Apple breaks records, but Wall Street grimaces

The stock slides after the company could not beat analysts' high expectations on both revenue and profit.

By Kim Peterson Oct 18, 2011 5:08PM
Apple (AAPL) couldn't beat the high expectations analysts set for the company Tuesday, reporting a quarter that disappointed even as it broke records.

It's a problem that will likely haunt Apple for a while. After years of completely blowing away its own forecasts, Apple has taught Wall Street to set a very high bar. For the company's fourth quarter, it was a bar that Apple could not reach. Shares of Apple dropped more than 6% in after-hours trading from Tuesday's $422.24 close.

Still, the company reported its highest revenue and profit ever for a fourth quarter. And sales of Macs and iPads hit an all-time record.

For the quarter ended Sept. 24, profit was $6.62 billion, or $7.05 a share. That's up from profit of $4.31 billion, or $4.64 a share, a year earlier. Analysts were expecting $7.28 a share.

On the revenue side, Apple reported an increase to $28.27 billion from $20.34 billion a year earlier. That again disappointed analysts who were expecting $29.3 billion. About 63% of that revenue came from overseas sales.

Gross margin showed improvement as well, to an astounding 40.3% from 36.9% a year earlier. And Apple beat its own forecast of $5.50 a share in profit on revenue of $25 billion.

"The company had a solid performance but given the heightened expectations, the shortfall will certainly lead to a sell-off in shares," analyst Bill Kreher of Edward Jones said, according to Reuters. "Despite the miss, we still feel Apple is the primary beneficiary of the mobility wave sweeping through the technology sector."


The last time Apple missed earnings expectations was its second quarter of 2002, The Wall Street Journal reports.


Here's how Apple's major products fared:
  • iPhones: 17.07 million sold, up 21% from a year earlier
  • iPads: 11.12 million sold, up 166% from a year earlier
  • Macs: 4.89 million sold, up 26% from a year earlier
  • iPods: 6.62 million sold, down 27% from a year earlier
The quarter finished a year in which revenue totaled $108 billion and profit came in at $26 billion.

Analysts seemed to focus on weakness in the iPhone, but in some ways that weakness was understandable as people put off buying a phone in anticipation of a new version coming out. The newest iPhone 4S went on sale this month. Some analysts expected Apple to sell 20 million iPhones in the quarter instead of the 17.7 million units sold.

Chief executive Tim Cook opened the investor conference call with a tribute to co-founder Steve Jobs, who died earlier this month. "The world has lost a visionary, a creative genius and an amazing human being," Cook said. He added that Apple is "dedicated to continuing the amazing work that he loved so much."

Cook was also asked a big question for the personal-computer industry: Is the iPad eating into sales of traditional computers? Yes, he said.

Some people are electing to buy an iPad rather than a Mac, Cook said. But a much larger number of people are buying an iPad instead of a Windows-based PC, he added.

"We're overwhelmingly coming out very, very well in that cannibalization question," he said. "With cannibalization like this, I hope it continues."

When asked about China in the call, Cook described the company's progress there was amazing. For the 2009 fiscal year, China contributed only 2% of overall revenue. For the fiscal year that just ended, however, that grew to 12%. And in the fourth quarter, it was 16%.

"It's an area of enormous opportunity," Cook said. "It has become No. 2 on our list of top revenue countries very, very quickly."

For the first quarter of its next fiscal year (which runs 14 weeks instead of 13), Apple is expecting $37 billion in revenue and $9.30 in per-share earnings. That's 32 cents more than analysts were expecting.
19Comments
Oct 18, 2011 9:00PM
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WOW...You know you are dealing with a whole new species of greed when a company earns 6.5 billion dollars in profits in a 3 month period and that's somehow viewed by some Wall Street psychopaths as  disappointing financial news......
Oct 18, 2011 6:42PM
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Gosh, any company would be happy with those numbers...  It's just Wall Street analysts who are disappointed.  I say to Apple:  "Ignore Wall Street--you're doing just fine!"

 

Oct 18, 2011 7:13PM
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Yet another example of why the 99% are somewhat in the right area, in New York.  People say Wall Street has no real power/corruption over businesses, but here is an example.  Wall Street "says" that Apple should earn "X".  Apple *nearly* earns what those "experts" think they should make, and the stock dumps and Wall Street slams Apple.  Yet, look at the numbers, the fact they are swapping between #1 and #2 all time valued companies...  If you listen to the "experts" on the "Street" you would think Apple is having major issues.

