Apple, caught between the promise of its new iPhone and the peril of a stock options investigation, reported record earnings Wednesday for the first quarter of its fiscal 2007 year.
Apple posted net income of US$1 billion on revenue of $7.1 billion, for the quarter ended Dec. 31, 2006.
These results compare to net income of $565 million on revenue of $5.7 billion, in the year-ago quarter.
The company, which dropped the name "computer" from its name to reflect its broadening array of consumer electronics products, such as its popular iPod music player, reported a gross margin of 31.2 percent, up from 27.2 percent in the year-ago quarter.
Apple released its latest financial results one week after Chief Executive Officer Steve Jobs unveiled the new iPhone at the company's annual Macworld Conference & Expo in San Francisco. The iPhone, which is to go on sale in June in the U.S., combines a cellphone, a video and music iPod and an Internet connection device into one package. Apple said the phone would be available in the U.S. only through Cingular Wireless.
Although well received by Mac fans at the convention, some skeptics wonder whether, at a pricey $499 to $599 plus Cingular subscription costs, it will find many buyers.
Apple was promptly sued in federal District Court in San Francisco by Cisco., which claims the trademark to the name iPhone.
Apple is also facing other legal jeopardy, as the U.S. Attorney's Office for the Northern District of California confirmed Jan. 12 that it is investigating how Apple accounted for backdated stock options.
In a Dec. 29, 2006, filing with the U.S. Securities & Exchange Commission (SEC), Apple disclosed the results of a board internal investigation into backdating. It found that an October 2001 board meeting at which 7.5 million options for Jobs were granted never actually took place and that the options weren't officially granted until December of that year. Backdating the options grant date to October, though, gave Jobs an instant paper profit of about US$20 million because Apple stock was selling for less in October than it was in December.
Apple said it would restate $84 million in earnings from 2006 to account for more than 6,400 backdated stock option grants made between 1997 and 2002.
"The board of directors...has complete confidence in Steve Jobs and the senior management team," stated Al Gore, the former U.S. vice president and the Apple director who chaired the special internal investigative committee.