Apple posts disappointing fourth quarter

The electronics giant fell short of expectations on holiday season results

By Alex Halperin
January 24, 2013 3:11AM (UTC)
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Apple posted fourth quarter results that disappointed investors, further denting the "reality distortion field" that surrounded the company under former CEO Steve Jobs.

It reported revenue of $54.5 billion, almost exactly what analysts had predicted. Sales of its famous iPhone and iPad products were slightly below expectations at 47.8 million and 22.9 million, respectively. It reported gross margin of 38.6 percent below the expected 39.5 percent.


The world’s most valuable company has seen its stock slide almost 30 percent since September. Apple, which changed the world with its iPhone and iPad products, appears increasingly vulnerable to competition, especially from the South Korean behemoth Samsung.

While Apple offers a relatively small number of products for a company of its type and size, and a famously controlled tech “ecosystem,” Samsung sells a more diverse, almost anarchic, product line. And its products typically run on Google’s more open Android operating system.

Last spring, Farhad Manjoo wrote in Slate that the iPad is an “unbeatable” product, but after last Christmas season with Amazon, Google, Samsung and others selling cheaper tablets Apple’s dominance no longer looks like a foregone conclusion. Samsung also scored big by selling more than 10 million units of its Galaxy Note, more or less inventing the “phablet” category of touchscreen devices, which are bigger than phones but smaller than standard tablets.


Samsung now sells more mobile phones than any other company. Today CNET reported that it is also the largest buyer of the chips used in smartphones, tablets and other mobile devices, another sign of strength.

Perhaps due to Samsung’s influence, there have been many rumors about Apple diversifying into products such as a cheaper iPhone for developing markets. The approach suggests that a kitchen sink product line might be more valuable than being the industry’s leading innovator or most glamorous brand. However, a broad diversification of Apple products could potentially threaten the company’s longtime business model of charging premium prices for a limited number of premium products.

Today’s report came after a lackluster third quarter in 2012. Mashable described it as follows:


Though the company beat expectations for iPhone sales by a decent margin, it fell short on iPad sales and perhaps more importantly, Apple projected that it would report a significantly lower profit margin in the following quarter than analysts had expected. Apple's stock fell below $600 the next day for the first time in three months and has continued to decline, falling to as low as $483 a share in intraday trading last week.

Apple shares closed before today's announcement at $514.01, down from its all-time high of $705 in September. The Cupertino, Calif.-based company is the most valuable company in the world with a market capitalization of $483.5 billion. ExxonMobil is the second most valuable at $413.5 billion.

Alex Halperin

Alex Halperin is news editor at Salon. You can follow him on Twitter @alexhalperin.

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Apple Consumerism Ipad Iphone Samsung