 

So, Apple will probably lay off a bunch of people and add to the unemployment numbers in order to boost their income even further so that next time, they will HIT the number that those "experts" in New York THINK they should hit, so they won't bad mouth their company and cause the stock to drop.

 

6% drop = how many BILLIONS in value held around the world in funds, pensions, etc..  All because they smashed all of their internal records, but fell short of the "impossible?" bar that Wall Street fat pigs set.

Oct 18, 2011 9:34PM
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So true, all of the idiots are pathetic... Apples projected 5.50 per share profit is what should have been used... But as usual our entire economy is based on bullcrap forecast analyst who are nothing but greedy...

 

The greed, fearmongering, doom and gloom all need to stop soon, its why our economy is stalling out...  2008 was nothing but fearmongering, and the greed just needs to stop period... Stop digging the hole and get Americans back to work...

Oct 18, 2011 6:31PM
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Are you serious right now those numbers are great for this economy. I would bet the ones  that put the price target on apple don't have nowhere near those kind of numbers. Its like the poor telling a rich man how to make money.

Oct 18, 2011 8:05PM
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Here's a thought:  I'm an analyst.  I set unreasonably high expectations and then whisper to my buddies in the Hamptons to short the stock.  Nah never happen.  Funny thing is these "experts" make more money in a day than you or I in a month, but I'm sure the market's not rigged right?. 
Oct 18, 2011 8:07PM
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gonna have to cut the wages in the factory in china Crying
Oct 18, 2011 8:20PM
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Sure, set the bar too high, then short the stock when the real number comes out. After the stock sinks, buy it back and tell the world what a wonderful company it is.
Oct 18, 2011 7:52PM
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Apple beat it's own estimates.  Who cares what some IVY League Manhattan douche bag thinks?  Maybe Occupy should focus on the hedgies pulling a pump and dump.  This is pretty irrational for such a solid company/stock. 
Oct 18, 2011 7:25PM
Oct 19, 2011 1:18AM
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With misses like these who need****?
The "analysts" may have been disappointed but I was thrilled with the results.
All I can say is" rock on Apple" - keep on disappointing like this and I'll keep buying.
Screw the analysts, I'll be buying tomorrow - I wouldn't be surprised if the low life analysts sneak out and  do the same.

Oct 18, 2011 7:59PM
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Apple, perfect for hipsters everywhere. 

Overpriced, monopoly system.

Oct 18, 2011 7:22PM
Oct 18, 2011 7:15PM
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Oh no, Apple missed the expert analysts expectations. Those same analysts that have such an extensive real world knowledge of Science, Design, Development, Engineering, Production, Marketing, and actual on the job working for a living. Well I guess it is time to LBO Apple and sell off it's assets in the wonderful world of Scorched Earth Capitalism.

You are all fired, where is my bonus. 

Oct 19, 2011 6:47AM
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Get ready, the MSC Money teams big news today will be......"the dip is due to Greece blah -blah-blah". Just wondering are Vasoline sales up? Perhaps we need to buy stock in that!
Oct 18, 2011 7:53PM
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And we all know the 4 letters analysts start with. The other posters are right on the money. A record quarter in profits and sales but less than the ****-ists expectations. Stock down 6%. Today good news from Europe/Dow up 180. Tomorrow if bad news out of Europe/Dow down 150, 200?

It's like deja vu all over again* with Wall Street.

*Yogi Berra

Oct 18, 2011 7:55PM
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I can't believe they censored my use of the word a__l.
Oct 19, 2011 3:55AM
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Apple for as big as it is could not support Opie's ability to make war for 15 days.  That is how bad things are.  This is what has to be done.
Oct 18, 2011 8:36PM
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OK how many of you "Hatge Wall Streeters' who are blasting Wall Street and Apple here are doing so from your iPbone or iPad?

 

Silly

 

Yea, you sell it, I would love to see Apple drop a hundred points, so I can buy it as fast as I can

 

--One Happy APPL stock owner here

Lets get a dividend going, it is aboiut time, how about  3 for one or 4 for one split?

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