3rd UPDATE: Apple Calls Out Google After Strong 4Q

Apple Inc. (AAPL) fiscal fourth-quarter profit surged 70% as the company posted strong iPhone and Mac computer sales that pushed revenue above $20 billion for the first time.

However, the company's shares wilted in after-hours as gross margins and iPad sales numbers failed to meet analyst expectations.

Apple Chief Executive Steve Jobs also used the opportunity to take a swipe at Google Inc.'s (GOOG) Android operating system and hardware partners producing devices running on it.

The blowout earnings for the Cupertino, Calif.-based electronics giant underscore Apple's continued transition to mobile devices. That shift started nine years ago with the iPod and has picked up pace with the iPhone and iPad, which Apple Chief Financial Officer Peter Oppenheimer said is being tried at a majority of the world's top companies.

For the quarter ended Sept. 25, Apple reported a profit of $4.31 billion, or $4.64 a share, up from $2.53 billion, or $2.77 a share, a year earlier. Revenue jumped 67% to $20.34 billion, with 43% coming from the U.S.

In July, the company projected earnings of about $3.44 on revenue of about $18 billion. Wall Street's latest expectations were $4.08 and $18.93 billion, respectively.

Gross margin fell to 36.9% from 41.8%, the second-straight quarter that metric dropped on year, and behind average analyst expectations of 38.1%. The company had previously indicated that it expected margin compression.

The company's iPhone sold 14.1 million units, 91% more than a year ago. The line of smartphones had an average selling price of $610, which includes subsidies paid by wireless carriers, the company said. Apple also reported it sold 4.2 million iPad devices -- below expectations -- at an average selling price of $645.

Steve Jobs used a conference call after the earnings to bash Google and its hardware partners. At one point, he declared devices using Google's Android mobile operating system would fail, particularly tablet computers competing with his company's iPad.

"We think the current crop of (competing) tablets are going to be DOA, dead on arrival," Jobs told analysts during a conference call to discuss earnings, referring to them by their common size of 7-inches. "Their manufacturers will learn the painful lesson that their tablets are too small and increase the size next year, thereby abandoning both customers and developers who jumped on the 7-inch bandwagon with an orphan product."

Despite Apple's criticisms of its competitors, Google's software continues to prove popular. Android recently surpassed iPhone in terms of market share and Google indicated it was starting to see significant revenue from mobile ads linked to Android in its earnings last week. Analysts said Jobs's comments might indicate his concern about Apple's continued leadership position.

"I was surprised by the degree to which he was willing to take on Google," Gartner analyst Van Baker said. "It's clear he sees this as a horse race with them and that he has to be aggressive."

Job's comments come as the company's shares dropped nearly 6% in after-hours trading following disappointing reports of the company's gross margins and iPad sales.

Shares of Apple, which reached a record high of $319 during the regular session Monday, dropped 5.7% in after-market trading, to $299.83. Apple's share price has surged 51% this year, a move that now makes it the second-most valuable company in the U.S. after ExxonMobil Corp. (XOM), with a market capitalization of roughly $295 billion.

The maker of computers and electronics devices, which is notorious for giving conservative guidance, said it expects fiscal first-quarter earnings of about $4.80 a share on revenue of about $23 billion. Before the results, analysts polled by Thomson Reuters had expected $5.07 and $22.4 billion, respectively.

Meanwhile, Apple on Wednesday will unveil a new version of its computer operating software, as it moves to target corporate customers, a market that has historically eluded Apple.

-By Ian Sherr and John Kell, Dow Jones Newswires; 212-416-2480; [e-mail]