Apple (Nasdaq: AAPL) 
blew by forecasts for its fourth quarter, reporting sharply higher profit on continued strong sales of iPods and Macintosh computers. The company said it ended the fiscal year with US$10 billion in cash.
Apple said profit was $546 million on revenue of $4.84 billion, compared with $430 million in profit and $3.68 billion in sales a year ago. Profit was up 27 percent year-over-year, while revenue rose 32 percent.
Soaring PC Demand
The company shipped a record number of Macs in the quarter, with 1.61 million machines sold, up 30 percent from the year before, with "unprecedented" demand for MacBook notebook 
computers, which made up 61 percent of all computer sales.
Back-to-school sales were cited as a major driver of sales, with several large-scale deals in the K-12 educational space. The arrival of the first Intel-based Macs also boosted sales, the company said.
The growth rate is around three times that of the overall PC market. Research firm IDC has predicted growth of about 10 percent for all PC makers. Apple said it believes about 50 percent of Mac buyers in the quarter were first-time Apple computer owners.
Apple also shipped 8.7 million iPods, an increase of 35 percent as new iPod nanos and other product rollouts helped boost demand.
CEO Steve Jobs said the quarter "caps an extraordinary year for Apple" that saw it sell 39 million iPods and 5.3 million Macs, while also making the transition to Intel-based microprocessors.
Apple shares jumped in after-hours trading following the report, with shares up 4.5 percent to $78.
Subject to Change
Apple warned the results should be considered preliminary and are subject to "significant adjustment" as a result of ongoing inquiries into the way it granted stock options in the past.
The options-timing scandal, which has ensnared dozens of publicly traded companies, has dogged Apple in recent weeks, but has yet to put a significant dent in its stock price or spill over into its operations.
During the earnings conference call, CFO Peter Oppenheimer said in response to a question about the options investigation that the company's board has "found no misconduct of any member of Apple's current management team," which includes Jobs.
Oppenheimer also offered first-quarter guidance that was slightly below Wall Street forecasts. He said revenue would be between $6 billion to $6.2 billion, while analysts, on average, had been expecting $6.44 billion in revenue.
Investors were not alarmed by the guidance, however. UBS Investment Research analyst Ben Reitzes noted that Apple traditionally guides lower and generally exceeds its own forecasts. Reitzes also pointed out in a research note that Apple is facing more difficult comparisons because the same quarter last year contained an extra week.
Shrugging Off Competition
Though the company does not forecast specific product lines, Apple executives expressed confidence that iPods would continue to sell well despite growing competitive pressure, including the Microsoft (Nasdaq: MSFT) Zune.
"We're very confident in our new lineup despite increased competition this holiday season," Oppenheimer said, noting that Apple has many parts of the portable music player market addressed, having rolled out a $79 version of the iPod shuffle and a high-end line of video-capable iPods. He also pointed out that an estimated 70 percent of the new car models being rolled out this fall have iPod integration features in their sound systems.
Apple's iTunes Music Store did not see as robust growth as in the past, but Oppenheimer explained that sales were up year-to-year and that the September quarter is typically a slow one for digital music sales, with relatively few artists releasing new records.
Apple did not provide any insight into its specific product plans for 2007, but some analysts have already predicted the long-wait Apple mobile phone would be released early next year.
It was something of a surprise that Apple was able to report on time, American Technology Research analyst Shaw Wu said. Apple had warned previously the report may be delayed. "The fact they reported on time and gave the full picture, even with the caveats, is a vote of confidence for investors," Wu told MacNewsWorld.
A key going forward will be whether the Mac sales surge continues in the company's fourth quarter and if Apple can make more substantial market share gains, especially since Microsoft's Windows Vista, the newest version of the dominant operating system for PCs, will not be widely available until early 2007.
Meanwhile, one research firm is saying it may make more sense for Apple to get out of the computer-making business to embrace a licensing model.
Using a pure PC-maker such as Dell (Nasdaq: DELL) , Apple could boost its market share from around 5 percent to more than 20 percent, while at the same time enabling it to focus on its consumer electronics products, such as the iPod, mobile phones and in-home video technology, claimed Gartner (NYSE: IT) analyst Charles Smulders.
Such an arrangement would help a number of different parties, he added. "Apple would benefit from expanded distribution, Dell would benefit from the differentiated products, and Intel (Nasdaq: INTC) would benefit from wider sales of a non-AMD platform," Smulders said.
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