Apple Inc. on Monday posted lower profits but higher revenue as sales from the iTunes store and from iPhones more than offset declines in Macs and iPods.
But the Cupertino, Calif., company's shares went on a rollercoaster ride immediately after the earnings release following the close of the stock market, dropping as much as 9% as investors fretted about the company's gross margin forecast for the next quarter, which was expected to be flat. The stock gradually regained most of its losses throughout the evening after company executives discussed the report in more detail.
The company 's chief financial officer, Peter Oppenheimer, in a call with financial analysts cited several reasons for the disappointing forecast. Chief among them is a $900 million revenue deferral Apple will take in its first fiscal quarter on the sales of new Apple devices that offer iWork and iLife for free. The company had previously sold both software suites on its iTunes App Store, but announced last week that it is giving away the products to customers who buy an Apple device.
Another reason for the lower profit margins, Oppenheimer said, was the predominance in sales of newer devices that are more expensive to produce, such as the $399 iPad Mini with an ultra-sharp, but costly, Retina display due out in November. Apple expects its component costs to decline over time, but new products with more advanced technologies generally have higher overall costs than those that have been out in the market for a while.
The business unit that includes iTunes continues to grow rapidly, posting $4.3 billion in revenue, a 22% growth in revenue the fourth quarter ended Sept. 28, compared to the same period in 2012. Meanwhile, iTunes Radio has garnered 20 million unique listeners since it debut on Sept. 18. Apple did not release any additional figures concerning the free, ad-supported streaming radio service.
Here is a summary of device sales, in units, in the fourth quarter compared to the same quarter a year earlier:
iPhone sales: 33.8 million, up from 26.9 million in 2012
iPad sales: 14.1 million, up slighhtly from 14 million in 2012
Mac sales: 4.6 million, down from 4.9 million in 2012
iPod sales: 3.5 million, down from 5.3 million in 2012