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Apple Dives 10% After iPhone Sales Fall Short Of Views

Apple (AAPL) reported its first year-over-year decline in earnings per share in nearly 10 years late Wednesday as sales came in lighter than Wall Street expected for the holiday season. The tech titan's shares tumbled 10% in after-hours trading.

Apple earned $13.81 a share, down a smidge from $13.87 a year earlier, for its fiscal first quarter ended Dec. 29. Analysts polled by Thomson Reuters had expected EPS of $13.47. Sales rose 18% to $54.5 billion, up 18%, but less than the $54.7 billion expected by the Street.

Just a year ago, Apple was basking in EPS growth of 116% and 73% in sales growth.

Gross profit margin was 38.6% in the December quarter, vs. 44.7% a year earlier and 40% in the fiscal fourth quarter. But that was better than the 36% Apple forecast three months ago and it topped analyst expectations for 38% gross margin.

For the current Q2, Apple expects sales of $42 billion, at the midpoint of its guidance. Analysts were expected $45.4 billion. Apple forecast a gross profit margin of 38% at the midpoint of its range. That implies Q2 earnings per share of about $8. Wall Street had penciled in roughly $11.69, or down 5% from a year earlier, said RBC Capital Markets analyst Amit Daryanani.

Apple Rediscovers Gravity

Apple shares' 10% fall in late trading would be a fresh 11-month low. In the regular session, the stock rose 2% to 514.01 — but that was 27% off Apple's Sept. 14 peak.

Apple sold 47.8 million iPhones last quarter, up 29% from a year earlier. It also sold 22.9 million iPads, up 48%. Both were roughly in line with diminished expectations, though some analysts had still expected slightly higher smartphone sales. The iPhone accounted for 52% of total Apple revenue in Q1. Meanwhile, iPad tablets contributed 19% of sales.

Piper Jaffray analyst Gene Munster said the iPhone sales number was "mildly disappointing." He expected closer to 50 million. He said "Apple's December quarter results (do) not sway our long term confidence in the iOS ecosystem.

Apple sold 4.1 million Mac computers, down 22% vs. a year earli er, and 12.7 million iPods, off 18%.

Mac sales were way less than the 5 million forecast by Wall Street, Daryanani said in a research note. Sales of iPod media players also were lighter than expected, he said.

International sales accounted for 61% of total Q1 sales.

To spur iPhone sales, Apple might need to come out with a cheaper iPhone, analysts say. That's especially true in developing markets like China. The addition of China Mobile (CHL) as an iPhone carrier is seen as a major catalyst for the stock.

Key Suppliers Hit

Apple's Q1 results and guidance will affect a host of component suppliers that do business with Apple. They include audio chipmaker Cirrus Logic (CRUS), camera sensor maker OmniVision Technologies (OVTI) and wireless chipmaker Broadcom (BRCM).

Shares of those companies and other Apple suppliers fell late.

Nasdaq 100 futures also suffered a sharp decline after hours.

Even with Apple's rapid slowdown in earnings and sales growth, CEO Tim Cook said in a statement that he was "thrilled" with the "record" sales.

"We're very confident in our product pipeline as we continue to focus on innovation and making the best products in the world," Cook said.