Apple's Jobs blasts rivals as iPad sales disappoint

SAN FRANCISCO Mon Oct 18, 2010 7:57pm EDT

Apple Inc. CEO Steve Jobs speaks about an application for the iPad at a special event at Apple headquarters in Cupertino, California, April 3, 2010. REUTERS/Robert Galbraith

Apple Inc. CEO Steve Jobs speaks about an application for the iPad at a special event at Apple headquarters in Cupertino, California, April 3, 2010.

Credit: Reuters/Robert Galbraith

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SAN FRANCISCO (Reuters) - Apple Inc CEO Steve Jobs went on the offensive on Monday after a rare sales disappointment by the iPad maker sent its shares tumbling, but his biting words failed to reverse market sentiment.

Jobs, who has not addressed investors on an earnings call for two years, lashed out at competitors Google Inc and Research in Motion and dismissed the upcoming range of smaller tablets made by rivals such as Samsung Electronics and Dell Inc.

"The current crop of 7-inch tablets are going to be DOA, dead on arrival," Jobs told analysts on the conference call. "Their manufacturers will learn the painful lesson that their tablets are too small and increase the size next year."

Shares of Apple -- the second largest corporation on the Standard & Poor's 500 index, after Exxon Mobil -- slid 6 percent, which would be the biggest single-day loss since 2008.

Supply and production bottlenecks kept iPads, which have a 9.7-inch touch screen, from store shelves and buyers waiting weeks for their gadget. Although the 4.19 million iPads sold in the fiscal fourth quarter fell short of Wall Street's target of around 5 million, analysts said sales should ramp up in the holiday quarter as Apple resolves supply hitches.

Gross margins fell short of target as iPads, whose profit margin is lower than for iPhones, made up a larger proportion of Apple's sales. Investors had expected more from a company that had smashed Wall Street's targets in each of the past eight quarters.

Margins in the fiscal fourth quarter came to 36.9 percent, below Wall Street's average forecast of 38.2 percent.

There was no disappointment in iPhone sales, however. Apple sold 14.1 million of the smartphones, a gain of 91 percent and better than Wall Street had expected. The company said demand is still outstripping supply.

Mac sales surged 27 percent to 3.9 million, at the high end of analysts' estimates.


Some analysts agreed with Jobs -- who said the iPad lacked credible rivals -- and foresaw sales of the iPad, which came on the market only in April, jumpstarting in 2011 as the gadget gets rolled out to more countries and to more mass-market retail outlets like Wal-Mart Stores.

"iPads were low, but I also think they had a lot of production problems getting that off the ground. So I don't think that really is a good demand indicator for iPad," said analyst Jane Snorek of First American Funds.

Some analysts had projected shipments of closer to or even more than 5 million for the tablet computer, but others had warned that supply constraints had held back sales.

Apple on Monday reported a net profit of $4.31 billion, or $4.64 a share, in the fiscal fourth quarter ended September 25, up from $2.53 billion, or $2.77 cents a share, in the year-ago period.

That was better than the average analyst estimate of $4.08 a share, according to Thomson Reuters I/B/E/S.

Revenue surged 67 percent to $20.3 billion, ahead of Wall Street's target of $18.9 billion.

As it looks ahead to the holiday season, Apple -- which typically issues very conservative guidance -- forecast current-quarter earnings of $4.80 a share on revenue of $23 billion. The consensus estimate is for a profit of $5.07 a share on revenue of $22.4 billion.

Shares of Cupertino, California-based Apple slid almost 6 percent to $299.02 in extended trading, after a brief trading halt. They closed at $318.00 on Nasdaq.

(Writing by Edwin Chan; Editing by Richard Chang)

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Comments (6)
jmmx wrote:
The main reason for the price fall is the same old “buy the rumor, sell the news” phenomenon. Apple has frequently been susceptible to this.

It is, of course, exaggerated by the lower than expected iPad numbers. However, people will soon see the iPad numbers were low only due to supply constraints that are being addressed, and that the rest of the picture is fantastic.

Especially when the new goodies get dished out on Wednesday morning.

My guess is that AAPL will drop $10-15 tomorrow morning, but by the end of the day will be up $3-5. It may languish for a few days, even a few weeks (tho I do not think that is likely), then it will start a rather meteoric rise to about $370.

Oct 18, 2010 7:39pm EDT  --  Report as abuse
mb56 wrote:
I think Jobs will be proven wrong regarding tablet size. A tablet should be a mobile device, and at 10 inches the Ipad is just to big to appeal to anyone but Apple fanatics. Smaller tablets with industry standard USB ports and the ability to run open software will sell like hotcakes.

Oct 18, 2010 8:16pm EDT  --  Report as abuse
aeortiz wrote:
The amount of negative spin in this article makes a great contrast with other reports glorifying the record breaking over all sales that Apple achieved.

Oct 18, 2010 9:50pm EDT  --  Report as abuse
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