High Wall Street expectations dent Apple shares

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A view of the Apple store on New York's famous Fifth Avenue. Photo - Brendan McDermid/Reuters

World?s most valuable technology corporation Apple Inc. saw a major dent in its shares, missing analysts forecasts for the first time since 2008. Its shares fell more than 5% in after-hours trading after fourth quarter iPhone sales were weaker than experts predicted.

The September quarterly report was Apple?s first under new chief executive Tim Cook, who took over in August after co-founder Steve Jobs resigned. The company?s leading visionary and co-founder later died on 5th October. Apple said its revenue rose to $28.27 billion but that was also lower than the average analyst estimate of $29.69 billion.

The company reported net profit of $6.62 billion, or $7.05 a share. That fell shy of expectations for earnings of $7.39 a share. Apple stunned the tech world with quarterly results that missed expectations for the first time in years as customers held off buying iPhones until the latest version came out in October.

During a conference call, chief executive Tim Cook suggested demand for the iPhone 4 had been dampened by rumors that a new model was about to be released. “The reduction happened largely in the back half of the quarter as the speculation hit extreme highs,” Cook said.

Apple sold 17.1 million iPhones in the last quarter. That was a 21% increase on the same period last year, but analysts had expected sales of 20 million.

This seems to have opened a wide opportunity for other smartphone rivals like Samsung Electronics Co. and HTC Corp. which use Google Inc.?s Android operating system to barge into the Apple market share.

However, not all seems to be a downer for Apple. It sold 11.12 million iPads over the latest quarter, which was a 166% rise on the same period last year. Sales of the Mac computers totalled 4.89 million, a 26% rise and an all-time record.

Cook said he was particularly excited by China, where sales are growing at a “feverish” pace. Increased China earnings accounted for 16% of Apple’s revenue in the fourth quarter, up from 2% in 2009.

Thailand dealing with natural disasters and flooding might be a major area of concern for the firm, as its sourcing of hard disks and components for the Mac will be difficult.

Some analysts suggest now is the time to buy shares, with Apple providing a stronger-than-expected outlook for the current quarter. “We would be aggressive buyers of Apple this morning as we anticipate a big holiday season for the company,” said Ticonderoga Securities analyst Brian White, who reiterated a “buy” rating on the stock.

JP Morgan said in a note to clients that the rare miss was explainable and could be an entry point for opportunistic investors. The firm added that shares of Apple were likely to come under pressure in the near term but that the company’s sales overseas would ultimately boost growth.

Sources ? Reuters, bbc.co.uk, Bloomberg

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