Wall Street Watch Friday: Apple Earnings Fall Short

Apple Earnings Miss
Apple Earnings Miss

Apple (AAPL) can no longer be counted on to beat Wall Street's profit targets. The world's most valuable tech company posted mixed quarterly results after Thursday's market close.

Net sales soared 27% to $36 billion, just ahead of the $35.8 billion that analysts were expecting. Unfortunately, profitability climbed by a lower than expected 23%. Apple's net earnings of $8.67 a share fell short of the $8.75 a share that the pros were forecasting.

Investors should be used to this by now. Apple was consistently a bottom-line beater during Steve Jobs' reign, but the iEverything company has come up short in three of the past five quarters under CEO Tim Cook.

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There's nothing wrong with the iPhone. Despite supply constraints on the iPhone 5 that was introduced toward the end of the quarter, Apple's 26.9 million iPhones sold during the quarter were 58% more than it moved a year earlier. iPod unit sales fell 19% and Mac volume was up a mere 1%, but the market wasn't expecting much out of either category.

The one surprising metric was the mere 26% uptick in the number of iPads sold during the period. Most companies would kill to be able to move 14 million tablets, but for Apple, that tally does raise concerns. Then again, this is probably why Apple introduced its fourth generation of iPads -- and the iPad mini -- earlier this week. Instead of waiting for what has historically been springtime refreshes, Apple is making sure that it has new wares to sell this holiday season.

We're starting to see why.

Other Things Worth Watching

• Amazon.com (AMZN) has been resilient in recent quarters. The market has put up with skimpy profitability, knowing that Amazon's trying to build out its line of Kindle e-readers and Kindle Fire tablets. That's why Amazon posting a larger quarterly loss than the market was expecting after Thursday's close isn't a deal breaker. However, watching net sales climb just 27% to $13.8 billion -- when the pros were forecasting $13.9 billion on the top line -- is a problem.

• It's time to see if Microsoft (MSFT) can woo the tech crowds again. The world's largest software company is introducing Windows 8 on Friday. It's also rolling out Microsoft Surface, the hyped tablet running the company's new operating system. Will PC users upgrade? Will owners of iPads and Android tablets warm up to Windows as a tablet platform? The test starts today.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Microsoft, Apple, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Apple and Amazon.com. Motley Fool newsletter services have recommended creating a bull call spread position in Apple and a synthetic covered call position in Microsoft.

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