Apple Inc. fell the most in two months on the Nasdaq after forecasting shrinking gross margins and profit that missed some analysts’ estimates, indicating that the company is making less from each iPhone and iPad it sells.
Apple dropped $8.51, or 2.7 percent, to $309.49 at 4 p. m. New York time in Nasdaq Stock Market trading. Apple predicted profit of $4.80 a share for this quarter, short of the $5.03 average of estimates compiled by Bloomberg before the announcement.
The forecast, coupled with a drop in new contracts reported by International Business Machines Corp., pushed down technology stocks. While Apple’s profit climbed to a record last quarter, competition from Google Inc. and Research In Motion Ltd. threatens to squeeze margins. The iPad tablet, released this year, also didn’t sell as well as analysts had estimated.
“Everyone is closing in and it’s a huge question of how they are going to respond,” said Michael Obuchowski,
chief investment officer of First Empire Asset Management, which holds Apple shares. “I’m really worried about Apple; I’m not convinced that I’m going to hold Apple two years from now.”
Gross margin, the percentage of sales left after deducting production costs, will be about 36 percent, compared with 36.9 percent last quarter and 41.8 percent a year before that, Chief Financial Officer Peter Oppenheimer said on a conference call.
Earnings helped push up cash and investments to more than $50 billion, giving Apple the technology industry’s biggest war chest for acquisitions, said Brian Marshall, an analyst at Gleacher & Co. in San Francisco. Apple may eventually make a large acquisition, possibly for a company such as Akamai Technologies Inc., which produces technology for distributing media content on the Web, he said.
“They are in a position to outbid everybody if they view the asset as valuable enough,” said Marshall, who recommends buying Apple shares and doesn’t own any himself.
Jeff Young, a spokesman for Cambridge, Massachusetts-based Akamai, didn’t return a call seeking comment.
“We’d like to continue to keep our powder dry,” said Chief Executive Officer Steve Jobs, after joining an earnings conference call for the first time in two years, when asked whether Cupertino, California-based Apple would use the cash for a stock buyback or dividend. “We strongly believe that one or more very strategic opportunities may come along.”
Open Versus Closed
He spoke after Apple reported that fourth-quarter profit rose 70 percent to $4.31 billion, or 4.64 a share, on sales of $20.3 billion.
Jobs, 55, dismissed the threat of rivals. Apple’s approach of designing the software and hardware for its devices results in a better user experience, he said. Google, meanwhile, has touted its open software standard, giving Android free to handset makers such as Motorola Inc. and HTC Corp. That just creates a “commodity” experience, Jobs said.
“We are very committed to the integrated approach, no matter how many times Google tries to characterize it as closed,” Jobs said. He said Apple is outselling RIM, which makes the BlackBerry, and he doesn’t “see them catching up with us in the foreseeable future.”
Marisa Conway, a spokeswoman for Waterloo, Ontario-based RIM, declined to comment. Jane Penner, a spokeswoman for Google in Mountain View, California, didn’t respond to requests for comment.
Apple shares, up 47 percent this year, surpassed $300 last week.