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Is Apple’s Magic Balloon Deflating? Mixed Quarterly Results, Sharp QoQ Decline in iPhone Sales

Worm in Apple

Earlier today, Apple Inc. announced results for the fiscal third quarter 2012, i.e. second calendar quarter and immediately disappointed the market with a record drop in sales of its popular iPhone smartphone, and a decline in sales of iPods. iPads broke records, while Macs remained stale.

Apple reported $35 billion revenue and a net income of $8.8 billion, resulting in $9.32 earnings per share (EPS). This is lower than Wall Street estimates, which estimated Apple at $37.18 billion in revenue with $10.36 EPS. However, shareholders had something to be happy about as Apple announced the company will pay off dividend to the tune of $2.65 per share to all stockholders on record before the closure of NASDAW on August 13th, 2012.

Paying the dividend to its shareholders is considered a good step forward for AAPL stock traders, who relied on share price to earn money off the stock. However, this cash dividend might be a way to soften the blow of mixed sales results.

For starters, Apple sold 26 million iPhones, which represents a neat 28% increase over last year. However, in terms of quarter-on-quarter sales, Apple suffered a blow close to the tune of 10 million iPhones. The company sold 35.1 million phones in second fiscal quarter (Chinese New Year Sales), and got beaten by Samsung (45 million). More importantly, we're continuously hearing analysts estimating that Samsung sold over 50 million phones . In case this turns true, Samsung will outsell Apple by practically 2 Galaxy smartphones to one iPhone.

Bad news continued with a expected 10% decline in iPod sales to 5.8 million and this is where the bad news end. Apple sold a record 17 million iPads, spurned by the arrival of "the New iPad" i.e. iPad 3. This is 3 million short of what analysts expected, but record nevertheless. Furthermore, Apple sold four million Macs, which represents 2% growth from last year – the market is essentially flat in that perspective. Overall, the situation is still looking bright for Apple, as decline in one segment is offset in another.

However, if the company doesn't rebound with the arrival of iPhone 5 (or "The New iPhone"), one can only wonder what effect will it have on the stock price.

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