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Apple's Record Results Send Shares Tumbling

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It seems - despite doing everything right - Apple can't do anything right...

Following a mediocre MacWorld, which offered no hardware improvements to either its iPod or iPhone lines and divided many about the merits / compromises of the Macbook Air, the company has announced record breaking profits which have once again sent its share price tumbling.
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For its financial first quarter Apple reported revenue of $9.6bn and a staggering net quarterly profit of $1.58bn. This compares to respective figures of $7.1bn and $1bn over the same period last year. Gross margin was an impressive 34.7 per cent (from UK and European RRPs alone methinks), up from 31.2 per cent in Q1 2007.

During this time 2,319,000 Mac computers were sold representing a huge 44 per cent leap in unit growth and 47 per cent revenue growth over Q1 2007. Finally, the company sold 22,121,000 iPods (!) during this quarter - a five per cent increase on Q1 2007 - while iPhone sales were 2,315,000.

"We're thrilled to report our best quarter ever, with the highest revenue and earnings in Apple's history," said Apple CEO and self appointed guru Steve Jobs. "We have an incredibly strong new product pipeline for 2008, starting with MacBook Air, Mac Pro and iTunes Movie Rentals in the first two weeks."
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Sadly, the stock market was less impressed. Apple shares again nosedived 11 per cent on the news before recovering to end the day 3.5 per cent down. Apple shares are now also almost 25 per cent down on their record $200 price in December.

So what upset the traders? The key here is not to look at the records (a strange concept, I know) but to examine the expectations and potential for future growth. In this mindset cracks appear, notably:

*Simply: analysts thought Apple was going to do even better. Yes, the figures were records but not records by enough
*iPod sales are virtually flat suggesting market saturation and fears continue to spread that music orientated phones are starting to eat away at it
*iPhone sales, though impressive, were short of expectations in the US. Figures for the UK and Europe have also been buried, making many fear the worst
*No new iPods or iPhones to spike sales at the start of the year
*Scepticism over the price and compromises of the MacBook Air
*iTunes movie rentals limited to the US with little sign of a global breakthrough
*And a biggie: the ragged state of the US Economy - not a great motivator for placing faith in the luxury electronics market

So all doom and gloom? Nah, but the pressure will be on to fix bullet points four and six with the impending launch of the iPhone / iPod touch SDK. Also note Jobs' carefully chosen language: "starting with" and "in the first two weeks" to which I can only comment in a formal and professional tone: Goodie!

Link:
Apple Q1 2008 Results Press Release

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