Apple met its revised third-quarter targets the company announced yesterday, returning $32 million profit on $1.43 billion revenue.

Revenues were in line with Apple's lowered estimates, but profits were down against the year-ago quarter.

For its fiscal third quarter ended June 29, Apple's reported net profit of $32 million equals $0.09 per diluted share, the company said. That compares to a net profit of $61 million, or $0.17 per diluted share, in the same quarter last year. Analysts polled by Thomson Financial/First Call had predicted returns around $0.09 per share on $1.42 billion revenue.

Year-on-year Total revenue was $1.43 billion, down 3 per cent from $1.47 billion in the year-ago quarter, the company said. Apple had originally predicted revenues of $1.6 billion in the quarter, but revised its expectations downward in a surprise profits warning on June 18.

Hardware sales fell against the same quarter last year. Apple shipped 808,000 Macs (378,000 iMacs, 169,000 iBooks, 167,00 G4 Power Macs and 94,000 G4 PowerBooks), down 2 per cent from the same quarter a year ago. International sales accounted for 42 per cent of revenue during the quarter.

iMac sales climbed 46 per cent during the quarter, helped by new iMacs. Power Mac sales fell 31 per cent against the year ago quarter, PowerBook sales fell ten per cent and iBook sales fell 16 per cent. “Other peripherals climbed 19 per cent. The company failed to sell as many Xserves as it had anticipated in the quarter.

Positive “Even in this extended worldwide downturn, Apple is continuing to be profitable and continuing to innovate,” said Apple CEO Steve Jobs.

“We're working hard to attract new customers with our 'Switchers' advertising campaign, and our 31 US retail stores – and we're continuing to invest in a strong slate of new products, some of which we'll talk more about at Macworld Expo, New York, tomorrow,” he added.

Confirming weeks of speculation, Apple confirmed that sales of its new flat-panel iMac had not met expectations. Apple's chief financial officer revealed: “Despite strong sell-through of flat-panel iMacs in April, demand slowed rapidly in late May and June,” he said. “This trend ran counter to” Apple's expectations.

A similar slowdown occurred in Apple's professional desktop range: “We were surprised and disappointed with our shortfall in these areas,” Anderson said.

Revised warning The company reduced its estimated performance for the quarter in June, attributing this to “soft demand in the consumer and creative markets”. It projected revenue of $1.4 billion to $1.45 billion, down from its previous forecast of $1.6 billion, and said earnings per share would come in at $0.08 to $0.10 – down from its earlier prediction of $0.11.

Revenue was also slimmer than expected in Europe and Japan. This contributed to the lowered guidance, Apple said.

Apple expects its fourth quarter revenue to be on a par with its third quarter figures. It expects to show a “slight profit”, after accounting for nonrecurring charges, Anderson said.

Stable “Despite the slowdown in the market, our operational efficiency was excellent,” claimed Fred Anderson, Apple's chief financial officer. “Our balance sheet is very strong, with $4.3 billion in cash, and we achieved a very efficient cash conversion cycle of 36 days. We expect September quarter revenues to be approximately flat with the June quarter, and expect a slight profit for the quarter before any non-recurring items,” he explained.

Apple officials seemed less optimistic during yesterday's conference call. Figures from market research companies IDC and NPD Intelect suggest that personal computer sales to both consumers and education markets will decline through to December, Anderson said.

This means Apple's fiscal fourth quarter could include more layoffs, adding to a seven per cent reduction announced earlier this month at its Sacramento manufacturing facility. Restructuring charges of less than $10 million are also expected in the current quarter, Anderson said.

Outlay Apple also expects operating expenses for the current (fourth) quarter to increase, due to recent acquisitions, new research and development work, and the opening of more retail stores.

Additional news from the financial call includes:

Apple plans to open 50 retail outlets by the end of the year. However, the retail-segment loss increased from $4 million to $6 million this quarter. The company hopes to break even in the current quarter.

Education sales continue to disappoint the company – education sales missed Apple's estimates by seven per cent, and were down 17 per cent from last year.

The value of Apple stock fell to $16.39 on the extended trading market yesterday. Its shares closed at $18.23 following trading Monday.

Apple's financial statements are available for download from its Web site. A QuickTime audio broadcast of the financial results conference is also available using QuickTime.