The global economic slowdown has caught up with Apple (AAPL), which Tuesday reported third-quarter financial results that fell short of Wall Street's expectations.
The earnings miss was only Apple's second in at least the past 20 quarters, and immediately sent its shares plummeting more than 5 percent to $567.80 in after-hours trading.
Company executives said the relatively disappointing results were tied to the weak economy in Western Europe and a few other countries, as well as a slowdown in iPhone sales as consumers wait for the next iPhone model, which is expected to be released in late September or October.
"Rumors and speculations -- we think this has caused some pause in customers' purchases," Apple CFO Peter Oppenheimer said during a conference call with analysts.
Apple said its earnings per share were $9.32 on revenue of $35 billion. Analysts polled by Thomson One Analytics predicted earnings per share of $10.36 on revenue of $37.19 billion.
"Even the almighty Apple is getting impacted by the European weakness," Edward Jones analyst Bill Kreher said. "That's what caught the Street off guard."
Apple sold 26 million iPhones in the quarter, representing 28 percent unit growth over the year-ago quarter but down 26 percent from the second quarter. The
company reported sales of 4 million Macintosh computers, just 2 percent higher than the year-ago period. Apple executives blamed the muted sales on the timing of Apple's refresh of its MacBook laptop computers, which came late in the quarter.
"Right across the board, they just missed -- whether it was Macs or iPhones," Needham & Co. analyst Charles Wolf said. "Still, Apple's had a terrific run this year -- one of the best in technology."
Apple's iPads, though, were a bright spot. It sold 17 million units in the quarter ending June 30, up 84 percent from the same period last year, and a 44 percent jump from the previous quarter. The third-generation iPad, which the company began selling in March, went on sale in China just last week.
"We are happy with our quarter, given what is going on around us," Oppenheimer said.
Apple CEO Tim Cook, while noting weaker sales in Europe, said he didn't see any big problems looming in the United States or China. He reported that iPhone sales in China were up 100 percent from the same quarter last year.
Cook was asked by an analyst whether he was concerned that the majority of smartphone users overseas are buying phones that cost less than $300, much less than what the iPhone sells for. Cook responded that smartphone users simply want the best, and that Apple is prepared to give it to them.
"We've been very focused on China because we see it as an enormous opportunity for us," Cook said. "We're very pleased we were able to grow our iPhone sales over 100 percent last quarter. I firmly believe people in emerging markets want great products like they do in developing markets, so we'll stick to our knitting and make the best products we can. And if we do that, we think we've got a very, very good business ahead of us."
Apple, known for providing conservative guidance, said it expects fourth-quarter earnings of $7.65 a share on revenue of about $34 billion, also below analysts' expectations.
said believes the relative slowdown is a good opportunity for investors to snap up Apple shares. "Given Apple's track record of beating expectations, a miss is likely to lead to a downtick. I think investors need to look past the valley to the peak -- the holiday season."
He added that next year "is going to be very strong for Apple."
Asked about Apple TV, which many people believe will be Apple's next big thing, Cook was as cagey as ever in his comments, again calling the project still simply "a hobby" for the company. He said that with sales of 1.3 million Apple TVs this quarter, "we're now at 4 million for our fiscal year, which is pretty incredible."
"It's still at a level we call a 'hobby,' but we're still pulling the string to see where it takes us," Cook said. "We don't keep projects we don't believe in, and there are a lot of people here who believe in" Apple TV. "We do it because we think it'll lead us somewhere. So we'll see. I think 4 million is not a small number and there are a lot of believers in it."
In other news, the company said it would start a dividend payment of $2.65 a share payable Aug. 16 to shareholders of record as of the close of business Aug. 13.
Apple also announced it would release its latest Macintosh operating system, Mountain Lion, on Wednesday.
Staff writer Patrick May contributed to this report. Contact John Boudreau at 408-278-3496. Follow him at Twitter.com/svwriter.
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