August 1, 2007, 12:00 AM

iTunes and iPhones make sweet financial music for Apple

Online music sales rose 33% for Apple in the third quarter and iPhone sales are on a roll. Apple expects to sell 10 million iPhone units in 2008, COO Timothy Cook told Wall Street analysts.

Mark Brohan

Research Director

The sale of iPhones gave Apple Inc. a strong end to its recently concluded third quarter, but online music sales also grew by 33%.

Apple, No. 15 in the Internet Retailer Top 500 Guide, generated 40% of Q3 revenue from the sale of music-related downloads and hardware, chief financial officer Peter Oppenheimer told analysts on the company’s recent earnings call. Apple iTunes has sold more than three billion songs and the iTunes digital library now features more than five million songs, 550 television shows and 500 movies, Oppenheimer said. “Music revenue grew 33% fueled by very strong iTunes Store sales,” he told analysts.

For the third quarter Apple posted net income of $818 million on sales of $5.4 billion vs. net income of $472 million on revenue of $4.37 billion in the prior year. Apple’s other music sales, which include the iTunes store, iPod services and related accessories, rose by 42.9% to $653 million from $457 million in Q3 of the prior year. Apple doesn’t break out specific sales for its iTunes store.

Apple also told analysts that iPhone sales and service are exceeding expectations. “It took Apple seven quarters -- almost two years -- to sell our one millionth iPod,” Apple chief operating officer Timothy Cook told analysts. “We hope to sell our one millionth iPhone in the first full quarter of sale. What we have seen so far gives us a lot of confidence to reiterate our goal to sell 10 million units across 2008.”

So far Apple has sold more than 270,000 iPhones, the company says.


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