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You are here: Home / Mobile Industry News / iPhone Growth Slows, iPad Speeds Up
Apple Earnings Miss the Mark, with Slowing iPhone Growth
Apple Earnings Miss the Mark, with Slowing iPhone Growth
By Jennifer LeClaire / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
Even as reviews begin pouring in for Mountain Lion, analysts are still discussing Apple's latest earnings report. Apple on Tuesday announced results for its fiscal 2012 third quarter ended June 30. Beyond missing analyst expectations, both analysts and Apple are shining a light on iPad sales.

Apple posted quarterly revenue of $35 billion and quarterly net profit of $8.8 billion, or $9.32 per diluted share. The third-quarter results compare with revenue of $28.6 billion and net profit of $7.3 billion, or $7.79 per diluted share, in the year-ago period.

Meanwhile, gross margin was 42.8 percent, compared with 41.7 percent in the year-ago quarter. And international sales accounted for 62 percent of the quarter's revenue. The iPad made its mark across the board and around the world, but new concerns are rising about the iPhone's slowing growth.

17 Million iPads Sold

Apple sold 26 million iPhones in the quarter. That's 28 percent unit growth over the year-ago quarter. Apple also sold 17 million iPads, an 84 percent unit increase over the year-ago period. The storyline: iPhone revenue growth is slowing as consumers opt for cheaper models but the iPad is ramping up. More consumers are also turning to larger Android phones.

"We're thrilled with record sales of 17 million iPads in the June quarter," said Tim Cook, Apple's CEO. "We've also just updated the entire MacBook line, will release Mountain Lion [Wednesday] and will be launching iOS 6 this fall. We are also really looking forward to the amazing new products we've got in the pipeline."

Cook was offering the typical bullish and hyped up Apple lines. But the fact is that the new Mac line up could spur more revenue and Mountain Lion is a highly-anticipated update to the operating system because it allows all Apple devices to work better together. And Apple appears bound to put out a larger iPhone in the future.

Is the iPhone Too Small?

We caught up with Rob Enderle, principal analyst at the Enderle Group, to get his take on the iPhone-Android battle as it relates to Apple's earnings. He told us part of the problem is that the late CEO Steve Jobs contained transitions within a quarter.

"Apple had a June iPhone launch event so as people started going into the second quarter sales of older versions of the iPhone started to slow," Enderle said. "As the new version of the phone came out that would cause sales to spike so they were able to meet their numbers."

As Enderle sees it, the good news is that when Apple announces the next iPhone the company will see a spike in sales. The bad news, he added, is it's going to be a spike.

In other words, Apple will not see even-flowing financials. Apple will see hills and valleys instead, which makes it difficult for analysts to predict earnings. Difficult-to-predict earnings lead to missed earnings, which displeases investors.

"The iPhone has led the market. Everybody chased Apple. That is how they were able to maintain their dominance. Now it's clear they are chasing Android, at least on hardware. The iPhone is too small," Enderle said.

"Apple isn't good as a chaser any more than Microsoft is. Both companies are better out in front than they are from behind."

Read more on: Apple, iPhone, iPad, Android, Earnings
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