Apple Inc stunned Wall Street with quarterly results that missed expectations for the first time in years as customers held off buying iPhones until the October launch of the latest version. Shares of Apple fell 7 percent in extended trading on Tuesday, wiping some $27 billion off the value of the world's largest technology company.
It was Apple's first quarterly earnings report under Chief Executive Tim Cook, who took over from Steve Jobs in August at a critical juncture for the company. Apple is battling Google Inc in the mobile arena, as well as other challengers such as Samsung and Amazon.com Inc.
"Investors are going to start to speculate that there is change under way now that Jobs is gone, and that there's trouble ahead. We don't share that point," said Channing Smith, co-manager at Capital Advisors Growth Fund, which holds Apple shares.
Apple said it sold 17.07 million iPhones in its fiscal fourth quarter ended September 24 - well short of the roughly 20 million forecast by analysts. The iPhone is Apple's flagship product, yielding some 40 percent of annual sales. Revenue rose 39 percent to $28.27 billion, lower than the average analyst estimate of $29.69 billion, according to Thomson Reuters I/B/E/S.
It was the first time Apple missed revenue expectations since the fiscal fourth quarter of 2008. Net profit was $6.62 billion, or $7.05 a share. That fell shy of expectations for earnings of $7.39 per share. The last time Apple missed EPS estimates was in the first quarter of 2001, according to Thomson Reuters I/B/E/S. Apple executives said consumers had postponed purchase decisions until the crucial holiday quarter because of speculation that a new phone was on the way. Apple unveiled the iPhone 4S in early October, and it hit stores last Friday.
Apple - which typically offers projections so conservative they are disregarded - on Tuesday forecast December quarter revenue and earnings above Wall Street's estimates. Cook started his first earnings conference call as CEO by honouring Jobs, who died on October 5 after a years-long battle against pancreatic cancer. He said he was "very confident" of posting record iPhone sales in the current quarter. The company moved 4 million iPhone 4S units - more than double its predecessor - in its first three days, despite lukewarm reviews.
Another area for optimism for Apple was iPads. The company moved 11.12 million units during the quarter despite attempts by various manufacturers, including Samsung, to capture a slice of the tablet market. Now Amazon.com has also entered the fray with its Kindle Fire tablet.
Revenue from the region increased four-fold to $4.5 billion during the quarter. Apple's Mac sales saw a large spike during the September quarter but it failed to lift earnings. Apple sold 4.89 million Macs, up 27 percent from a year ago. Gross margin came to 40.3 percent - a tad higher than Wall Street's forecast of 39.74 percent. International sales accounted for 63 percent of the quarter's revenue.
Apple said it expected December quarter earnings of $9.30 a share on revenue of about $37 billion. Wall Street is projecting $9.01 for the period, but it was unclear if that was comparable. Apple shares fell to $394.78 in after-hours trading, after closing at $422.24 on the Nasdaq.
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