Apple¿s good earnings news not good enough for Wall Street

Apple reported another record quarter yesterday, posting impressive numbers once again. But with expectations running even higher (not to mention a stock market getting bruised by fears of a recession), investors sent AAPL shares tumbling.

Once again, Apple shipped the most Macs ever in one quarter: 2.32 million, 7 percent increase over the previous quarter and a 38 percent increase year-over year. The surprise here was that desktop sales increased 20 percent from the previous quarter, while laptop sales were flat. Year-over-year, laptop sales rose 38 percent and desktops a hefty 53 percent.


Apple Chief Financial Officer Peter Oppenheimer said the Mac desktop rate of growth was over five times that projected for the overall PC desktop market (estimated at 10 percent in the most recent IDC figures). He attributed the desktop gains to the popularity of revamped iMac models released in August.

Investors had no gripes with the Mac's performance, but deflated by the iPod's. Though iPod sales rose to 22.1 million, an increase of 5 percent from last year, many analysts had estimated sales closer to 25 million.


Meanwhile, the iPhone sold 2.3 million units. So far it appears sales of the most hyped product of 2007 have not slowed. Oppenheimer said during the earnings conference call with analysts that Apple is "confident in our goal for 10 million for calendar 2008."

In his Macworld keynote Jan. 15, Steve Jobs said that 4 million iPhones had been sold to date, Oppenheimer noted, which included 3.7 million sold through the end of December. That means Apple sold 300,000 iPhones over the first two weeks of January – not bad post-holiday sales for a pricey consumer electronics device.

Overall Apple exceeded its own forecasts by earning $1.76 a share with profits of $1.58 billion on revenue of $9.6 billion. Though this beat the analysts' consensus earnings estimate of $1.62 a share on revenue of $9.47 billion, most expected much better results. In the often-wacky world of Wall Street, that means Apple's earnings are a disappointment.

On top of that Oppenheimer offered lower than anticipated guidance for next quarter's earnings, further feeding the concerns of already jittery investors. Never mind that Apple is projecting revenue growth of 29 percent year-over-year. After watching AAPL get pummeled last week following the absence of an iPhone-caliber product at the Macworld show, it took only a whiff of negativity to launch a fresh wave of selling.

After shedding $5.72 during regular trading yesterday, AAPL dropped another $17.71 in after hours trading, putting it at $137.93, a 23 percent fall from its December high of $202.96.

Apple's biggest problem now is the perception that the prospect of imminent economic trouble here in the U.S. and throughout the world will mean slower sales in 2008. Oppenheimer declined to address the issue directly during the conference call, but it could put a drag on Apple's fortunes this year.

Still, there's this tidbit of good news: between the boffo profits and other cash generating operations, grew its cash stash by $3 billion, to a phenomenal $18.4 billion. That's one heckuva rainy day fund.

UPDATE: The selloff continues; as of noon AAPL was down about $26, a 17 percent drop from the previous day's close, leaving the stock under $130. It's getting nasty.