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Apple bracing for December earnings drop as it introduces new products

Apple has revealed that it expects to see the first earnings-per-share decline in its history come December.

For a company with $121.3 billion (£75 billion) in cash, your first reaction might be, cry me a river. But on second thought, you might wonder why this is happening given that Cupertino just unveiled a slew of new products that will hit the market in time for the holidays.

During its third-quarter earnings call this evening, Apple execs explained that those new products are exactly the reason for the drop since they will be more expensive to produce.

"This is most prolific product period in Apple's history," said Apple chief financial officer Peter Oppenheimer. "Unprecedented number of new product introductions. Record levels of demand."

In fact, 80 per cent of Apple's expected December quarter revenue will be from its new product line-up: the iPad mini, the fourth-generation iPad, the 13in MacBook Pro with Retina display, the new Mac minis and revamped iMacs. And let's not forget the iPhone 5 and the new iPods from September.

Apple has "never before introduced so many form factors at once," Oppenheimer said. They all have higher costs and lower gross margins and are at the height of the cost curve. The iPhone 4 and 4S also got a price drop.

"We will work hard to try and get down the cost curves and improve our manufacturing and other efficiencies as we've done in the past," Oppenheimer continued.

Apple chief Tim Cook chimed in and reiterated that Cupertino is "dedicated to making the very best products in the world."

"We think about the smallest of details and we're unwilling to cut corners," he said.

That includes making a 7in tablet, which Cook said Apple will "never" do.

The iPhone 5 is atop many consumers' holiday wish lists, but that demand has resulted in long wait times. Cook acknowledged that Apple is in a "significant state of backlog right now" on the iPhone. But "in terms of production, our output has improved significantly since earlier this month, [and] I'm very, very pleased with the progress that we've made there."

Cook said it's "difficult to predict when supply and demand will balance, but I'm feeling very confident in our ability to supply quite a few iPhones" in the coming months.

Another statistic of note, meanwhile, was the fact that iPad sales were down from 17 million last quarter to 14 million this quarter. When you consider that some companies have difficulty breaking that 1 million mark in a year, let alone a quarter, the 14 million tally is impressive. But Apple still has to answer to its shareholders.

Cook attributed the dip in part to orders for K-12 schools, which usually happen in the June quarter. The September quarter is usually reserved for higher education institutions, and they typically buy Macs over iPads, he said.

Meanwhile, the rumours about the iPad mini didn't help things as people waited for the smaller device rather than pick up the older 9.7in model. "Some of that was anticipated and some of it I wish wouldn't occur," Cook acknowledged.