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1/28/2014
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Apple iPhone Record Sales Fail To Impress

Apple sold 51 million iPhones last quarter, but investors expected sales to top 56 million.

Apple Mac Pro: 9 Ways It Wows
Apple Mac Pro: 9 Ways It Wows
(Click image for larger view.)

Investors punished Apple's stock in after-hours trading on Monday after the company reported record – but lower than expected – iPhone sales. Shares were down about 8% about an hour after the company issued its earnings statement.

Apple reported record quarterly revenue of $57.6 billion and quarterly net profit of $13.1 billion, or $14.50 per diluted share, for its fiscal Q1 2014.

While Apple sold 51 million iPhones, a quarterly record, expectations were higher still, at about 56 to 57 million. The company sold 47.8 million iPhones in the same quarter a year earlier.

"We are really happy with our record iPhone and iPad sales, the strong performance of our Mac products and the continued growth of iTunes, Software, and Services,” said Apple CEO Tim Cook in a statement. "We love having the most satisfied, loyal, and engaged customers, and are continuing to invest heavily in our future to make their experiences with our products and services even better."

Demand for Apple's Mac computer line, which just celebrated its 30th anniversary, proved to be surprisingly strong. The company sold 4.8 million Macs, compared to 4.1 million during the same period a year earlier.

[Who is up and who is down? Read Android Surges, iOS Slips In 2013.]

During the company's conference call for investors, company CFO Peter Oppenheimer noted that Mac sales had grown amid a 6% year-over-year decline in PC sales, as measured by IDC.

Apple's iPad continues to sell well. The company sold 26 million iPads during the quarter, a record. That's up from 22.9 million in the same quarter a year earlier.

Sales of Apple's iPod, made redundant by its iPhone, declined 52% in unit sales and 55% in revenue.

Cook pointed to corporate affinity for iPhones and iPads as an indicator of future enterprise revenue. Ninety percent of tablet activations in corporations are iPads, he said.

"The road in the enterprise is a long one, but I think we've done a lot of the groundwork ... and I would expect that it would have more and more payback in the future," said Cook.

To match investors' high expectations for iPhone sales, Cook is counting on Apple's recent deal with China Mobile, which has more customers than any other mobile carrier in the world.

"We've been selling with China Mobile now for about a week and last week was the best week for activations that we've ever had with China," said Cook.

Cook characterized the iPhone slowdown in the US market as the effect of a change in mobile carriers' upgrade policies. The revised upgrade rules, he suggested, limited customers' ability to upgrade to new Apple devices.

Questioned about Apple's inability to grow iPhone market share at or faster than the rate of overall smartphone market growth, Cook said, "Our objective has always been to make the best, not the most."

Thomas Claburn is editor-at-large for InformationWeek. He has been writing about business and technology since 1996, for publications such as New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and television. He's the author of a science fiction novel, Reflecting Fires, and his mobile game Blocfall Free is available for iOSAndroid, and Kindle Fire.

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Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
1/29/2014 | 11:14:58 PM
Re: Misleading title
It's just that it's a cyclical company.  It has its annual-ish grand product release, it soars in the stocks for quite some time after that, and then there's a market correction.

It's the kind of non-news techies like to talk about.  ;)
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
1/29/2014 | 11:12:46 PM
Re: Misleading title
It is worth pointing out that some recent innovations on Apple's part, such as its "downmarket" iPhone model, the iPhone 5c, were years in the making -- announced to be in the works as early as 2011 and before.

I suspect the next big innovation we'll see is the patent described here put into action, taking power away from the carriers.
norris1231
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norris1231,
User Rank: Apprentice
1/29/2014 | 10:41:15 PM
Re: Misleading title
I completely agree that Apple's anniversary played a major role in the huge amount of attention they received.  The anniversary is a milestone for a company that has shown its aggressiveness to be the top seller.  However, every dog has its day and has a bad game.  Apple just had a bad game on this one.
norris1231
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norris1231,
User Rank: Apprentice
1/29/2014 | 10:38:28 PM
Re: Misleading title
I agree that Apple will come back strong with some type of innovating invention.  Apple has been hot and separating itself from the competitors for a long time now.  It was just time for them to have an off section.  They will come back strong very soon in my opinion.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
1/28/2014 | 10:02:57 PM
Re: Misleading title
I also suspect that Apple has attracted more press attention than usual recently because of the company's recent 30th anniversary of selling a computer.
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
1/28/2014 | 10:01:37 PM
Eh.
Everybody freaks out when Apple's stock fails to zoom up to epic proportions -- let alone fall.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
1/28/2014 | 5:10:48 PM
no talk about future products
Cook didn't let any hints slip about future products other than to express confidence. The Mac Pro preview obviously isn't something that will be extended to other products.
Whoopty
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Whoopty,
User Rank: Ninja
1/28/2014 | 12:13:38 PM
Re: Misleading title
Even with the high sales numbers, I feel like Apple is stagnating a bit. That's just part of its lifecycle though and I'm sure before long it'll take a leap and create something interesting again. 
TMagrini850
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TMagrini850,
User Rank: Strategist
1/28/2014 | 11:04:28 AM
Misleading title
Your headline is misleading.  The stock market is a leading indicator.  Investors had already anticipated the record sales of iPhones and other Apple products for this quarter by bidding Apple's stock up from 450 in mid-September to 550 yesterday.  The investor reaction is based on the guidance Apple released for the upcoming quarter.
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