Apple Shares Lose Their Normal Shine

A weaker-than-normal forecast and lingering concerns about CEO Steve Jobs' health take the stock lower. Frank Curzio reviews the day's stock market in The Real Story (above).
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SAN FRANCISCO -- Apple (AAPL) - Get Report blew past Wall Street's third-quarter expectations but the company's standard conservative guidance for the current quarter appeared to disappoint investors.

Apple also did little to quell the buzz around the health of CEO Steve Jobs and the issue of the company's succession planning, which contributed to taking a toll on the company's stock.

Shares of Apple fell $17.29, or 10.5%, to $148.75 in recent after-hours trading.

Apple said Monday that it earned $1.07 billion, or $1.19 a share, in the third quarter, compared with profit of $818 million, or 92 cents a share, a year earlier.

Revenue rose to $7.46 billion from $5.41 billion a year ago.

Analysts polled by Thomson Reuters were expecting earnings of $1.08 a share on revenue of $7.36 billion.

Gross margin fell to 34.8% in the third quarter from 36.9% a year ago. International sales accounted for 42% of the quarter's revenue.

For the fourth quarter, Apple offered its traditional conservative guidance and then some, saying it expects revenue of $7.8 billion and earnings of $1 a share. Analysts were expecting revenue of $8.32 billion and earnings of $1.24 a share.

Gross margin for the fourth quarter is expected to be 31.5%, down from the previous quarter because of back-to-school promotions and the introduction of a new product among other things, said Apple CFO Peter Oppenheimer. Oppenheimer didn't offer any additional details about the upcoming product.

Apple also did little to squelch speculation around CEO Steve Jobs' health. The

New York Post

reported on Monday that some hedge fund managers and investors are concerned about Apple's future after Jobs.

In response to an analyst's request for a statement, Oppenheimer said, "Steve loves Apple. He serves as the CEO at the pleasure of the board and has no plans to leave Apple. Steve's health is a private matter."

Apple's refusal to address the company's future means "it will be subject to rumors," says Romeo Dator, co-manager of the

All American Equity Fund

(GBTFX) - Get Report

at U.S. Global Investors.

It's likely to be an overhang on the company's stock, says Dator. The fund holds shares of Apple in its portfolio.

Better-than-expected sales of the iPod were a bright spot in the company's third-quarter results. Despite fears that growth in the iPod division has reached a plateau, Apple posted strong iPod numbers.

About 11 million iPods were sold in the quarter, representing 7% revenue growth from a year ago and 12% unit growth from a year ago. Sales were mainly driven by the lowest priced product in the portfolio, the $49 Shuffle. Analysts' expectations ranged from 10.25 to 10.5 million devices.

Sales in the U.S. grew sales grew 10%, while international iPod sales were up 15%.

Apple shipped 2.49 million Macs, posting a 43% revenue growth from the year-before and 41% unit growth. Analysts' expectations had ranged from 2.4 million to 2.5 million Macs.

Quarterly iPhone sales came in at 717,000 devices, said Apple, and compared 270,000 iPhones sold in the year-ago-quarter.

The quarter's results don't include the company's latest iPhone 3G device. Apple has said that it sold 1 million iPhone 3Gs in the three days since the device's launch on July 11. That compares to the 74 days it took the company to sell one million first generation iPhones, said Apple.

Apple's iPhone competes with BlackBerry maker

Research In Motion

(RIMM)

, handset makers

Motorola

(MOT)

,

Nokia

(NOK) - Get Report

and

Palm

(PALM)

among others.

iPhone users have also downloaded more than 25 million applications from the company's App store, which currently offers some 900 programs. About 20% of those are free with the rest priced at less than $10 a program.

Apple's retail stores continue to draw consumers, with revenue growing from the store growing 58% year-over-year to $1.44 billion. Apple stores sold 476,000 Macs during the quarter, with more than half of those sold to customers who have never owned a Mac before, said Oppenheimer.

Apple plans to end fiscal 2008 with 242 stores worldwide, up 45 stores from a year ago. Apple added 170

Best Buy

(BBY) - Get Report

stores in the third quarter as it partner, which helped drive sales of Mac.

Apple's results are in contrast to the soft numbers reported by tech giant

Google

(GOOG) - Get Report

last week and the weak outlook offered by

Microsoft

(MSFT) - Get Report

.