Apple's Booming Q1 Dinged By Weak iPad Sales

Apple's Q2 profit was $5.99 billion, or $6.40 per share, compared to $3.07 billion and $3.33 per share during the same quarter last year. Apple also reported revenue of $24.67 billion during the quarter. Analysts polled by FactSet Research were expecting $5.35 per share on revenue of $23.3 billion. Gross margin came in at 41.4 percent, down from 41.7 percent from last year's quarter.

During Apple's Q2 ended March 26, the Cupertino, Calif.-based firm sold 18.6 million iPhones, up 113 percent from last year's quarter. Apple sold 3.76 million Macs during the quarter, up 28 percent from last year. Apple's iPod sales dropped 17 percent to 9.02 million units, but it was iPad sales that received the most attention from analysts.

After selling 7.33 million iPads during its holiday Q1, Apple sold just 4.69 million iPads in Q2, while Wall Street analysts were expecting sales of 6.3 million. This was likely due to Apple's rollout of the iPad 2 in March causing people to put off iPad purchases, as well as a shortage in iPad 2 supply in the wake of its March 11 launch that still persists.

Apple is still "heavily backlogged" with iPad 2 supply but is ramping up manufacturing and recently expanded iPad 2 availability to 25 countries, with an additional 13 countries to come next week, Apple COO Tim Cook said in the call. But while Cook is "extremely pleased" with the progress that's been made, he stopped short of suggesting that Apple is out of the woods just yet.

"We're confident that we're going to produce a very large number [of iPad 2s] for the quarter, but whether that will be enough to meet demand, I don't know. I can only be confident on the supply side," Cook said in the call.

In a Q&A after the earnings call, Cook was asked if Apple might have erroneously forecast the level of demand for the iPad 2. "Product transitions are never simple," Cook responded.

Apple must inform suppliers many weeks in advance before launching a new product, and the company lowered channel inventory of the original iPad to 570,000 units during Q1. Apple added 170,000 iPad 2 units, although most of that was still in transit at the close of the quarter, Cook said.

However, Apple has made significant progress in ramping up iPad 2 production, Cook noted. "We have got off to a materially better start and produced more units than in the first iPad ramp," Cook said. "I wish we could have produced a lot more iPad 2s because there were certainly a lot of people waiting for them."

Meanwhile, iPhone sales in the U.S. grew 155 percent year over year, and Cook said Apple's addition of Verizon as an iPhone carrier played a big role in driving that. However, Cook also gave a shout out to AT&T, which managed to activate 3.6 million new iPhones during its last quarter.

Although the situation in Japan is still uncertain after last month's earthquake, tsunami and nuclear power plant disaster, Apple doesn't expect any material impact on component supplies or cost for its upcoming quarter, although the company has shaved $200 million from its revenue guidance for next quarter, Apple CFO Peter Oppenheimer said in the call.