Apple bucks recession with 5 million iPhones sold in three months

Apple continues to ride out the recession in fine style, with a frankly astonishing 5.2 million iPhones sold in the last three months. Though iPod sales slipped, Mac sales increased, resulting in a better-than-expected quarter for the company.

Revenue came in at $8.34bn, a 12 per cent increase from a year ago, when Apple reported earnings of $7.46bn.

Ending on 27 June, it was the best 'nonholiday' quarter in terms of revenue and earnings for Apple yet -- a bar that had been newly set during the previous quarter.

Apple also beat most analysts' expectations of its unit sales in its core businesses for the quarter. The company sold 2.6 million Macs, up by 4 per cent from a year ago, and 5.2 million iPhones, a 626 per cent leap from a year ago. And even though the company's 10.2 million iPods sold during the quarter was better than expected, it's also Apple's first yearly drop in iPod sales, declining by 7 per cent.

Apple's chief financial officer Peter Oppenheimer did something unusual: he broke out sales of each model to provide context for the decline. During the third quarter, Apple sold 10.2 million iPods, compared with 11 million a year ago.

It turns out that the shifting appeal of the shuffle, nano and classic iPods are to blame. But Apple apparently saw this coming. Those declining sales are "the reason we developed the iPod touch," Oppenheimer said. "We expect our traditional MP3 players to decline overtime as we cannibalise ourselves with iPod touch and iPhone."

Mac sales were very impressive for the quarter, however. Data provided by market research firm IDC showed the entire PC industry down more than 3 per cent for April, May and June, but Apple sold 4 per cent more computers this quarter than it did during the same quarter in 2008. The company's laptops were responsible for that surge: MacBook and MacBook Pro shipments were up by 13 per cent.

Apple confirmed that much of that came late in the quarter after it transitioned to calling all of its unibody laptops MacBook Pros and cut prices across the board.

"Mac sales did accelerate" after WWDC, chief operating officer Tim Cook said on the earnings call on Tuesday afternoon. "We feel great about how they're selling."

What he's not enthusiastic about: netbooks. He took the opportunity during the earnings call to take a few more swipes at the growing category of computing. It's a category that every one of Apple's competitors in the PC industry have embraced, yet Cook picked up where he left off during the previous quarter's earnings call in politely trashing the devices.

"Our goal is not to build the most computers, it's to build the best. Whatever price point we can build the best at, we will play there," he said in response to a question about netbooks. "At this point, we don't see a way to build a great product for this $399, $499, this kind of price point, unit."

Cook also said most customers are disappointed by their experience with netbooks.

"Some of these netbooks, or many of those, are very slow, have software technology that is old, they don't have a robust computing experience. They have small displays and cramped keyboards. I could go on and on, but I won't."

In other words, it doesn't sound like we should expect a cheaper MacBook from Apple for less than $500. But there was no mention of something between $500 and $999, where the company still has a very wide price gap in its current lineup.

"We're going to focus on what we've always done," Cook said. "The Mac has outgrown the market in 18 of the last 19 quarters. I think that says that we do have the right approach."