Despite strong competition from the likes of Samsung and Android products, Apple reported holiday earnings that will likely dwarf those from any of its competitors. The iPhone maker posted a $13.1 billion profit for its fiscal first quarter ending on Dec. 29, including revenue of $54.5 billion. Sales of both the iPhone and iPad were up sharply.
That's a pretty strong sales period. Yet the Cupertino-based company watched helplessly as its stock plummeted by $47 billion. As the Wall Street Journal noted, that's the combined value Dell, Nokia, and Research in Motion.
So, what happened?
The problem with posting a profit that large, if you could call it that, comes from the fact that there was no growth in earnings. During the same period last year, Apple also reported a $13 billion profit, except it made all that money off of $46.33 billion. If Apple pulled in $8 billion more this year, why isn't it reporting more profit?
That's where the freak-out comes into play. Apple tried to downplay negativity by saying its ambitious release schedule would hurt profits until manufacturing was perfected, but that explanation doesn't get to the core of what analysts and investors are worried about. They think the company might have topped off its growth potential.
That would explain how Apple could sell more 28 percent more iPhones and 48 percent more iPads yet still fail to meet expectations. Many more people are already using smartphones, meaning that Apple has a smaller target of newcomers it could hit with its products. Meanwhile, fierce competition from Samsung and the Android operating system, the latter of which ships with almost 75 percent of the world's smartphones and tablets, has forced the company to rethink its previous position of only selling high-end, premium-priced products (iPad Mini is one example of a cheaper Apple item with a thinner profit margin, and the iPhone Mini could be next).
Not everyone is down on the company, though.
"Sentiment has turned super-pessimistic on Apple, where they've gone from being able to do no wrong to suddenly being able to do no right," said Evercore Partners analyst Rob Cihra to the New York Times. "I tend to think the company's momentum is a heck of a lot more solid than people are concerned about."
CEO Tim Cook also took some time to point to the company's brightening prospects in emerging markets such as China.
"In terms of geographic distribution, we saw highest growth in China, and it was into the triple digits," he said.
And always a company looking for opportunity, Apple downplayed lower sales of its Mac PCs by saying its tablets will more likely end up taking a far larger chunk out of Windows-based computer sales.
"It is clear [the iPad] is already cannibalizing [Windows] some," Cook said. "There's a tremendous amount (of) opportunity there. I've said for two or three years now that the tablet market will be larger than the PC market at some point. You can see by the growth in tablets and pressure on PCs that those lines are beginning to converge."
Combine that with the potential for an Apple TV to really shake up the home-viewing market whenever it's unveiled, and you've got a company whose future might not be as dire as the markets would have you believe.
