Apple earnings fall short: Has the company topped out?

(MoneyWatch) Apple (AAPL) announced its earnings for the fourth quarter: $36 billion revenue and net profit of $8.2 billion, or $8.67 per diluted share. That represents a 27 percent increase in revenue and 24 percent jump in profit over the same time last year.

For most companies, those results would be tremendous. But Apple isn't just any company, and while revenue was just above Wall Street expectations, profits fell short. A look at unit sales suggests that the consumer electronics juggernaut, while still strong, might be falling prey to competition and consumer exhaustion.

• Will the iPad Mini shrink Apple earnings?
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• Will Apple's past success tarnish its future?

Most of Apple's product unit sales increased year over year, except for Mac desktops, which dropped by 24 percent. But where the trouble begins to show is in comparing the third and fourth quarters.

There was a 3 percent sequential increase in iPhone unit sales, going from 26 million in Q3 (ending June 2012) to 26.9 million in Q4 (which ended in September). But remember that includes the record early sales of the iPhone 5. Factor out those 5 million sold in the first weekend, and iPhone sales might have taken a sizeable dip.

The sales picture for the iPad was even worse. Apple sold 17 million of them in its third quarter but only 14 million last quarter, an 18 percent drop. Q3 did have the advantage of a new model release, but the drop off has been quick and significant.

Perhaps people were waiting for the newer, and cheaper, iPad Mini. If so, the cannibalization at a much lower price point could weigh heavily on Apple's earnings.

It would seem that competitive pressure from Android devices has finally taken hold, given Apple's current product strategy. It announced not only the iPad Mini, to address competition from low priced tablets, but a new version of the large iPad only 7 months after its last release. That could be best explained as a way to bump up sales, as Apple typically gets a surge after a product announcement.

However, moving from its usual one-year schedule, particularly with a new model that is being described as "refreshed," is a sign that Apple needs to sustain waning consumer excitement.

Competitors such as Samsung have pushed hard in advertising campaigns to make themselves look as if they are leading a features race, and that might be taking a toll. In addition, Apple has long moved beyond its traditional fan base to a broader consumer market that won't necessarily be as supportive or forgiving.

[tim_acheson]

Apple's financial results are disappointing, and dominated by iOS.

The corporation's brief rise to success seems too dependent on one product, iOS, which is now rapidly being eclipsed by countless cheaper and better devices.

[VapeGirl]

Apple has all those billions in profits because they do not care that they are polluting the hell out of China and using Chinese people almost like slave labor.

[californiadreaming]

Yes, anyone who has seen the computer and consumer electronics business for more than 15 or 20 years should know that all of these cycles tend to come and go - and they go as fast as they came. We have so much innovation and talent that things eventually change completely.

The iDevices and portable (mobile) electronics industry goes through constant cycles. It is amazing that this one - initially inspired by Apple - has stayed in this form as long as it has. Of course people will not spend a lions share of their disposable income on the same thing over and over.

There will always be a need for mobile communication and computers, but eventually people will focus elsewhere. It is human nature to do so. We currently are in a "bubble" in mobile devices. But, just like housing, that bubble will either pop or just dissipate. It is fun to play for a while, but eventually we get tired of toys and find something else. What Apple is seeing are tthe limits of the bubble. That means it's time for something new.