APPLE on Wednesday reported the kind of quarter most big companies would envy, posting a profit of $US13.1 billion ($A12.4 billion) and selling 28 per cent more iPhones and 48 per cent more iPads, its two biggest products.
Its stock quickly sank 11 per cent. What is going on? Because of its great success in recent years, many investors have come to expect nothing short of perfection from Apple. And while it is still widely considered the most innovative company in the technology world, a maker of products that its devoted customers cannot live without, Apple is facing challenges.
It is dealing with increased competition from big rivals such as Samsung and Google, and with so many people already using smartphones, the market is not quite as untapped as it once was. Apple is forging into cheaper product categories, meaning lower profit margins. And given that Apple has grown so big, with sales of more than $US160 billion in the past 12 months, keeping up its heady growth rate is becoming harder and harder.
Once-euphoric investors, who pushed Apple's stock to a record high of $US702.10 in September, have become nervous, and in after-hours trading on Wednesday, the stock traded at $US461.30, down 34 per cent from its peak.
Apple has reinvented itself several times over the past decade with new products, and could do so again. Television and electronic payments are among the markets where analysts believe the company could make a serious push, leading it to new heights.
"Apple has really been able to invent whole new markets," said John Gallaugher, an associate professor at Boston College's Carroll School of Management. "That's where it differs from companies like Microsoft. I don't think the mojo of this team has evaporated."
In a call with analysts, Timothy Cook, Apple's chief executive, said the company's pipeline of new products was "chock-full". In the meantime, though, the love affair that investors once had with Apple is clearly waning. "There's nothing that can help the stock from sliding now," said Mark Moskowitz, an analyst at JPMorgan Securities, who said Apple's holiday sales met his own forecasts, even though they missed others' predictions.