iPad Sales Disappoint, Jobs Slams Android

SAN FRANCISCO, Oct 18 (Reuters) – Apple Inc (NASDAQ:AAPL) CEO Steve Jobs went on the offensive on Monday after a rare disappointment in sales by the iPad maker sent its shares tumbling, but even his biting words failed to reverse market sentiment.

Jobs, who has not addressed investors on an earnings call for two years, lashed out at competitors Google Inc (NASDAQ:GOOG) and Research in Motion (RIM) RIMM and dismissed the smaller tablets made by rivals such including Samsung (005930) and Dell (NASDAQ:DELL).

"The current crop of 7-inch tablets are going to be DOA, dead on arrival," Jobs told analysts on the conference call. "Their manufacturers will learn the painful lesson that their tablets are too small."

Shares of Apple — the second-largest corporation on the Standard & Poor’s 500 index, after Exxon Mobil (NYSE:XOM) — slid 6 percent in after-hours trading, which would be their biggest single-day loss since 2008.

Supply and production bottlenecks kept iPads, which have a 9.7-inch touch screen, from store shelves and buyers waiting weeks sometimes for their gadget. The company sold 4.19 million iPads in the fiscal fourth quarter.

"A little bit disappointing there. Street was expecting closer to 5 million units. The problem is supply, they can’t make enough of them," said Gleacher & Co analyst Brian Marshall.

Analysts said sales should ramp up in the holiday quarter as Apple resolves supply hitches.

Gross margins fell short of target as iPads, whose profit margin is lower than it is for iPhones, made up a larger proportion of Apple’s sales. Investors had expected more from a company that had smashed Wall Street’s targets in each of the past eight quarters.

Gross margins came to 36.9 percent, below Wall Street’s average forecast of 38.2 percent, despite better-than-expected components costs in the period.

"The one surprise is on the margin side. Everything else is pretty spectacular," said Gartner analyst Van Baker.

There was no disappointment in the iPhone, however, whose surging sales showed little impact from a PR debacle last summer over the device’s antenna. 

Apple sold 14.1 million of the smartphones, a gain of 91 percent and better than Wall Street had expected. The company said demand is still outstripping supply, with the iPhone now available in 89 countries.

Mac sales surged 27 percent to 3.9 million, at the high end of analysts’ estimates. Apple Chief Financial Officer Peter Oppenheimer said the strong Mac performance was evidence that the iPad was not cannibalizing sales.