Apple, the juggernaut, stumbles overseas

Apple reported a less than stellar Q3. But there are bright spots – including the top-selling iPad.

Reuters
An Apple store in China.

Apple is a juggernaut. Apple rarely stumbles. Apple has enough cash on hand to create a real life Scrooge McDuck money pit. A couple times over. 

Which is what makes the sub-par Q3 earnings report such a surprise. In a report delivered yesterday, Apple revealed that it had sold 26 million iPhones in Q3 of 2012 – up from the same quarter last year, but down from last quarter, when Apple sold 35.1 million iPhones. Meanwhile, net income for the quarter was reported at $8.82 billion, which missed analyst predictions and helped send shares down 5 percent.  

Obviously, we aren't talking about a complete calamity here. $8.82 billion is $8.82 billion, no matter which way you slice it, and the arrival of a new iPhone later this year will likely drive up Apple smart phone sales all over again. Moreover, as Ian Paul of PC World notes, amid the semi-gloom, there is at least one seriously bright spot for Apple: The iPad. Apple has sold a whopping 84 million iPads since the device first launched in 2010. 

In Q3 alone – from April to June – Apple sold 17 million. "Despite the popularity of Apple’s slate, not one competitor has yet come close to matching Apple. Tablets like the BlackBerry PlayBook, Samsung Galaxy Tab, and Motorola Xoom are largely considered failures," Paul writes. "And it seems unlikely that Android tablets will surpass the iPad the way Android smartphones usurped the popularity of the iPhone."

Still, the earnings report isn't good news for Apple, which has carefully cultivated – and consistently earned – a sense of market invulnerability. "Right across the board, they just missed it [in Q3] – whether it was Macs or iPhones," Needham & Co. analyst Charles Wolf told John Boudreau of the San Jose Mercury News. Apple, for its part, has blamed the fiscal disarray in Europe and the state of the global economy.  

Of particular note: Things in China aren't going particularly well for Apple. The Cupertino company racked up $5.7 billion in sales in mainland China in Q3, down $2.2 billion from the previous quarter. Speaking to Reuters, TZ Wong, a Beijing-based analyst with IDC, said that Chinese consumers may be turning to different brands. 

"The (iPhone 4S) model is a little bit too long in the tooth when compared to other phones with better specs," Wong said. "To put it plainly, consumers are getting a little bit tired of the look of the iPhone 4 and the iPhone 4S."

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