Record sales of iPhones and iPads were not enough to renew Wall Street’s appetite for Apple. The stock fell 10% in after hours trading following the company’s fiscal first quarter earnings report. Many investors are worried that future revenue gains will increasingly come from lower margin products like the iPad mini.
Apple blew away its previous records for both iPhone and iPad sales. During the last three months of 2012, the company sold 47.8 million iPhones, breaking its previous record of 37 million set during the 2011 holiday season. Apple did not say how many of those handsets were the iPhone 5. The best indication of iPhone 5 sales may come from the carriers’ earnings reports; earlier this week Verizon Communications said in its reportand that it sold just 3.1 million iPhone 5 handsets, with 6.2 million iPhones sold overall.
While Apple is increasing its smartphone sales, competitors are growing faster. According to IDC, Apple’s smartphone market share slipped from 23% in the fourth quarter of 2011 to 14.6% by the third quarter of 2012 as the company lost ground to Samsung and other makers of Android phones. Strategy Analytics is predicting that Samsung will extend its smartphone lead over Apple this year. According to one report, Apple plans to respond with a lower-priced, basic version of the iPhone.
Apple sold a record 22.9 million iPads, and CEO Tim Cook said the tablet has the “mother of all opportunities” to take market share away from Windows PCs. He would not say how many iPad minis were sold, but he did say Apple faced supply constraints in making the slate and wished it could have made more.
Revenue for the quarter was a record $54.5 billion, up from $46.3 billion in the year ago quarter, but profit was essentially flat at $13.1 billion. The year-ago quarter included 14 weeks and the most recent quarter just 13, so weekly profit was up. Still, Apple’s profit increase was much lower than its revenue increase, meaning that margins have deteriorated. Gross margin was 38.6% compared to 44.7% in the year-ago quarter.
Apple projected still lower margins for the second quarter, saying that 38.5% would be on the high end. However, the company is known for offering conservative guidance and then beating expectations. The company said revenue for the first three months of 2013 will likely be between $41 billion and $43 billion.
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