Apple Shines on iPhone

Apple (AAPL) defied the markets on Tuesday, dialing up a record 15 percent profit rise on the back of strong Mac computer and iPhone sales, the world's tech and business press report with, at times, astonishment. In the quarter—Apple's best nonholiday quarter ever, the New York Times points out—Apple sold a staggering 5.2 million iPhones and 2.6 million Macs during a period in which PC sales fell 3 percent to 5 percent. The Wall Street Journal said of the numbers, "Apple Inc. continue[s] to buck the recession." Sales of iPhones alone tripled to $1.69 billion in the quarter, the newspaper notes. But, digging a bit deeper, the WSJ points out that the strong Mac sales were due in part to aggressive discounting and that iPod sales were a notable "weak spot" as they continue to eat into that part of the business. Still, investors cheered the news, sending shares up 4.5 percent in after-hours trading. About the only thing investors didn't get was an appearance in the analyst briefing by CEO Steve Jobs. His self-congratulatory comments were included in a written statement instead.

It was a completely different story in Sunnyvale, Calif., headquarters of Yahoo (YHOO). "The beleaguered Internet portal posted a 13% plunge in revenue over a year earlier as businesses continued to cut back spending on online advertising," the Los Angeles Times writes. Yahoo revenues fell by $200 million in the quarter as the core advertising business continued to falter. The analyst briefing with CEO Carol Bartz also reignited questions of a Microsoft tie-up. "Yahoo's results come amid renewed speculation that a search advertising deal with Microsoft is back on the table, possibly closing as early as this week," Business Week reports.

The pain continues to deepen in the airlines sector, too. "When the summer travel season ends after Labor Day weekend, so will the jobs of nearly 1,700 Continental Airlines employees," the Houston Chronicle writes. The 1,700 figure stunned the union chiefs. "Continental is about to join the Star Alliance and a new joint venture, which are both growth-type moves,” Jay Pierce, chairman of the Continental (CAL) chapter of the Air Line Pilots Association, told the Houston Chronicle. “The sole purpose of joining the Star Alliance is to generate more revenues.” Bloomberg reports that Continental has now lost money in seven straight quarters and that Tuesday's announced layoffs "are on top of 1,200 eliminated positions the carrier has announced since May."

Could Procter & Gamble Co. (PG) be getting ready to off-load its pharma arm, including specialty drugmaker Warner Chilcott? That's what the WSJ (in a story that still has the "embargoed" note to editors in the file) is reporting, adding that private-equity firm Cerberus Capital Management LP is in pole position to buy the drugs arm with an eye to turning Warner Chilcott into a stand-alone company. The acquisition could cost $3 billion and "would substantially boost the profile of Warner Chilcott, a New Jersey-based company that focuses on women's health care and dermatology products," notes the WSJ.

Fed Chairman Ben Bernanke ran the gauntlet that is Capitol Hill to deliver some semi-encouraging news about the nation's economy. Bernanke "laid out the case that growth is returning, saying businesses and consumers could be nearer to a resumption of spending after wrenching cutbacks," writes the WSJ. And, amid a chilly reception from lawmakers, he also "turned up the heat on Congress and the White House to get budget deficits under control or risk damaging the recovery," it writes. The good news, writes the NYT, is that the Fed projects the pace of recovery will slowly accelerate next year into 2011. Bernanke also stressed that unemployment will remain high, which isn't great for all those without jobs but is likely to help keep inflation in check at a time when the government is pumping "hundreds of billions of dollars into the economy to rescue banks and bolster the credit system." Until unemployment comes down, the Fed needs to keep interest rates close to zero, Bernanke said.

And finally, what is the Watergate Hotel worth? The hotel complex made famous by President Richard Nixon's downfall went to auction yesterday and attracted not a single acceptable bid. According to CNN.com, "the hotel fell back into the hands of its lender, PB Capital, after no one advanced the $25 million opening bid" threshhold. The former owner, Monument Realty LLC, was forced into foreclosure last week.