January 12, 2005 3:02 PM PST

Apple earnings sail past expectations

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of the Mac Mini should accelerate the trend.

Sales of the iMac were particularly strong, as Apple redesigned the product around a G5 processor. The product, along with the eMac, accounted for $620 million in revenue, up 187 percent from iMac sales in the prior quarter and up 147 percent from a year ago.

The company took in $177 million in revenue from its iTunes Music Store, along with iPod accessories and services. The store was "slightly profitable" in the quarter, Apple said on its conference call with analysts.

The company's forecast for the coming quarter also was higher than prior analyst predictions. Apple projected revenue of about $2.9 billion and earnings per share of about 40 cents. Analysts had been looking for revenue of $2.75 billion and earnings of 33 cents per share.

The company would not say how many Mac Minis or iPod Shuffle devices it expects to sell, but Executive Vice President Tim Cook did say that both products have profit margins that are lower than is typical for company products.

"Frankly, it is too early to gauge demand," Cook said. Asked whether the company will sell the miniature Mac in more stores than those that carry the current Mac line, Cook said expanded distribution is something the company will look at but added that there is nothing to announce.

Apple shares, which have been on a tear for months, lost ground Tuesday despite Apple's flurry of new products. Shares made up some of that ground in late trading Wednesday, ahead of the earnings report. Apple stock rose 90 cents, or 1.4 percent, to $65.46. Shares surged after the report, changing hands at $73 in after-hours trading, according to Island ECN.

However, Wolf raised his rating on Apple shares to "buy" on Wednesday, saying the increase in Mac switchers gives the stock more room to grow. Wolf set an $83-per-share price target.

The company's retail efforts are also gaining, with Apple stores accounting for $561 million in sales, double the revenue of a year earlier.

The company said it expects to open about two dozen more stores by the end of September, with new stores in the United States, the United Kingdom, Canada and Japan. Apple currently has 101 retail outlets.

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