Apple Inc., maker of the iPhone, fell the most in five months after the company’s profit forecast and sales of the iPad tablet computer missed analysts’ estimates.
Apple dropped $13, or 4.1 percent to $305 at 9:45 a.m. New York time in Nasdaq Stock Market trading. It slid as much as 5.7 percent to $300.02, the biggest decline since May. Apple predicted profit of $4.80 a share for this quarter, short of the $5.03 average of estimates compiled by Bloomberg.
The forecast, coupled with a drop in new contracts reported by International Business Machines Corp., pushed down technology stocks. While Apple’s profit climbed to a record last quarter, Chief Executive Officer Steve Jobs said the company will save its cash for deals as it repels threats from Google Inc. and Research In Motion Ltd.
“Everyone is closing in and it’s a huge question of how they are going to respond,” said Michael Obuchowski, chief investment officer of First Empire Asset Management, which holds Apple shares. “I’m really worried about Apple; I’m not convinced that I’m going to hold Apple two years from now.”
Earnings helped push up Apple’s cash and investments to more than $50 billion, giving Apple the technology industry’s biggest war chest for acquisitions, said Brian Marshall, an analyst at Gleacher & Co. in San Francisco. Apple may eventually make a large acquisition, possibly for a company such as Akamai Technologies Inc., which produces technology for distributing media content on the Web, he said.
Keeping ‘Powder Dry’
“They are in a position to outbid everybody if they view the asset as valuable enough,” said Marshall, who recommends buying Apple shares and doesn’t own any himself.
Jeff Young, a spokesman for Akamai, didn’t return an after- hours call seeking comment.
“We’d like to continue to keep our powder dry,” Jobs, joining an earnings conference call for the first time in two years, said yesterday when asked whether Cupertino, California- based Apple would use the cash for a stock buyback or dividend. “We strongly believe that one or more very strategic opportunities may come along.”
Jobs spoke after Apple reported that fourth-quarter profit rose 70 percent to $4.31 billion, or 4.64 a share, on sales of $20.3 billion.
Gross margin, the percentage of sales left after deducting production costs, will be about 36 percent, compared with 36.9 percent last quarter and 41.8 percent a year before that, Chief Financial Officer Peter Oppenheimer said on the call.
Jobs dismissed the threat of rivals. Apple’s approach of designing the software and hardware for its devices results in a better user experience, he said. By contrast, Google gives Android free to handset makers including Motorola Inc. and HTC Corp., creating a “commodity” experience, he said.
“We are very committed to the integrated approach, no matter how many times Google tries to characterize it as closed,” Jobs said. He said Apple is outselling BlackBerry-maker RIM and he doesn’t “see them catching up with us in the foreseeable future.”
Marisa Conway, a spokeswoman for Waterloo, Ontario-based RIM, declined to comment. Jane Penner, a spokeswoman for Google in Mountain View, California, didn’t respond to requests for comment.
Apple shares, up 51 percent this year before today, surpassed $300 last week. The company accounts for 21 percent of the Nasdaq 100 Index.
Apple sold 4.19 million iPad tablet computers last quarter, fewer than the 4.5 million predicted by Gene Munster, an analyst at Piper Jaffray Cos. in Minneapolis. Yesterday’s results also included the first full quarter of sales for iPhone 4, released in June. Apple sold 14.1 million iPhones and 3.89 million Macintosh computers.
Munster, who estimated Apple would sell 11 million iPhones, said last week that supply shortages likely held back sales of both the smartphone and iPad.
The cost of making the iPhone may be increasing, said Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Oregon. The device accounts for 43 percent of Apple’s revenue.
“We saw what we think is a pretty remarkable increase in iPhone costs,” and that’s fueled concern over margins, Hargreaves said in an interview with Bloomberg Television.
Revenue this quarter will be about $23 billion, Apple said. Analysts had predicted sales of $22.3 billion.
Even so, competition is increasing. The Android operating system was the most popular smartphone software in the U.S. in the second quarter, according to Gartner Inc.
Samsung Electronics Co., HTC, Motorola and Dell Inc. are among the companies using Android in tablet computers to rival the iPad. Hewlett-Packard Co., the largest computer maker, is developing a tablet computer.
Apple may get a sales boost by expanding the availability of the iPhone in the U.S. Verizon Wireless may begin selling it in January, two people familiar with the matter said in June.
Jobs also said he’s been surprised by iPad purchases by business customers.
“We haven’t pushed it real hard in business and it’s being grabbed out of our hands,” Jobs said. “The more time that passes, the more I am convinced that we’ve got a tiger by the tail.”
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