Apple Inc., creator of the iPhone series of cellular telephones, Siri and IOS 5 saw a 7 percent loss loss on Wall Street, amounting to nearly $27 billion dollars in lost value for the technology mega-giant.
Find out what’s happening, after the jump.
Channing Smith, co-manager at Capital Advisors Growth Fund said
“Investors are going to start to speculate that there is change under way now that Jobs is gone, and that there’s trouble ahead. We don’t share that point,”
“The iPhone is where the weakness was and it’s an explainable one. The strong demand for the iPhone 4S set up strong demand for the holiday season.”
Apple’s fourth quarter forecast of $20 million fell by the wayside with Apple earning only $17.07 million through September 24th.
While revenues rose 39 percent, to approximately $28.3 billion, this fell shorts of analysts estimates of $29.7 billion, marking the first time Apple has missed their mark since Q4 of 2008.
Net profits were $7.05 per share, for a total of $6.62 billion, despite expectations of earning $7.39, marking the first shortfall for Apple since Q1 of 2001.
BGC Partners analyst Colin Gillis said
“Expectations for this company were red-hot, that is why we downgraded it. The reality is their business is not an annuity. They have to sell their quarter’s worth of revenue every 90 days.”
“They need to set records every time they report to keep up the momentum.”
Apple execs are pointing their fingers at rumors of a new iPhone model, saying that consumer purchasing decisions had been postponed until the holiday season. Of course, Apple released the iPhone 4S earlier this month.
This is a big stumble for Apple, whose projections are usually laughably conservative. To compound this, they released forecasts for the new quarter which are well above Wall Street’s expectations.
Could this be the beginning of the end for Apple?
Probably not. They have a huge following and rabid iPhone fanboys readily stand in line for months to get a peek at a possible new iPhone release.
Portfolio manager Michael walker had this to say;
“There’s no question this was a transition quarter ahead of the 4S,” “With the early pace of iPhone 4S sales, my guess is that disappointment is relatively short-lived.”
“I’m not going to call Q3 a throwaway quarter for iPhones, but it was definitely a transition.”
Questions have been raised about Apples $81 billion cash surplus, to which Tim Cook, the new CEO responded that the surplus allows flexibility for future purchasing decisions and added;
“That said, I’m not religious about holding cash or not holding it, it’s a topic for the board on an ongoing basis.”
Peter Oppenheimer, Chief Financial Officer, said in an interview with Reuters ;
“We expected iPhone sales to decline in the September quarter from the June quarter as a result of the announcements we made … in June, where we said we would launch iOS 5 and iCloud in fall.”
“That basically created the rumor of the day across the September quarter, especially at the end.”
Apple has set expectations of earning $9.30 per share, amounting to approximately $37 billion for their fiscal first quarter, ending in December. Analysts on Wall Street project a more conservative $9.01 per share.
At the end of the day, Apple shares fell to $394.78 in after-hours trading, after closing at $422.24 on the Nasdaq.
We’ll be keeping an eye on this and seeing where it goes in the long run. Will Tim Cook be able to pull this out and keep the company successful in the wake of Steven Jobs’ death? Only time will tell.
Source : Reuters