iPhone sales boom but iPad disappoints Wall Street

CEO Tim Cook takes shot at Microsoft's Surface tablet, calls it 'compromised, confusing'

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But even off the Street's forecast as it was, the quarter was the third-best ever for the iPad, with the 14 million coming in under only the previous quarter's record of 17 million and the 2011 fourth quarter's of 15.4 million.

The iPad's $7.5 billion in sales dropped the tablet's contribution to the Apple's total revenue from 26.2% in the second quarter to 20.9% in the most recent.

Cook defended iPad sales, saying that the 14 million was above the company's own prognostications and that Apple had stuffed the pipeline the quarter before with over 1 million additional tablets.

But he also admitted that the rampant rumors of an impending smaller iPad, which Apple unveiled this week as the iPad Mini, made consumers pause.

"It's clear that customers delayed purchases of tablets due to new product rumors and this intensified in August and September," Cook said. "Some of that was anticipated and some of it I wish wouldn't occur. But it did occur."

The holidays will be a test for Apple, with the Mini's smaller size taking it into uncharted waters. Some analysts see it as Apple's toughest sell in years because buyers may balk at the $329 price when other similar-sized tablets from Amazon and Google cost $199 or less.

Oppenheimer pre-empted questions about the Mini's price when he answered an analysts question with what sounded like a script. As he talked he used the word "aggressive" twice to describe the $329 price tag.

"All these new products, and the iPad Mini too, obviously, are at their most expensive point [to make]," said Gottheil. "Apple's saying they packed a lot more stuff in the new products, and were aggressive on the iPad Mini. I believe it."

The iPad's ASP (average sales price) also dropped, noted Gottheil, to $535, down from $570 the quarter before, indicating that consumers were selecting lower-priced iPads, or more likely, buying more of the $399 iPad 2.

A year ago, before Apple decided to sell the older iPad at a discount when it introduced the new iPad in March, the iPad ASP was $617.

The iPad Mini will probably eat into the ASP, too. "There will be some cannibalization," predicted Gottheil of buyers deciding for the Mini rather than the larger, pricier iPad. He estimated that the cannibalization rate would run between 20% and 25%, meaning out of every ten consumers who decide to buy an iPad, between two and three will choose the Mini.

"We've learned over the years not to worry about cannibalization of our own products," said Cook. "It's much better for us to do that than somebody else to do it. And the far, far bigger opportunity here are the 80 million to 90 million PCs that are being sold per quarter. I think a great number of those people would be much better off buying an iPad or a Mac, and so that's a much bigger opportunity for Apple."

Like the iPhone, the Mac line also exceeded analyst predictions, posting sales of 4.9 million units -- under 1 million desktops, almost 4 million notebooks -- for a minuscule combined growth rate of under 1%. It was the third quarter running that Mac sales growth was in the single digits.

Revenue for the Mac line was up 6% year-over-year.

"The good news was that notebooks' ASP had a big jump, and was the highest it's been since the first quarter of 2009," said Gottheil. The $1,356 ASP for Apple laptops in the quarter was up 9% over the previous period.

"That was all from the higher-priced Retina 15-in. MacBook Pro," Gottheil said, referring to the high-resolution laptop Apple started selling in June that starts at $2,199.

This week, Apple introduced a 13-in. MacBook Pro with a Retina-style screen that begins at $1,699, $500 more than the corresponding model minus the high-resolution display.

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