Apple's fourth quarter dinged by iPhone 4S waiting game

Apple's disappointed Wall Street with fourth quarter earnings as consumers held out on buying iPhones ahead of the iPhone 4S device. The company also said it held back on rolling out new countries and carriers for the iPhone ahead of a new product cycle.

The company reported fiscal fourth quarter earnings of $6.62 billion, or $7.05 a share, on revenue of $28.27 billion.

Wall Street was expecting fiscal fourth quarter earnings of $7.39 a share on revenue of $29.68 billion. The company sold 17.07 million iPhones in the fourth quarter, up 21 percent from a year ago. Wall Street was looking for a range of 18 million to 20 million.

However, there are a few explanations for the iPhone unit miss. First, consumers could have held out for the iPhone 4S launch. In addition, Apple could have drained its iPhone 4 supply in favor of building iPhone 4S. Apple sold 4 million iPhone 4S devices in a weekend. That channel had to be built somehow.

On a conference call with analysts, Apple CFO Peter Oppenheimer explained the iPhone sales shortfall.

We were pleased with the iPhone sales growth as we prepared for the transition to the iPhone 4S. We expected iPhone sell-through to decline sequentially from the June quarter as a result of new product rumors following the announcement at our developers conference in June that iOS 5 and iCloud would become available in the Fall. As we predicted, iPhone sell-through did decline across the quarter, especially in the second half as new product speculation intensified. We ended the quarter with about 5.75 million iPhones in channel inventory, a sequential decline of about 180,000 which placed us within our target range of four to six weeks of iPhone channel inventory.

Given the October launch of the iPhone 4S, we opted to defer new carrier and country additions from the September quarter until after the launch.

In a statement, CEO Tim Cook touted Apple's $108 billion in annual revenue and $26 billion in earnings. In addition, Cook said Apple has "strong momentum going into the holiday season, and we remain really enthusiastic about our product pipeline."

Cook elaborated on the conference call about his confidence into the December quarter and iPhone 4S sales.

We're confident that we will have a large supply but I don't want to predict when supply and demand might balance because the demand is obviously extremely high right now, but I'm confident that we will set an all-time record for iPhone this quarter.

The afterhours reaction to Apple's results indicated that investors were willing to cut Cook & Co. a break. Apple missed estimates, but is likely to make up for it with a strong December quarter.

To that end, Oppenheimer projected fiscal first quarter revenue of $37 billion and earnings of $9.30 a share. Wall Street was looking for $9.96 a share on revenue of $42.24 billion.

Apple historically has low-balled its Wall Street guidance. But Apple's first earnings miss in four years may give investors pause. Don't be surprised if there are multiple questions about the next phase of Apple and whether growth is played out. Toss in Cook's first quarter and the death of Steve Jobs and questions are likely to multiply.

Other key figures in the fiscal fourth quarter:

• Apple moved 11.13 million iPads in the quarter.
• 4.89 million Macs were sold in the quarter, up 26 percent from a year ago.
• Apple sold 6.62 million iPods in the quarter, down 27 percent.
• The latest Mac OS had 6 million downloads in the September quarter.
• Mac inventory was between three and four weeks.
• iPod touch is more than half of all iPods sold.
• iTunes revenue was nearly $1.5 billion in the quarter.
• Apple retail store revenue was $3.6 billion, a tally that was flat with a year ago. Apple has 357 stores.
• Apple had $81.6 billion in cash, equivalents and marketable securities.

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