- Associated Press - Thursday, October 25, 2012

NEW YORK — Apple Inc. has a new iPhone, two new iPads and three new PCs as it heads into the holiday quarter, the biggest selling season of the year. But, paradoxically, it expects these new gadgets to bring down its profits compared with last year.

The reason: The new gadgets are expensive to make, according to Apple’s chief financial officer.

In part, this is a normal consequence of having so many new products, said CFO Peter Oppenheimer. When a production line is new, it costs more to run and the components are more expensive.

“The difference this time is the sheer number of products we’re introducing at a short time,” Mr. Oppenheimer told analysts on a call Thursday.

But Mr. Oppenheimer also singled out the iPad Mini, the new, smaller version of the iPad the company unveiled Tuesday. It starts at $329, well above the $199 competitors charge for similar products. Apple’s price is “aggressive,” with a profit margin well below other products, he said.

“When we set out to build the iPad Mini, we didn’t set out to build a cheap tablet,” Mr. Oppenheimer said.

Apple said it expects earnings of $11.75 per share in the holiday quarter, below the $13.87 per share it earned in the same period last year. Apple routinely low-balls its estimates, but this time the forecast was further from the analyst estimate than usual. Analysts polled by FactSet were expecting earnings of $15.59, on average.

Apple expects sales of $52 billion, roughly in line with the analysts’ expectation of $56 billion, considering the company’s conservatism.

Apple shares fell $6.33, or 1 percent, to $603.47, extending a downward trend for the stock, which hit a record high of $705.07 a month ago, on the day the iPhone 5 went on sale in the U.S. and eight countries.

For the just-ended quarter, Apple missed Wall Street earnings expectations for the second straight quarter, as iPad sales fell short of analyst forecasts. That slowdown was not completely unexpected though, as the rumor mill had been correctly predicting that Apple would launch the iPad Mini.

Sales were also hurt by slowing growth in China, after having more than doubled in fiscal 2010 and again in 2011. Growth in the July-September quarter was also slow in economically troubled Europe.

Net income in the fiscal fourth quarter was $8.2 billion, or $8.67 per share. That was up 24 percent from $6.6 billion, or $7.05 per share, a year ago. Analysts polled by FactSet were expecting earnings of $8.84 per share.

The Cupertino, Calif., company sold 26.9 million iPhones in the quarter, at the high end of expectations, and 14 million iPads.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2019 The Washington Times, LLC.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide