CUPERTINO -- Is Apple (AAPL) getting stuck in a gilded rut?

It did manage to post record profit of $13.1 billion when it announced earnings Wednesday for its holiday quarter. It sold a record-breaking number of iPhones and iPads while trying to keep up with crushing global demand for its new iPad Mini. And sales kept climbing skyward.

But Apple suddenly looks like it's downshifting from nearly supernatural quarterly performances to growth that's, well, simply respectable. While it posted annual sales growth of 60, 70 and even 80 percent each quarter as recently as a year ago, its growth in the latest quarter was less than 18 percent.

Most companies would kill for that kind of number, but for Apple it was the slowest pace since its fiscal fourth quarter of 2009. Worse, it warned of a further slowdown in the current quarter, sending its shares down nearly 10 percent in after-hours trading.

"Apple is looking downright earthly," said analyst John Jackson with IDC. "Apple's formula is maturing, and it may be that we've left the era where the ripple from new products alone had seismic consequences for Apple's performance. The new definition of what Apple innovation really means is becoming much more nuanced."


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It's not that Apple's much-anticipated report was shabby. Its profit eclipsed earnings a year ago, and this despite the fact the most recent quarter was one week shorter in length. Apple said it earned $13.81 a share on $54.5 billion in revenue for its fiscal first quarter ending Dec. 31, while analysts polled by Thomson Reuters had expected Apple to earn $13.47 a share on $54.7 billion.

"We're thrilled with record revenue of over $54 billion and sales of over 75 million iOS devices in a single quarter," CEO Tim Cook said in a statement. "We're very confident in our product pipeline as we continue to focus on innovation and making the best products in the world."

As Apple's stock price has dropped from more than $700 to under $500 a share since September, Cook has been under increasing pressure to recapture the Apple mojo associated with co-founder Steve Jobs' legacy. Yet even as the ever-upbeat chief executive jumped onto the conference call with analysts, there were signs of trouble. After its shares climbed throughout the day, Apple saw investors dumping its stock en masse, sending it down 9.8 percent after the markets had closed.

As Apple warned of even more of a slowdown in its March quarter, analyst Amit Daryanani with RBC Capital Markets did some quick back-of-the-envelope math and sent out an email warning investors that Apple seems to be expecting $8 in earnings-per-share three months from now, versus the $11.69 Wall Street analysts had been predicting. That would be a steep drop from $12.30 a share it earned in the March quarter last year.

"What's hurting Apple the most right now is that the products that are selling really well are products" like the iPad Mini that have a lower profit margin than the iPhone, Daryanani said. "That's why investors are reacting the way they are.

"The question is: Can Apple continue to innovate enough to offset this?" he said. "But at least for now, Apple is absolutely slowing down."

Looking at the earnings numbers, it was clear the company's phenomenal growth spurt that had been spurred by the launch of the iPad in spring 2010 was drawing to a close -- or at least starting to sputter. And the company expects its revenue to grow only 5 to 10 percent in its current quarter.

In January 2012, Apple's quarterly earnings blew everyone away, as its net profit of $13.06 billion was more than double the $6 billion it had earned a year earlier. This time, Apple barely managed to beat its year-ago earnings by a few hundred thousand dollars. And while Cook and CFO Peter Oppenheimer kept reminding analysts that the shorter quarter skewed the underlying sales numbers, analysts kept coming back with concerns about softer sales.

The current quarter could get rocky, as Apple said it expects revenue to be between $41 billion and $43 billion, with a gross margin at 37.5 to 38.5 percent, which is less than analysts had been estimating.

In one key indicator, Apple said it had sold a record 47.8 million iPhones in the last quarter, compared with 37 million in the year-ago quarter. Analysts had expected as many as 50 million, which many investors took as a sign that Apple had lost some of its smartphone swagger. Apple said it also sold a record 22.9 million iPads in the quarter, compared with 15.4 million in the year-ago quarter. But that number was slightly below analysts' call for sales of 23 million to 24 million tablets.

Some have called for Apple to come up with a downsized, cheaper version of the iPhone to expand its share in developing markets like China. But in the conference call, Cook made it clear that Apple would not chase rivals with bigger -- or smaller -- smartphones, saying that with the iPhone 5 "we put a lot of thought into screen size and we believe we've picked the right one."

"The most important thing to Apple," he said, "is to make the best products in the world and those that enrich our customers' lives. That means we're not interested in revenue for revenue's sake. We could put the Apple brand on a lot more things and sell a lot more stuff, but that's not what we're here for."

Staff writer Troy Wolverton contributed to this report. Contact Patrick May at 408-920-5689; follow him at Twitter.com/patmaymerc.

Here are some take-aways from Apple's much-anticipated earnings report for the holiday season:
Record sales, but just barely: Apple earned $13.81 a share on $54.5 billion in revenue, while analysts polled by Thomson Reuters had expected $13.47 a share on $54.7 billion.
Dodged a bullet: After falling short of analysts' estimates the past two quarters, Apple reported profit of $13.1 billion, just a tad higher than the $13.06 billion a year earlier.
iPhone is key to Apple's fortunes: It sold a record 47.8 million iPhones in the quarter, compared with 37 million in the year-ago quarter, but analysts were looking for sales closer to 50 million.
Cash is king: Apple is now sitting on $137.1 billion, up from $121 billion a year ago, and it declared a per-share cash dividend of $2.65 to spread some of it around.
Source: Mercury News reporting