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The Apple Financials Report: An Apple Miss?

I suppose Apple is entitled to one quarter where the final numbers doesn’t quite meet the predictions of financial analysts. At the same time, it does appear that expectations may have grown a little too extravagant, almost as if they expect Apple to walk on water quarter after quarter. It had to happen some time, and the street’s bullish attitude may have created unrealistic hopes and dreams about what Apple would announce.

But the figures themselves seem awfully good to me. In fact, Apple’s quarterly financials ought to be the envy of any large company. Sales totaled $28.3 billion, up 39 percent from last year. Net income amounted to $6.62 billion, or $7.05 per share, up 54 percent from last year. But industry analysts were expecting revenue of $29.4 billion, with earnings of $7.28 per share, so there you go.

As a result of Apple failing to meet what may have been overblown expectations, shares dropped 5.8%, or $24.33, in after-hours trading. I suppose a little reality check might be sufficient to restore the stock price after the numbers are digested for a few days. Let’s not forget that Apple sold over four million copies of the iPhone 4s on its first on sale weekend. That has to count for something. More to the point, Apple’s forecast for the current quarter actually exceeded analyst expectations, at $37 billion, with income totaling $9.30 per share.

Remember that Apple tends to lowball forecasts, so this may indicate a positively huge December quarter. What’s more, it does appear that the iPhone 4s continues to sell at a good clip, and it’ll probably be several weeks before supply begins to catch up with demand.

Looking at the actual units sold, iPhone sales tallied 17.1 million for the quarter ending September 24th, less than the previous quarter, where 20.3 million were sold, but that ought to be a pretty decent number considering that everyone knew as the quarter progressed that a new model would arrive in October. How many potential iPhone purchases were postponed? Since analysts were looking for sales in the 20 million range, that’s a clear reason for the revenue shortfall.

But even CEO Tim Cook admits that there was some impact, understandable considering all the publicity those rumors of the next iPhone revision generated. It seems inconceivable that some of those initial sales weren’t made to potential customers who sat on the sidelines waiting for a new model. That, of course, is always the danger, which is one key reason why Apple seldom announces new products very far in advance, with the exception of operating system releases, where developers need to know about the changes to keep their apps compatible.

In this case, Apple not only released a new iPhone, but the usual iOS revision had an unusually high number of new features and improvements. While existing iPad and iPhone users are evidently doing well with the upgrade, that may have been one more reason to postpone purchase.

In a more favorable light, Apple also reported that 93 percent of Fortune 500 companies are deploying or testing iPhones. This is up from 91 percent during the last quarter. That news can’t be too encouraging to the management of Research In Motion, who just announced their new OS, dubbed BBX, and please don’t ask me the reasoning behind that label, though it’s no doubt based on QNX, the OS that is, in part, the basis for the upgrade.

And before I forget, Apple reported setting 11.2 million iPads, which seems in line with expectations, though some pegged possible sales at over 12 million. That’s an increase of 166 over last year, making the iPad the fastest growing product in Apple’s catalog.

It’s also obvious that so-called iPad killers are still going nowhere. Perhaps the biggest potential threat, however, appears to come from the forthcoming Amazon Kindle Fire: Predictably Cook had a dismissive response to the Fire’s potential: “We’ve seen several competitors come to market to try to compete with the iPad over time. Some had different form factors, different price points. I think it’s reasonable to say that none of these have gained any traction thus far.”

The most surprising announcement is about the ongoing success of Apple’s original business, personal computers. Some 4.89 million Macs were sold, an all-time record, no doubt due, at least in part, to the release of Lion. Cook described the unexpectedly high Mac sales as “almost unbelievable” when you consider the stellar growth of the iPad. Clearly the iPad is cannibalizing some of those sales, but perhaps more from traditional PCs, which aren’t doing so well nowadays. If that trend continues through the holiday quarter, it’s likely Apple will crack the top five among global PC sales; it’s currently number three in the U.S.

At the same time, Apple is flush with more money than ever, ending the quarter with $81.6 billion in cash and short-term investments; it was $76.2 billion in the past quarter. No doubt those who are asking Apple to declare dividends, or make some high-dollar acquisitions, will only increase those demands going forward.

If you want to explore the financials in more detail, you’ll find the key figures are posted, as usual, at Apple’s site.