Apple Inc. hit a rare bump in the road, just as it began to transition to life without Steve Jobs.
The company didn't sell as many iPhones as Wall Street was hoping for in the recent quarter, a period during which co-founder Mr. Jobs handed the reins to new Chief Executive Tim Cook. Mr. Jobs died after a long battle with pancreatic cancer earlier this month.
Apple said Tuesday it sold more than 17 million iPhones in its fiscal fourth quarter ended Sept. 24, up from more than 14 million a year ago but lower than the 20 million or more that analysts had been expecting.
Apple's shares, which have been climbing to record highs recently, dropped 6.5%, or $27.43, to $394.81 in after-hours trading Tuesday following the results.
Mr. Cook, speaking on a conference call, said iPhone sales slowed toward the end of the quarter amid speculation over the debut of a new model. Mr. Cook was optimistic about the new iPhone 4S, which Apple began selling on Friday after the quarter closed.
We are "very confident that we will set an all-time record in the December quarter for iPhone sales," he said.
The results show how important the iPhone franchise has become to the Cupertino, Calif., company, just as competition in the smartphone arena intensifies—and how the unrelenting buzz around the company's new products can come back to bite it. In recent quarters, the iPhone has contributed more than a third to nearly half of Apple's revenue, according to analysts, and its business depends on consumers continuing to buy or upgrade to new versions of the more than four-year-old device.
Some analysts said the results shouldn't be seen as too negative. "We don't think this is a slowdown in [market] share gains, it's a pause," said Brian Marshall, an analyst ISI Group.
Overall, Apple posted fiscal-fourth quarter revenue of $28.27 billion, a 39% jump from the year-earlier quarter, but a slowdown from 82% year-over-year revenue growth in the fiscal third quarter.
Profit rose 54% to $6.6 billion, missing analysts' expectations—a rarity for a company that has been experiencing gangbuster growth. The company said it sold 11.1 million iPads, compared with 4.19 million a year ago.
Apple's results add to a mixed picture of how the tech industry is weathering the economic slowdown. International Business Machines Corp. this week reported weaker-than-expected results, fueling concerns among investors that tech spending is softening. Internet advertising giant Google Inc.'s growth remained brisk, with ad sales accelerating during the quarter ending in September.
The results come as Silicon Valley has been mourning the loss of Mr. Jobs, whose passing has industry watchers asking whether Apple can continue its streak. Mr. Jobs is credited with transforming the company by consistently pioneering new products and marketing them with pizzazz.
Meanwhile, the competitive landscape around Apple has been heating up. Apple has leapfrogged BlackBerry-maker Research In Motion Ltd. to become the top seller of smartphones in the U.S., with 27% of such sales in the first half of the year, according to research firm IDC.
But Apple's position on the software side of the market is weaker. Google's Android software, which is used by a variety of hardware makers, powered 54% of smartphones sold in the U.S. during that period while Apple's iOS software powered 27%, according to IDC.
Still, Apple executives continued to ratchet up expectations for the current quarter that ends in late December. In an interview, Apple's chief financial officer, Peter Oppenheimer, described early sales of the iPhone 4S as "blow-away," and said "we enter the holiday quarter with tremendous momentum."
The company, which is known for issuing low guidance, said it expects fiscal first-quarter earnings of about $9.30 a share on revenue of about $37 billion, higher than some analysts had predicted.
Gene Munster, a research analyst with Piper Jaffray & Co., said recent sales for the iPhone 4S —which has a similar look to the iPhone 4 but also new software features such as the talking "intelligent assistant" Siri— are encouraging. He said the sales show consumers are willing to buy new iPhones not just for the hardware but new software too. "People out of contract will upgrade," he said.
On the conference call, Mr. Cook, who handled most of the questions from analysts, added that Mr. Jobs's "spirit will forever be the foundation of Apple" and expressed thanks for the myriad condolences the company had received. Apple is holding an employee memorial for Mr. Jobs on Wednesday.
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