Apple falls nearly 10%; iPhone sales disappoint

Updated: 8:41 p.m. ET

Shares of Apple (AAPL) tumbled sharply in after-hours trading Wednesday after the company reported quarterly iPhone sales that just missed Wall Street estimates.

Revenue of $54.5 billion was up 18% from a year earlier but also about $230 million less than expected. Earnings of $13.81 a share were down 6 cents from a year earlier but ahead of the Street estimate of $13.44.

The company said it sold 47 million iPhones in its fiscal first quarter, up 29% from a year earlier but down slightly from Street estimates of sales of 48 million units and hopes for sales of 50 million units.

Shares were down $50.52, or 9.8%, to $463.49 at the end of after-hours trading; it had traded as low as $457.30. It will weigh on markets on Thursday. Apple hasn't closed below $460 since Feb. 3, 2012. The stock had closed at $514.17, up $9.40, in regular trading.

With Wednesday's close, the shares were down 26.7% from their closing high of $702.10 in September. Some analysts see the stock headed sharply lower. Jeff Gundlach of DoubleLine Capital told CNBC that the shares could hit $425. 

The big question in the report was iPhone sales, which accounted for 56% of total revenue. Reports had suggested sales had not been as robust as expected, perhaps as few as 44 million sold.

Sales were better than that. In fact, those 47.8 million units sold were a record. Traders, however, had hoped for more.

There were questions about whether Apple could get the phones produced fast enough. In addition, there were worries that the smartphone market was getting saturated, thanks to new devices hitting markets worldwide. Samsung has emerged as an intense competitor.

At the same time, Apple said it sold 22.9 million iPad tablets, up nearly 48.7% from a year earlier and 34% from the fiscal fourth quarter, which ended in September. But iPad Mini sales could have been much stronger except for problems getting them produced.

Meanwhile, sales of Macintosh computers were down 21.1% from a year earlier. Manufacturing constraints and cannibalization of sales by the iPad kept sales down, CEO Tim Cook said on the company's conference call.

The iPad has also hurt sales of low-end computers that use the Microsoft (MSFT) Windows operating system. Microsoft, the publisher of MSN Money, reports results after Thursday's close.

Sales of iPod music players were off 17.5%.

Apple expects $41 billion to $43 billion in revenue in the fiscal second quarter and a gross margin of 37.5% to 38.5%. The margin, a key profitability measure, was 38.6% in the first quarter.

Apple's board declared a cash dividend of $2.65 a share payable Feb. 14 to shareholders of record on Feb. 11. The dividend rate was unchanged.

The earnings came after what had been a decent day for stocks. The Dow Jones industrials ($INDU) and the Standard & Poor's 500 Index ($INX) closed at five-year highs. The Dow was up 67 points to 13,779, its best finish since Oct. 18, 2007. The S&P 500, up 2 points to 1,495, had its best close since Nov. 6, 2007.

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