Apple posts a disappointing $6.6-billion profit
Despite $6.62 billion in profit, Apple Inc.’s quarterly results disappointed Wall Street for the first time in nearly a decade, largely because investors expected a lot more people to buy its iPhone 4.
As it turns out, though, many consumers didn’t buy the 16-month-old iPhone 4 because they were waiting for the much-hyped rollout of the new model.
The iPhone 4S sold more than 4 million units in the first three days it was in stores last week, double the best debut of any previous iPhone model. But that was too late to be counted in the company’s fourth quarter, which ended Sept. 24.
The success of the new phone did little to mollify investors who were anticipating far better sales of the older phone and were used to Apple’s long-standing habit of blowing past Wall Street’s expectations.
In after-hours trading following the release of its financial results, Apple shares dropped about $28, or 7%, to hover near $394 after closing at $422.24. That was a reversal for the stock, which had been trading above the $400 mark for much of the last week on the strong performance of the new iPhone.
Apple’s stock plunged even though the company posted a 54% jump in profit compared with the same quarter last year. Revenue climbed 39% to $28.27 billion. But both results were less than what analysts expected — the first time that’s happened since 2002.
In the past, Apple has exceeded expectations even when it hasn’t had a new version of the iPhone. That’s because the company’s growth came from expanding into new countries and offering its devices through more wireless carriers. That upward trend may have tripped up Wall Street, where analysts said they underestimated how many people would wait for the new phone.
“Expectations got out of whack,” said Shaw Wu, an analyst at Sterne Agee. “This was a transitional quarter [between the old and new phones]. Some of the folks didn’t account for it enough, including ourselves.”
But investors may also have been worried about the number of iPad tablet computers the company sold, said Jeff Fidacaro of Susquehanna Financial Group. Although the 11.1 million units sold was a quarterly record for the device, Wall Street had expected the company to sell 400,000 more.
“That number is going to weigh a little bit on investors,” Fidacaro said, especially given the heavy tablet competition Apple is expected to face this holiday season. Amazon.com Inc. last month announced its upcoming Kindle Fire, a lower-cost tablet that has garnered more buzz than any other iPad competitor since Apple launched the device last year.
Sales of Apple’s iPod music player continued to drop, with the company selling only 6.6 million of the devices, down 27% from a year earlier, when it sold 9.1 million. In general, fewer consumers are buying music players as more smartphones come with the built-in ability to play songs. Apple did report that it sold nearly 4.9 million of its Mac laptops and desktops, its best-ever quarter for personal computer sales.
Still, Apple’s chief executive, Tim Cook, did not appear to be worried about the company’s prospects. He and other executives predicted that Apple would sell more iPhones and iPads than ever in the current holiday quarter, with Cook adding that “in our wildest dreams we couldn’t have gotten off to a start as great as we did with the 4S.”
On Wednesday, Apple will hold a company celebration of its recently deceased co-founder and former chief executive, Steve Jobs. Its retail stores will be closed during the memorial for a short period starting at 10 a.m. Pacific time.
