Apple shares beaten late on concerns over CEO's health, guidance

Apple handily beat expectations for its fiscal third quarter Monday, but investors used a late trading session to punish shares of the Mac and iPhone maker after the company offered conservative forward-looking guidance and refused to comment on the health of chief executive Steve Jobs.

In a statement following the market's close, Apple said third-quarter profits rose more than 30 percent to $1.07 billion, or $1.19 per diluted share, on revenues of $7.46 billion, driven by record sales of nearly 2.5 million Macs and double-digit iPod growth to more than 11 million units.

However, the Cupertino-based company saw its shares tumble 10.75 percent, or nearly $18, to $148.42, as investors overwhelmingly rejected management's guidance of $1.00 in per share earnings on sales of $8.3 billion for the current fourth quarter. On average, analysts had been forecasting earnings of $1.23 per share on the same amount of revenue.

In a subsequent conference call, Apple chief financial officer Peter Oppenheimer also braced analysts for unwelcome declines in the company's gross margin going froward. He said an ongoing back-to-school promotion and an unspecified product transition during the current quarter will see gross margin fall sequentially by 330 basis points to 31.5 percent.

Oppenheimer told analysts to expect average gross margin for all of fiscal 2009 to come in even lower at 30 percent, as the company moves forward with a strategy that will see it introduce new "state of the art products" that will generate slimmer profits because they'll be offered at price points that can't be matched by rival electronics makers.

Also weighing on Apple shares late Monday were rejuvenated concerns over the health of chief executive Steve Jobs. Shares struggled in the red for most of the day after the New York Post reported that some hedge fund managers on Wall Street are finding it difficult to cope with the increasingly gaunt appearance of the company co-founder.

Jobs's physical health has been an on-again, off-again topic of concern ever since he was diagnosed with a rare form of pancreatic cancer four years ago, for which he underwent successful treatment. However, his overly haggard appearance at last month's Apple developer conference spooked a number of investors and company followers who wondered if his health had begun to relapse.

"Multiple sources who have met with - and in some cases even dined with - Jobs in the weeks surrounding the introduction of the iPhone 3G on July 11, said they came away troubled by his thin appearance," the Post reported.

When asked by an analyst about Jobs's condition on Apple's quarterly conference call Monday, Oppenheimer refused to provide any color, citing his boss's right to privacy.

"Steve loves Apple. He serves at the pleasure of Apple's board," he said. "He has no plans to leave Apple. Steve's health is a private matter."