Apple profit rises on Mac strength

By Scott Hillis

SAN FRANCISCO (Reuters) - Apple (AAPL.O) on Wednesday said its quarterly profit rose 73 percent from a year earlier, zooming past expectations on strong Macintosh computer sales and helping to send its shares up nearly 10 percent.

Apple said it expected to sell one million iPhones by the end of its current quarter, and reiterated its goal of selling 10 million of the devices globally in 2008.

It also reported a surprising rise in profit margin, citing lower prices for components like memory chips, strong direct sales, and more purchases of higher-end products.

Shares of Apple, which had been up 62 percent since the start of the year when Chief Executive Steve Jobs unveiled the iPhone, rose 9.6 percent to $150.70 after the report.

"There's no question that Apple is on a roll," said Tim Bajarin, president of Creative Strategies. "Between the iPhone and the iPod, they continue to get a halo effect that brings people into the Apple stores, which in turn gets more people interested in Macintoshes."

Combining a wireless phone, Web browser and media player that offers service over AT&T's (T.N) mobile network, the iPhone is Apple's attempt to build a third product line that will equal its computer and iPod businesses.

The iPhone went on sale on June 29 in the most anticipated product launch in years, but its financial impact was negligible because it was available only in the final days of the quarter and Apple books the sales as subscription revenue over two years.

Apple sold 270,000 iPhones in the two days, near the low end of analysts' expectations that had ranged from a quarter of a million units up to 700,000. Apple executives took pains to note it took nearly two years for the company to sell one million iPods after an October, 2001, debut.