Apple’s earnings disappoint. Shares fall over $30 after hours

July 24, 2012, 8:46 PM UTC

FORTUNE — Apple (AAPL) did a rare thing Tuesday: It disappointed Wall Street.

Although it reported sales and earnings ahead of its (typically) low guidance, and although CEO Tim Cook declared himself “thrilled” that the company sold a record 17 million iPads in the quarter, the stock immediately dropped more than $30 in after-hours trading.

Analysts had expected iPhone sales to weaken amid rumors that a new model was in the works, but the 26 million units sold were well below even the professionals’ cautious consensus. And because iPhone sales account for more than half of the company’s revenue, the shortfall was keenly felt on both the top and bottom lines.

Those 17 million iPads sold, however, were a record, well above the Street’s consensus (although well below the estimates of independent analysts).

To sweeten the news for shareholders, Apple announced a $2.65 per share dividend payable on Aug. 16 to shareholders of record on Aug. 13. And it announced that that Mountain Lion, the new operating system for the Mac, will be released on Wednesday, a bit earlier than expected.

But all in all, not one of Apple’s best performances.

“Investors were bracing for a weak June iPhone number and soft September guidance and got it,” wrote Piper Jaffray’s Gene Munster in a note to clients.

The numbers:

Sales: $35.023 billion, up 22.5% year over year
Net profit: 
$8.8 billion, up 21%
EPS: $9.32, up 19.6%
iPhone:  26 million units, up 28%
iPad: 17 million units, up 83.9%
Mac: 4 million units, up 1.3%, compared with -1% for the PC market
iPod: 6.8 million units, down 9.8%, over half iPod touch
iPod: iTunes store generated $1.8 billion
Apple TV: 1.4 million units, up 170%. 4 million so far this fiscal year
Gross margin: 42.8%, down from 47.4% last quarter, up from 41.7% in Q3 2012
Apple store revenue: $4.1 billion, up 17%
Number of Apple stores: 372, 123 outside the U.S.
Cash and marketable securities: $117 billion, up $7 billion from Q2
Revenue guidance: $34 billion
EPS guidance: $7.65
Gross margin guidance: 41.5%

Notes from the conference call with analysts below the fold.

Without better numbers to report, CFO Peter Oppenheimer has resorted to listing specific schools and companies that have adopted Apple products. Promises “amazing new products” in the future.

Asked about China sales, CEO Tim Cook reported that sales in greater China fell $2.2 billion from Q2, from $7.9 billion to $5.7 billion (up 48% year over year). He attributed this primarily to lower iPhone sales after the big Chinese New Years Sales. Delayed sales of the new iPad (because of a trademark dispute) and MacBook Airs (waiting for regulatory approval) didn’t help. Not seeing any effect of slowing economy, and mainland China sales were up 100% year over year.

Oppenheimer notes that the U.S. dollar has strengthened against most currencies, which will slow sales overseas. Cook adds that Europe was particularly weak.

Both Oppenheimer and Cook drop hints about future products, making them sound that they could be just around the corner. In ducking a follow-up question about carriers Cook makes it sound to me like he’s talking about a new iPhone, not a TV or an smaller iPad.

Asked whether the low Mac sales are the result of iPad cannibalization, Cook says no, the chief cause was the late launch of the new MacBooks.

What disappointed Apple executives? Oppenheimer ticks off the problems: Europe’s economic woes cut into sales. New iPhone rumors has slowed sales of the old ones. Intel delays threw off the timing of their MacBook release. Also, the aforementioned strengthened dollar.

Asked about selling into the third world, Cook reiterates that he believes people in all markets want the best products. “So we’re going to stick to our knitting and make the very best products.”

Cook says Apple sold about 1 million iPad 2s into the K-12 education market.

“Most customers aren’t looking for a tablet, they’re looking for an iPad.”

iPad international markets are in triple digit growth rates, the U.S. is slower. Latin American is tripling. “We seeing growth in some countries that are bordering on shocking.”

Sold 1.3 million Apple TVs, up 170%. Brings fiscal year to over 4 million units.

Asked whether Passbook could lead to a digital wallet, Cook ducks the question. Suggests a much more modest goal of bringing passes into one place.

“I love India,” says Cook. But thinks Apple has better potential in other countries. The multilayered distribution in India adds to the cost of coming to market.

A new variation of the Cook doctrine: “We’re maniacally focused on making the best products,” he says when asked about cutting prices. “That’s why we breath. That’s why we live, and we’re not going to change that.”

Asked about the effect of rumors and speculations, Cook says that’s just the way things are in in a free country. “People are allowed to say what they think and so forth, I’m not going to spend any energy trying to try to change that. I’m glad that people want the next thing. I’m super happy about that.”

And that’s a wrap. Tune in tomorrow for our Earnings Smackdown, when we review the performance of individual analysts and rank them from best to worst.

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The recording will be rebroadcast beginning at 8:30 p.m. Eastern. The dial-in number for the rebroadcast is (888) 203-1112 (toll-free) or (719) 457-0820. Confirmation code: 1260435.