The plot thickens.

Wednesday night, on the back of the controversy surrounding the market's reaction to the introduction of the iPhone, Apple's ( AAPL) earnings report beat the pants off consensus profit forecasts. But the company cautioned investors regarding the next quarter's results.

Reflecting many of the concerns that I expressed Tuesday and Wednesday -- which are now coming to the surface -- I expect some Wall Street downgrades today (J.P. Morgan downgraded Apple to neutral from overweight, citing soft Macintosh shipments and ever-increasing expectations) and for the stock to begin giving back the hype associated with the MacWorld announcement. (In pre-market trading Thursday shares of Apple were down 1.3%.)

Many were critical of my concentration on the iPhone's prospects in these columns. "What about Apple's MacIntosh success?" was a common refrain. What about MacIntosh? Units only rose by 28% year over year (1.6 million units vs. Street chatter of 1.8 million-plus), with most expecting 35% to 45% growth! ( Goldman Sachs' model was for 37.4% growth.)

The hubris of Apple has been well documented. As I have written over the past week, I remain skeptical regarding the general assumption of a seamless transition into the iPhone's uber-growth forecasts during 2007 and in the market's robust reaction to the iPhone's introductory announcement.

The competition will not be standing still. It is inevitable that companies like LG and Samsung, which has its own NAND supply, will bring on cheaper products with similar functionalities and possibly even better displays -- and unlike Apple, open systems. Consider these competitive new market entrants in the handset and MP-3 player markets.

Finally, last Tuesday's announcement also runs the real risk that both the handset industry's smartphone and Apple's iPod markets freeze up a bit (as demand wanes) over the next two quarters as consumers await the iPhone.

At time of publication, Kass and/or his funds had no positions in stocks mentioned, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd. Until 1996, he was senior portfolio manager at Omega Advisors, a $4 billion investment partnership. Before that he was executive senior vice president and director of institutional equities of First Albany Corporation and JW Charles/CSG. He also was a General Partner of Glickenhaus & Co., and held various positions with Putnam Management and Kidder, Peabody. Kass received his bachelor's from Alfred University, and received a master's of business administration in finance from the University of Pennsylvania's Wharton School in 1972. He co-authored "Citibank: The Ralph Nader Report" with Nader and the Center for the Study of Responsive Law and currently serves as a guest host on CNBC's "Squawk Box."

Kass appreciates your feedback; click here to send him an email.

More from Opinion

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Tuesday Turnaround: Micron, Autonomous Driving, and J.C. Penney

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Cable Stock Investors Should Keep an Eye On Wireless Broadband's Rise

Trump Blinks on China Trade War That's Looking Harder to Win

Trump Blinks on China Trade War That's Looking Harder to Win

Monday Madness: GE, China, and Micron

Monday Madness: GE, China, and Micron

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly