Apple yesterday reported record-breaking earnings, posting $20.34 billion in revenue on strong iPhone sales, but investors apparently took a second look this morning. Apple’s stock dropped sharply this morning in early trading on concerns that falling gross margins could signal trouble for the company going forward.
Apple sold 14.1 million iPhones compared to just under 7.4 million in the previous quarter. The company sold 4.2 million iPads, which fell below analyst expectations. However, Apple’s Mac line had its best quarter ever.
CEO Steve Jobs made an uncharacteristic appearance at yesterday’s earnings call. Jobs made a point of comparing the iPhone’s most recent quarter to other notable OEMs.
“[The iPhone] handily beat RIM’s 12.1 million Blackberries sold in their most recent quarter ending in August. We’ve now passed RIM, and I don’t see them catching up with us in the foreseeable future. They must move beyond their area of strength and comfort into the unfamiliar territory of trying to become a software platform company,” Jobs said, according to a transcript of the call from Seeking Alpha.
The always direct Jobs also addressed competition coming from devices running Google’s Android OS. Jobs said that while Google is activating 200,000 Android devices per day and has 90,000 apps in the Android Market, Apple activates 275,000 iOS devices per day and has almost 300,000 apps in its App Store.
Jobs called Android a “fragmented” operating system, suggesting that HTC and Motorola’s use of proprietary UI overlays only exacerbate fragmentation of the UI. Additionally, Jobs called the “open versus closed” debate between Android and iOS a “smokescreen.”
“We think Android is very, very fragmented and becoming more fragmented by the day. And as you know, Apple strives for the integrated model so that the user isn’t forced to be the systems integrator,” Jobs said.
Be that as it may, Apple carries the burden of high expectations for all its products, and investors today expressed worries about falling gross margins. Apple’s gross margins fell to 36.9 percent, just over a point below the Street’s consensus of 38 percent.
Apple’s stock was trading at $311 per share in early trading, down 6 percent from its Monday close of $317 per share.