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By Jeremy Glaser and Michael Holt, CFA | 07-24-2012 05:00 PM

Apple's Bumpy Road Ahead

Growth is likely to keep slowing at Apple until the firm releases its next-generation iPhone, but the long-term future of the tech giant remains bright, says Morningstar's Michael Holt.

Jeremy Glaser: For Morningstar, I am Jeremy Glaser.

"Apple" and "disappointing" are not two words we've seen in the same sentence together very often, but this quarter came in a little bit light. I am here with our analyst Michael Holt to take a look and get his take.

Mike, thanks for joining me.

Michael Holt: Thanks for having me.

Glaser: So, let's take a look at this quarter. Did it meet your expectations? What surprised you?

Holt: I think it definitely was a little lighter than we were expecting, specifically on the iPhone unit shipments, but you've got to take this with a grain of salt, because expectations got ahead of themselves with this quarter. We know that this is the third quarter since the iPhone has been released. We know that we are expecting a pullback. We just didn't know the exact magnitude. And we expect more of the same next quarter. It's going to be another wait-and-see quarter before we get another product launch that will drive things forward.

Glaser: So Apple may have failed to meet those lofty expectations, and certainly as you mentioned, the phone was the core of that. What's happened with the iPhone? How important is that to Apple right now?

Holt: The iPhone is still the most important device for Apple. Even in this quarter, we were light on iPhone units, but we actually exceeded my expectations on iPad units, but because of the gross margin differences between those devices--the iPad is a lower gross margin [product] than the iPhone--that's not enough to turn things around on the bottom line.

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