Apple says iMac sales less than expected

Excluding items, the company earned $163 million, or 45 cents per share. Including an after-tax gain from the sale of ARM Holdings stock, Apple earned $200 million, or 55 cents per share.

Revenue increased 17 percent to $1.82 billion. Various reports expected the computer maker to report revenue ranging between $1.9 billion and $1.95 billion.

Chief financial officer Fred Anderson said during a conference call today that "iMac sales were a bit below (original) expectations." Yet he added that the company expects revenue to rise in subsequent quarters "due to planned product introductions."

"We're targeting over 10 percent sequential (revenue) growth," Anderson said. "It's been about nine months since we have had any major product introduction. We're going to change that tomorrow, and we think you will be impressed."

Gerard Klauer Mattison analyst David Bailey said that although Apple's revenue numbers fell under views, the company was able to meet profit expectations through higher profit margins.

"We had expected consumer sales to be a little weaker, but (they) came in a little bit below expectations," Bailey said, adding that the third quarter is "seasonally just a slow quarter."

Apple has seen strong gains and has grown its market share in the consumer PC industry since introducing its fruit-colored iMac line in 1997. Yet analysts had warned that sales were weakening for the popular model as Apple hadn't updated the product since last October.

In an attempt to ward off such sentiment, Apple chief executive Steve Jobs is widely expected to show off new hardware tomorrow during a keynote address at the Macworld Expo trade show in New York.

Analysts were expecting Apple to earn 44 cents a share for the third fiscal quarter, according to First Call/Thomson Financial.

Apple stock ended the day down $1.06, or 1.8 percent, to $57.25. Shares fell below $54 in after-hours trading, according to media reports.

Separately, Apple announced that it will sell its iMac and iBook consumer lines in the more than 570 Circuit City retail stores nationwide. Analysts had expected Apple to announce additional retail efforts, however.

For the quarter, Apple sold more than 350,000 PowerMac G4 systems and some 450,000 iMac computers, according to the company release.

Apple also said it expected memory prices to rise in the second half of the year, while hard disk drive and flat panel display prices are expected to fall. Anderson said optical drives and capacitors may continue to be hard to find, which could increase prices for the components.

All in all, Apple said it expects to pay slightly higher costs for components for the remainder of the year.

"We think it's up slightly in the second half," Anderson said.

Anderson said the company has not changed its public guidance for its highly anticipated OS X, either for the final release due in January or for the test version.

"That's still on target for late summer," he said of the beta version of the operating system.