What Antennagate? Apple Reports Record Earnings -- Thanks to IPad

Marketer Once Again Eclipses Microsoft in Market Cap as Consumers Show Insatiable Desire for I-Anything

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NEW YORK (AdAge.com) -- How does Apple put the flap over iPhone 4 antenna in the rear-view mirror? Report record quarterly earnings on huge sales of all things i-related, including iPads, iPhones, iPod Touches and Mac computers.

The week after CEO Steve Jobs blamed reports of iPhone 4 antenna failures on an obsessive media, the company returned the focus on the performance of the Apple brand with a record $15.7 billion in quarterly sales, a 61% increase from the year-ago quarter, smashing Wall Street expectations by nearly $1 billion.

Earnings grew at a similar clip, up 77% to $3.25 billion in net profit from $1.83 billion a year ago.

Apple sold more than 3.27 million iPads, the tablet computer that launched this reporting period, and accounted for more than $2 billion in sales. Market research firm iSuppli expects iPad to be a big seller into the holidays. It predicts Apple will ship 12.9 million by year-end, which represents a significant increase from previous forecasts.

Apple also set a record with Mac computer sales at 3.47 million sold. The company sold 8.4 million iPhones, 61% more than the year prior, even though the company hadn't yet introduced the iPhone 4, which Mr. Jobs last week called "Apple's most successful product launch in its history."

IPod is still the leader in units sold, at 9.41 million, though sales are down 8%. However, iPod Touch sales are up nearly 50% and Apple still remains the market leader for portable music players, and demand for wireless devices without a phone remains strong.

Mr. Jobs hinted at yet another new product to come this year. "IPad is off to a terrific start, more people are buying Macs than ever before, and we have amazing new products still to come this year," he said in the statement.

The newest generation smartphone, which has been under fire for its wrap-around antenna that loses signal when touched, went on sale the day after the reporting period ended. On Friday, Mr. Jobs offered free cases to iPhone users to remedy the dropped-signal problem. Apple expects that cost to total $175 million, said Chief Financial Officer Peter Oppenheimer during the company's earnings call. In response to analysts questions about how the antenna issue is affecting sales, Apple execs say the company is "selling every unit it can make" and that returns because of the issue are insignificant.

After the press conference last week, Apple stock took a dip and Microsoft regained the title of largest tech company by market cap, but only momentarily. Apple, which surged past Microsoft for the first time in late May, has since rebounded to $229 billion vs. Microsoft's $223 billion.

The company expects to hit $18 billion in sales next quarter, which will include new iPhones.

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