iPhone boosts Apple's profits

After the close of the stock market on Wednesday Apple reported profits of $818m, or 92 cents a share, for its fiscal third quarter. Strong Mac and iPod sales led the charge, but Apple also has a third business these days: the iPhone.

The company reported selling 270,000 iPhones during the 30 hours before the quarter ended on 30 June. That's at the upper end of what estimates were going into iPhone weekend, though far below some of the extremely high estimates that surfaced following the launch.

Still, some were anticipating a smaller number after AT&T reported activating 146,000 iPhones during the same period.

Mac shipments accounted for 60 per cent of the company's revenue during the quarter, and grew by 33 per cent compared with last year. Apple updated its MacBook and MacBook Pro notebooks during the quarter, and notebook sales were of particular strength.

Notebook shipments increased 79 per cent compared with last year's third quarter, which was the first period the revamped Intel-based MacBook went on sale.

Apple's music business remained healthy, with iPod shipments up to 9.8 million compared with 8.1 million units during the same period a year ago.

As predicted, however, the iPhone stole the show. Oppenheimer said Apple now expects to ship its one-millionth iPhone by the end of September, setting a target for the back-to-school shopping season.

The 270,000 iPhones only include units sold to AT&T for distribution in its stores, units sold by Apple through its network of retail stores and some number of units that might have been in transit as the clock turned on the third quarter, Oppenheimer said. An Apple representative confirmed the number doesn't include online sales of the iPhone during the 30 hours before the quarter ended on 30 June.

Oppenheimer confirmed that Apple is receiving payments from AT&T related to the sale of iPhones but he didn't want to discuss the specifics of the agreement between the two companies. Gene Munster, an analyst with Piper Jaffray, believes AT&T is paying Apple about $11 a month per new iPhone customer, or about $3 a month for existing AT&T customers who switched to the iPhone.

Apple will recognise revenue related to its agreement with AT&T in the company's fourth quarter, which ends in September, Oppenheimer said.

Tim Cook, Apple's chief operating officer, reiterated the company's goal of selling 10 million iPhones by the end of 2008. He also confirmed that the company would have an iPhone for the European market by the end of the year, though he did not specify where it would appear beyond "a few major countries".

Cook said: "It will not be easy to build in this business, our competitors are large and entrenched."

Tom Krazit writes for CNET News.com