iPod at core of Apple's record Q2

Bushels of players, songs make up 45% of total revenue

Apple Inc. on Wednesday posted a record fiscal second-quarter profit that exceeded Wall Street estimates as the board defended CEO Steve Jobs after comments by the firm's former CFO that the boss might have played a bigger role than thought in a recent scandal over the backdating of stock options.

Before the earnings report, Apple shares closed up 2.3% at $95.35, and they rose to above $100 in after-hours trading, a 52-week high.

Former CFO Fred Anderson agreed Tuesday to a U.S. Securities and Exchange Commission settlement in the case and later said through his lawyer that he had warned Jobs of the accounting implications of backdating.

"We are not going to enter into a public debate with Fred Anderson or his lawyer," Apple board members Bill Campbell, Millard Drexler, Al Gore, Arthur Levinson, Eric Schmidt and Jerry York said Wednesday. "Steve Jobs cooperated fully with Apple's independent investigation and with the government's investigation of stock-option grants at Apple. … We have complete confidence in the conclusions of Apple's independent investigation and in Steve's integrity and his ability to lead Apple."

The company's latest quarterly profit jumped 88% year-over-year to $770 million as Apple shipped nearly 10.6 million iPods, 24% more than a year ago.

Revenue increased 20.6% to $5.3 billion, with $1.7 billion coming from iPod sales. Other music-related revenue, including sales at the iTunes Store, totaled $653 million. This meant that iPod and music sales accounted for 44.5% of Apple's overall revenue.

The technology powerhouse also said it shipped nearly 1.52 million Macintosh computers during the quarter, 36% more than a year ago.

"The Mac is clearly gaining market share, with sales growing 36% — more than three times the industry growth rate," Jobs said. "We're very excited about the upcoming launch of iPhone in late June and are also hard at work on some other amazing new products in our pipeline."

Jobs was not on Apple's earnings call. Management didn't provide many product specifics during the call, with executives saying it was too early to predict what kind of consumer demand the iPhone would attract.

The company will account for Apple TV, which syncs a consumer's iTunes library from their computer to a widescreen TV set, on a subscription basis to be able to provide service updates to customers, but this does not mean the firm plans to charge subscription fees for the product, executives said.

Also on Wednesday, Apple predicted about $5.1 billion in revenue for its fiscal third quarter and a profit of about 66 cents per share.
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