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SAN FRANCISCO (Reuters) - Apple Inc's (AAPL.O) results fell short of Wall Street's expectations as the European economy sagged and consumers held off on buying its flagship iPhone ahead of a new version expected in the fall, hitting its stock price.
Shares of the world's most valuable technology company shed more than 5 percent of their value after Apple - which beats Wall Street expectations with near regularity - reported its second quarterly miss on results in less than a year.
The stock slid to $570.81 in late trade. They closed at $600.92 on the Nasdaq.
The disappointing numbers highlight how the Apple brand is becoming less resistant to the economic and product cycles that have plagued rivals.
Apple, which Tim Cook has led since last August, divided the blame for the shortfall between muted consumer purchases in Western European countries and the pullback in demand as consumers wait for a new iPhone model that many expect will be launched in September or October.
From March to June, Apple shipped 26 million iPhones, well below the 28 million to 29 million that Wall Street analysts had predicted, even taking into account a pause in buying ahead of the iPhone 5. It was a far cry from the 35.1 million that moved in the March quarter.
Sales of the iPad, the tablet that accounts for well over half the world's market, came in at 17 million in the fiscal third quarter, above expectations.
Apple, notorious for its conservative forecasts, estimated earnings for the September quarter of $7.65 a share on revenue of $34 billion, well below the average estimate of $10.23 a share on revenue of $38.03 billion, according to Thomson Reuters I/B/E/S.
"It's a big miss. The guidance for next quarter was very low. I'll be very interested to know if it was a product transition or the economic" turbulence," said David Rolfe, chief investment officer for Wedgewood Partners.
"What is key is the mixture between iPhone and iPad. The iPhone has higher margins. iPhone sales were lower than expected - meaningfully lower - and that translates into a big hit on the bottom line."
The Silicon Valley giant has a lot riding on its next iPhone, the product that yields more than half its revenue and helps shore up overall margins.
Apple has seen Samsung Electronics (005930.KS) - now the world's largest seller of smartphones - and other handset manufacturers using Google Inc's (GOOG.O) Android software chip away at its market share.
"It really is the iPhone company. The iPad is not strong enough to beat numbers," said BGC Partners analyst Colin Gillis. "The iPhone 5 is already the most hyped device and for it to exceed expectations is going to be really hard."
Executives acknowledged buyers were refraining from purchases because of "rumors and speculation" around the iPhone 5, which sources have said will come with a thinner and larger screen. They laid part of the blame on sputtering demand from European economies like Germany and France, while dismissing the impact of a Chinese slowdown.
Revenue in the Asia Pacific region - which includes China but not Japan - shrank 22 percent from the previous quarter, far outstripping the 3 percent to 6 percent fall in revenue in the Americas and Europe.
"The economy in Europe is not doing well. We think this impacted our results," CFO Peter Oppenheimer said.
The expected roll out of a new Phone will likely pose a stiff challenge to rivals.
This was a reason why few investors were not expecting a blowout third-quarter as they remembered how chatter over a new iPhone last year caused Apple to miss quarterly expectations for the first time in years. The economic slowdown in Europe and China also made many investors nervous.
"We expected a lot of consumers will probably delay their upgrade and their purchases until the iPhone 5 comes out," Channing Smith, co-manager of Capital Advisors Growth Fund, said. "We saw a similar trend occur last year with the iPhone 4S."
Apple's fiscal third-quarter revenue rose to $35 billion, much lower than the average analyst estimate of $37.22 billion. It reported net income of $8.8 billion or $9.32 a share, compared to $7.3 billion or $7.79 a share a year earlier.
That lagged the $10.37 Wall Street had forecast.
Gross margin for the quarter was 42.8 percent, also lower than the expected 43.68 percent. Apple's hoard of cash and other securities now amounted to $117.2 billion.
"Apple is in that rarest of all positions where the Street will punish them for anything less than an excess of success," CCS Insight analyst John Jackson said. "If there's a positive spin on the iPhone story, it is one of latent demand." (Reporting By Poornima Gupta; Editing by Bernard Orr)