But an across-the-board price increase on the new and extremely popular flat-panel iMac, intended to offset the rising cost of LCD screens, has caused analysts to question Apple's ability to sustain current growth rates in the face of possible consumer price resistance.

Earnings Mixed

Charles Smulders, vice president of hardware platforms at research firm Gartner, told NewsFactor that Apple had "a fairly solid set of results, although a year ago was a weak quarter for [the company]."

Although it increased unit shipments over last year's and delivered profits that surpassed estimates, Apple nonetheless suffered ill effects from its inability to deliver enough flat-panel iMacs to meet demand, resulting in a year-over-year profit dip.

iMac a Hit

Apple shipped 220,000 iMacs in its second fiscal quarter, falling short of the 250,000 units initially expected by some analysts but exceeding some low estimates made when the company first disclosed its production difficulties.

Although overall gross margins for Apple were 27.4 percent, compared with 26.9 percent in the year-ago quarter, Smulders said the numbers could have been better.

"The iMac launch appears to have been a success, but the need to meet demand and shipment goals meant Apple sacrificed gross margin," he said. "Gross margin was also impacted by rising flat-panel screen and DRAM prices."

Out of Reach?

In late March, Gartner analysts predicted that Apple's competitors would be forced to match or exceed the $100 iMac price hike and would raise average PC prices by at least 10 percent through 2002.

Sony quickly followed suit, increasing prices on its desktop and laptops by up to $200, and Dell modified components to mask price increases. Even PDAmanufacturer Handspring jumped into the ring by bumping up the price of its Treo by $50.

Dropping Prices

Apple may have led the pack with its price increases, but Gartner said it also should be among the first to reverse that trend when component costs drop.

"Going forward, Gartner Dataquest continues to have concerns over the iMac's relatively high pricing compared to the old iMac. We believe there is a risk that the higher pricing puts the iMac out of reach of many users. The recent $100 price rise increases that concern," Smulders told NewsFactor.

Supply Issues Stick

During a conference call following its earnings announcement, Apple chief financial officer Fred Anderson claimed that his firm is now churning out nearly 10,000 flat-panel iMacs daily, scurrying to meet seemingly insatiable demand. But according to dealers, the new iMacs are still experiencing some distribution problems.

"There are still supply problems with the new iMacs," Jim Hancock, president of Apple authorized reseller ComputerTown, told NewsFactor. He said some of the problems are related to Apple's channel but declined to comment further.

Apple's Anderson said he expects back orders will be filled by May.