iPad down, iPhone up

Supply and production bottlenecks keep iPads from store shelves while demand for iPhone outstrips supply.

Apple Inc 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 some time, lashed out at competitors Google Inc and Research in Motion and dismissed the upcoming range of smaller tablets made by Apple's rivals.

"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 and increase the size next year."

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.

Although the 4.19 million iPads sold in the fiscal fourth quarter fell short of Wall Street's target of around 5 million, 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 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 in the fiscal fourth quarter came to 36.9 percent, below Wall Street's average forecast of 38.2 percent.

iPhone sales skyrocket

There was no disappointment in iPhone sales, however. 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.

Apple on Monday reported record quarterly revenue led by blockbuster sales of its latest generation iPhone and took shots at rivals Google and Research In Motion.

The California-based company said that its net profit in the quarter ending September 25 soared 70 percent to $4.31 billion on unprecedented sales of Macintosh computers, iPhones and iPads.

"We are blown away to report over 20 billion dollars in revenue and over four billion in after-tax earnings - both all-time records for Apple," said Apple chief executive Steve Jobs.

Apple reported record revenue of 20.34 billion dollars in the fourth quarter of its fiscal year, up from 12.21 billion dollars a year ago. Apple said it sold 3.89 million Macintosh computers during the quarter, up 27 percent from a year ago, 14.1 million iPhones, up 91 percent from a year ago, and 4.19 million iPads, up from 3.3 million the previous quarter.

Apple said it sold 9.05 million iPods during the quarter, down 11 percent from a year ago.

Jobs said during an earnings call that iPhone "handily" outsold BlackBerry and that he didn't see the handsets made by Canada-based Research In Motion catching up any time soon.

He then took aim at Google and its Android software for mobile phones. Jobs downplayed claims that approximately 200,000 Android mobile devices are activated daily, saying that daily activations for Apple gadgets averaged 275,000 in the past 30 days.

"We are confident our approach will triumph over Google's fragmented approach," Jobs said.

While Android touts being "open" software that handset makers can craft into devices as they wish, Apple's "closed" approach lets it control quality from the hardware to the software.

"The closed approach enables Apple to make products they believe create the best customer experience," said NPD analyst Ross Rubin.

"The success they are having in the market validates that many customers believe that is true."

Jobs contended that the array of smartphone makers putting custom spins on Android software will be "a mess" for users and application makers.