By Bill Rigby
Oct 28 (Reuters) - Apple Inc's profit and marginsslid despite selling 33.8 million iPhones in its Septemberquarter, prompting a brief but sharp selloff as disappointedinvestors cashed in some of the stock's recent strong gains.
Wall Street had hoped for a stronger beat on quarterly salesafter the company predicted in September that its revenue andmargins would come in at the high end of its own forecasts.
CEO Tim Cook predicted a "really great" holiday shoppingseason in a conference call with analysts, a crucial time forApple as its new iPads go up against Amazon.com Inc's Kindle Fire and its new iPhones compete with lower-cost gadgetsmade by Samsung Electronics and other rivals usingGoogle Inc's Android software.
Sources have said demand for Apple's cheaper, brightly huediPhone 5C lagged demand for the top-tier iPhone 5S, spurringconcerns about the iPhone's market positioning and its abilityto compete with a growing profusion of lower-cost rivals.
Cook did not address the popularity of the 5C on his callwith analysts but said there was "a very significant backlog"for the cutting edge 5S.
The world's most valuable tech company said on Monday itexpected revenue of $55 billion to $58 billion this quarter,outpacing Wall Street's forecast for about $55.65 billion.
Gross profit margin for the fourth quarter was 37 percent,down from 40 percent a year ago as intense competition from thelikes of Samsung Electronics took a toll. That was roughly levelwith analysts' average 36.9 percent forecast.
"We would have expected higher gross margins," saidMorningstar analyst Brian Colello. "With the higher price phonesand clear preference toward the 5S, we were all expecting moreof a gross margin boost for the December quarter."
Shares in Apple, which have gained 17 percent since itsupbeat forecast last month, slid as much as 5 percent on Monday before recovering after Cook said the company will continuestudying its capital-return program, addressing recent demandsby investors to share more of its cash hoard.
The stock was roughly flat at about $529 after hours, aftergaining 0.7 percent in regular Nasdaq trading.
Beyond the holiday quarter, investors still hold out hopethat the company that upended the cellphone industry andpopularized tablet computing can again dream up a revolutionarydevice, returning Apple to the stellar growth of past years.
The company is increasingly hard-pressed to fend off rivals.Research house Strategy Analytics estimated on Monday thatApple's market share slipped to 13.4 percent in the calendarthird quarter from 15.6 percent previously, while Samsung ledthe market with 35.2 percent.
As growth tapers off, some shareholders have becomeincreasingly aggressive at seeking a bigger return of cash - thecompany ended the September quarter with $146.8 billion in cashplus short-term and long-term marketable securities.
Billionaire Carl Icahn, who owns 4.7 million Apple shares,has led the charge, demanding the company initiate a tenderoffer to buy back $150 billion of its stock.
Cook told analysts the company will continue to seekshareholder input on its capital return program, and willannounce any changes in the first part of the new calendar year.
Apple said it sold 33.8 million iPhones last quarter,roughly in line with analyst expectations for 33 million to 36million.
It sold 14.1 million iPads during the quarter, up veryslightly from 14 million in the year-ago quarter, and moved 4.6million of its Mac computers, down from 4.9 million a year ago.
Overall revenue was $37.5 billion, ahead of Wall Street'saverage forecast of $36.8 billion, according to Thomson ReutersI/B/E/S.
Earnings per share slid for the third straight quarter to$8.26, ahead of analysts' average estimate of $7.94.
"They had already preannounced and people got euphoric inrecent weeks. It wasn't a massive blowout," said Shannon Crossof Cross Research.
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