Growth Concern at Apple? Margins Mystery Revealed

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Oct. 29 (Bloomberg) -- Jon Erlichman looks at the numbers behind Apple's fourth-quarter earnings report. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Lineup.

More on that in a moment.

The shakeup at sears.

But first, apple.

The company beat on earnings but warned of slowing sales because of competition in the tablet market.

Jon erlichman has been digging through those numbers since last night.

Let's start with the highlights.

Why will we see slowing sales?

Those who have been watching the coverage of this quarter may have some growth concerns.

When you see headlines like the fact that apple's earnings declined year-over-year and you have slower sales growth, you wonder what is going on.

This company continues to sell a monster number of products, the iphone and the ipad, closed to $50 million in the quarter.

Very profitable.

The landscape has changed.

Despite the tablet lead that apple has, there are other players trying to gear up for holiday sales.

Despite the fact that apple has discovered new iphone devices, the competition from samsung is making apple work harder for each penny.

The key focus ended up being on the company's margins for the holiday.

-- holiday period.

The gross margins have historically been high but will be weaker.

The company generated in this quarter nearly 37.5 billion dollars in revenue.

The way the company explained it was that there are some new products on the market that are at lower prices for apple.

That means you can be bringing in less revenue form -- from those devices.

You are spending more to make those devices.

They are deferring some of the revenue that they make from software tied to these devices.

Putting all those pieces together, that seems to be the explanation.

What about the growth margin -- gross margin?

Investors seem to be focused on that.

The take away from the explanation appleshare it was that had they not done some of these accounting things, like deferring some of the software related revenue, those margins would have been higher overall.

This is a company still generating huge cash.

In this period, $9.9 billion and operations.

Apple is still a very profitable company bringing in a lot of money.

It is growing at a slower rate.

What does that mean for investors?

This is the focus from carl icahn.

He says if you are not growing at the same rate, give more money back to shareholders in the form of stock buyback.

That is right.

The cash pile, what about it?

You are talking about cash from operations of around $10 billion.

Basically getting us to around $60 billion in cash from operations over the last four quarters.

This is a company that has in the neighborhood of $147 billion in cash, absolutely enormous.

And a lot of that money is still overseas.

There are tax implications to bring that money back.

There did not seem to be and they suggested that the company plans to do that to return that additional overseas money to shareholders.

They with me.

I want to bring in tom.

Senior research analyst.

This text has been automatically generated. It may not be 100% accurate.

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