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Apple's Balloon Loses a Little Air

Apple's Balloon Loses a Little Air

Apple had a chastening experience with its Q3 earnings report, failing to meet Wall Street expectations. Though the company may not be flying quite as high, it's still sailing along admirably, though. It sold 26 million iPhones in the quarter, up 28 percent from the same time a year ago, and 17 million iPads, an increase of 84 percent from last year.

Apple announced quarterly earnings that were lower than expected Tuesday, causing shares to plunge in after-hours trading.

Though analysts weren't projecting another record quarter for the Cupertino company, results still fell short of Street predictions. Profit rose 21 percent to US$8.8 billion, or $9.32 per share, on a revenue of $35 billion. Analysts expected closer to $10.37 per share.

The company sold 26 million iPhones in the quarter, up 28 percent from the same time a year ago. Apple beat some expectations on iPad sales, selling 17 million, an increase of 84 percent from last year. The third version of the tablet device launched in March.

Going into Tuesday evening, Apple shares were down nearly 6 percent, trading around $566.80.

From 30 to 19 Points

iOS 6 will be launching in the fall, Apple said, meaning a new iPhone could hit the market about a year after the iPhone 4S. Apple has already released details about the latest mobile operating system, including the debut of an in-house version of its maps and improvements to Siri, Safari browsing and the email system.

Apple has been more characteristically mum about the hardware changes to a new version of the iPhone. The general design of the phone, including its screen size, has not changed much since its introduction, even as competing smartphones hit the market with larger displays and thinner bodies. This week, a new report surfaced from Reuters that claims the company's new phone will indeed be sleeker, thanks to a new 19-pin connector dock that will replace the 30-point dock that the current iPhone, iPod and iPad uses.

The new design would render many consumers' cords and accessories, such as speakers and alarm clocks, obsolete. But it could also help improve the speed and functioning of the device overall, said Wayne Lam, senior analyst at IHS iSuppli.

The new dock would also fall more in line with European standards.

It's a switch that the company wouldn't make without weighing the pros and cons, said Lam.

"It makes sense to break away from this design that has really been more of a legacy design for the company," he told MacNewsWorld. "If they break away, they can probably improve speed, they can double the functionality of a cord, they can improve the data output port and generally squeeze the design output a little better, so there are advantages here that Apple must have thought through."

iPad Hits China

While iPad sales may have been the one number to beat analyst expectations for the quarter, the company probably didn't get a boost from recent sales in China. The newest version of the iPad hit shelves there last week, with a later debut than other worldwide markets because of a legal dispute over the "iPad" name. While potentially volatile crowds have gathered in the past for Apple product launches, this rollout was much quieter as the company presumably hoped to avoid any riots.

Apple no doubt was relieved that the launch didn't spur any disturbances but possibly concerned that it might not have drawn the same positive reaction that the iPhone did, said Michael Stanat, global research executive at SIS International Research.

In China, a number of factors -- such as less network infrastructure to supports new devices; a general late adoption to tablets; and competition from more affordable and well-known brands in Asia, including Samsung and Lenovo -- mean that the iPad might not be as big as a hit in the country as Apple hoped, he said.

"In China, tablets are less common than Web-enabled mobile phones," he told MacNewsWorld.

"From my own observations in using my tablet in Shanghai, tablets are relatively uncommon compared to other markets, such as the United States," noted Stanat. "As in many markets, computers are seen as an important substitute to tablets. Affordable substitutes from lesser-known brands and fierce competition with established brands and platforms impact demand for the new iPad."

Consumers who do want a tablet and can afford one might already have it, he suggested, since the devices have been available in Hong Kong and other neighboring markets.

"In China, there is a phenomenon of purchasing Apple products in other markets such as Hong Kong," Stanat said. "For mainland Chinese consumers, this can mean gaining quality-assured, warranty-enabled products at lower costs than on the mainland. This phenomenon can also impact demand for official versions of the new iPad on the mainland."


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