Updated from 12:45 p.m. EST

A stellar first-quarter earnings report wasn't enough to prevent a pullback in Apple ( AAPL) shares on Thursday, as the company's traditional conservative guidance prompted traders to take profits on a stock that had climbed 25% in three weeks.

The stock was recently off 5.5% to $89.68.

"I thought it was a terrific quarter," says Standard & Poor's equity analyst Richard Stice. "Obviously, the iPod numbers were off the charts. I thought you could see a number as high as 17 million, but clearly they did much better than that."

Apple said late Wednesday that iPod shipments hit an eye-popping 21.1 million in its recent first quarter, growing 50% over the same quarter last year.

Gross margins, which surpassed estimates and hit 31.2%, also impressed the Street.

"Apple's gross margins improved a stunning 200 basis points sequentially," Bernstein's Toni Sacconaghi wrote in a Thursday note. "We estimate that iPod margins may have risen 400 to 500 basis points in the quarter to around 30%, with Mac margins up 300 basis points to 32-33%."

Accounts over which Bernstein has investment discretion own more than a 1% share of Apple common stock.

Yet even with the strong holiday performance, the forecast for the March quarter -- despite the consistent Apple strategy with conservative forecasts -- disappointed some investors. There also was precious little information given on the company conference call about recently announced flashy new products such as the iPhone and Apple TV, perhaps contributing to the selloff.

Also, Apple shares were trading at around the $80 level just three weeks ago, before momentum from the company's MacWorld product announcements had shares flirting with the $100 mark.

Apple's stock woes Thursday mirrored much of the tech sector; the Investors also avoided tech stocks on Thursday, which didn't help. The Nasdaq was off 1% in recent trading.

Historically conservative, the company said sales for the March quarter should range between $4.8 billion to $4.9 billion, short of the $5.24 billion expected by analysts. Profit estimates of 54 cents to 56 cents also missed the 60 cents a share targeted by analysts.

"I think (traders) are trying to resolve the fact that they crushed estimates but issued lower guidance," says Jim Grossman, an equity analyst with Thrivent Asset Management, which holds Apple shares.

But he's not concerned about the outlook: "They're going to put numbers out there that they can beat."

Mac shipments grew 28% year over year in the December quarter, and some had expected the number to grow sequentially, but it was essentially flat at 1.6 million.

"I don't think it was negative, but I can see some people looking at it and saying, 'Maybe they should have done 1.7,'" Stice says. "I thought those numbers were good."

In the September quarter, investors were "giddy with excitement" over the Mac share gains, Grossman says, so there was some disappointment that they didn't sell more computers over the holidays.

"The Mac number was impressive in isolation. I think Wall Street had gotten a little ahead of itself in terms of (expectations)," Grossman says.

Even with the lower guidance, some analysts raised estimates. Stice, who has a strong buy on the stock, upped his EPS forecast to 66 cents from 61 cents and raised his price target to $119 from $110.

UBS analyst Benjamin Reitzes added a penny to his EPS estimate, to 61 cents for the second quarter. For fiscal year 2007, he raised his EPS forecast to $3.20 from $2.87 and moved his target price to $124 from $118. Reitzes has a long common stock position in Apple, and his firm has provided nonsecurities services to Apple.

"Our estimates are above the company's guidance for the March quarter, with revenue of $5.2 billion and EPS of 64 cents," Prudential Equity analyst Jesse Tortora wrote in a Thursday note. He raised his price target to $100 from $90 and has a hold on shares. His firm owns more than 1% of Apple stock.

Still, it can be hard for analysts to accurately model profitability when the company is reluctant to give too many details on future products such as the newly-revealed iPhone and Apple TV, Thrivent's Grossman says.

"While they give us some information (on the quarterly conference call), there isn't a lot to chew on," he says. "That adds to some confusion."

Apple steamrolled over earnings and revenue estimates late Wednesday, reporting a profit of $1 billion, or $1.14 a share, for the first quarter compared with $565 million, or 65 cents a share, in the same quarter last year. Thomson First Call analysts had projected an EPS of 78 cents.

Sales added up to $7.1 billion, growing from $5.7 billion in the comparable quarter a year ago and easily topping the average analyst forecast of $6.42 billion.

"It's tough to quibble with anything they did during the quarter," Stice says.

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