and we are going to provide ever-increasing value to our customers," said Oppenheimer.

Analyst Bill Fearnly of FTN Equity Capital Markets wrote in on Oct. 19 research note that retailers' supply of MacBook Pro laptops was running low, often a sign that new products are around the corner.

Stealing Microsoft's Thunder

Any new product introduction could steal some thunder from Microsoft (MSFT), whose much-anticipated Windows 7 operating system debuts Oct. 22.

The buzz among consumers about Apple's products is already plenty loud. The company sold 3.05 million Macs during the quarter, a record. MacBook notebooks accounted for nearly 2.3 million of those, and generated $3.95 billion in revenue, or 40% of Apple's total. In fiscal 2009, Apple sold nearly 10.4 million Macintosh machines, beating last year's unit sales by more than 681,000.

Sales of 7.4 million iPhones during the quarter were also a high-water mark. Apple sold 20.7 million iPhones in fiscal 2009, and has sold nearly 34 million of the devices since the product's debut in 2007. Apple, which reports iPhone revenue as subscriptions over two years, booked $2.3 billion in revenue from iPhone sales.

The Return of Jobs

The iPhone continued to gain market share. Market researcher iSuppli estimates iPhones accounted for 12.1% of smartphone sales as of the end of June, up from 10.1% as of the end of March. Apple's growth is outpacing the overall market's, according to iSuppli.

One area that is in decline for Apple is its iPod music player. Unit sales fell to 10.2 million units during the quarter, vs. 11.05 million a year earlier. Revenues declined 6%. In September, Apple CEO Steve Jobs announced a new lineup of iPods and, more important, appeared on stage at an Apple for the first time in nearly a year. Jobs had been absent after undergoing a liver transplant and other medical problems.

For the fiscal year, Apple recorded revenues of $36.5 billion, up more than 12%. Profits of $6.29 per share beat Wall Street's estimates by 41¢ per share, and the company finished the year with more than $34 billion in cash.

With Mac and iPhone sales humming and Jobs back at the helm, investors look ready to lift Apple's shares to even loftier levels.

Hesseldahl is a reporter for BusinessWeek.com.

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