Apple's second quarter financial results beat Wall Street expectations.

Analysts polled by Thomson First Call were expecting earnings of 10 cents per share on revenue of $1.8 billion. Revenue for the quarter was in fact $1.909 billion, up 29 per cent from the year-ago quarter ($1.48 billion). Net income was $46 million, or 12 cents a share – up from $14 million, or 4 cents per share, in the same quarter last year.

Excluding a one-time after-tax restructuring charge of $7 million, the company's net profit for the quarter would have been $53 million, or 14 cents per share.

Al Frank Asset Management president John Buckingham told Bloomberg: "Apple now has about $12.30 a share in cash, enough for acquisitions and new-product development. Apple had both positive guidance and good historical numbers, that's why the stock's faring well. We're happy the earnings blew away expectations.''

Market stalling

Schwab Soundview Capital Markets analyst Michelle Gutierrez pointed out that Apple's worldwide share of the PC market has declined. She told Associated Press: "Apple's share has dropped to 2.3 per cent from 5 per cent in 2000. It remains to be seen whether the company's campaign to get people to switch from Microsoft Windows-based computers to Macintosh machines will help Apple expand its PC business."

"The kids have iPods now, and they're telling parents they want an Apple. Hopefully, Apple could use that strategy to leverage it for more PC sales," she added.

Apple chief financial officer Fred Anderson would not discuss whether Apple had seen iPod sales helped it gain new computer buyers outside its customer base during the analyst conference call that followed the release of its financial results.

But he said: 'Since Apple doesn't sell low-end computers, boosting revenue – and not gaining worldwide market share – is Apple's focus."

Looking ahead

Anderson offered the guidance for the third quarter that was above Wall Street estimates.

Anderson said: "Looking ahead to the third quarter of fiscal 2004, we expect our fourth consecutive quarter of year-over-year double-digit growth in both revenue and earnings, with revenue of about $1.925 billion. We expect GAAP earnings per diluted share of $.12 to $.13, including approximately $.02 per diluted share in restructuring charges."

The 2 cents of restructuring charges are thought to be due to the closure of Apple's manufacturing operations in Elk Grove, California.

Apple said it expects 28 per cent gross margins in the next quarter, despite decreasing iPod margins. The company also expects memory prices to continue to climb during the first part of the quarter, but to then stabilize.

According to Reuters, analysts now expect Apple to earn a third-quarter profit, on average, of 9 cents, within a range of 7 cents to 11 cents, on revenue of $1.81 billion.