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Apple Misses 4Q Earnings Targets, Blames iPhone 5 'Rumors' (Updated)

Lower than expected iPhone sales led to the missed targets, but the company predicts record iPhone sales in the current quarter

Ah, the price of high expectations.

Apple executives on Tuesday blamed iPhone 5 rumors for the company’s failure to meet Wall Street projections, and then proceeded to set the bar very high for the current quarter.

"We are confident we will set an all-time record for iPhone sales in this quarter," CEO Tim Cook told analysts during a conference call to discussed the company's latest financial results.

The tech giant had a rare miss on Tuesday, issuing fourth quarter earnings that failed to meet expecations after the market had closed. This is the first time since 2002 -- or 2004 depending on which service you believe -- that the company missed its earnings targets.

While industry analysts expected the Cupertino-based company to bring in somewhere north of $29 billion in revenue and earnings per share around $7.30, it registered $28.3 billion in revenue and $7.05 earnings per share.

The news caused the company's stock price to drop in after-hours trading. After closing last week at a record price of $422, it now sits at $394.

iPhone sales appear to be the biggest culprit, as the expectation was Apple would unload 22 million smartphones. Instead, it moved just 17.1 million.

Apple CFO Peter Oppenheimer said on the company's earnings call that weaker iPhone sales were a result of rumors about the iPhone 5.

"We expected iPhone sales to declined sequentially as a result of new product rumors following the announcement in July that iOS5 and iCloud would become available in the fall. As predicted, sales did decline, especially in the second half when new product speculation intensified,” Oppenheimer said.

Oppenheimer reiterated his belief that rumors had a big impact throughout the call, but wanted to shift attention to Apple's new toy -- the iPhone 4S.

Coming into the announcement, some analysts said the sales figures would be low because early sales of the 4S would not count in the fourth quarter numbers. Apple believes this will result in big numbers for the first quarter of the upcoming fiscal year, as it raised its guidance for projected revenue and profits.

Early iPhone 4s sales are very strong. The company said it sold 4 million iPhone 4S its first weekend in stores. 

Also read: iOS5 Downloads Reach 25M as Apple's iPhone 4S Flies Off the Shelves

This was Cook's first earnings announcement since the death of co-founder Steve Jobs, and Cook started the call with a statement about the late Chairman.

"The world has lost a visionary, creative genius and an amazing human being," Cook said. "Steve was a great leader and mentor, and he inspired everyone at Apple to do extraordinary things. His spirit will forever be the foundation of Apple and we'll continue doing the amazing work he loved so much."

After Cook said his piece, Oppenheimer took over to discuss specific numbers.

Other than the iPhone, most of the sales figures hewed close to expectations, but the company did set all-time quarterly records for Mac and iPad sales.

The biggest jump came in the tablet market, where Apple moved another 11.1 billion iPads. That exceeded the expectation of 10 million and represents a 166 percent improvement over last year's fourth quarter. It also marked a 22 percent improvement over the third quarter, when Apple sold 9 million tablets.

Oppenheimer dismissed the possiblity that Amazon's upcoming tablet, the Kindle Fire, would dampen iPad sales. While many competitors have tried to compete with the iPad, "none of these have gained any traction thus far," Oppenheimer said.

As for Macs, Apple bested the expectation of 4.5 million units sold by moving 4.9 million. Oppenheimer credited continued growth in demand for the MacBook Air and sustained demand for the MacBook Pro.

iPod sales both failed to meet expectations and declined relative to the fourth quarter last year.

Other than product sales, the biggest topic of discussion was Apple's retail expansion into another countries, specifically China.