Apple Shares Dip On iPad NumbersApple Shares Dip On iPad Numbers

Shares of Apple were off more than 3% in late afternoon trading Tuesday after the company reported weaker than expected sales of its iPad tablet computer.

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Apple shares were down 3.09%, to $308.17, on volume of more than 37 million less than an hour before the closing bell.

On Monday, Apple reported that it sold 4.2 million iPads during its fiscal fourth quarter. While impressive, the number was below analyst estimates of between 4.8 million and 5 million units.

Apples declining gross margins, which provide a measure of profitability, also weighed on investors as the bears moved in Tuesday. Apple posted gross margin of 37% for the fourth quarter, compared to 42% in the same period a year ago. The decline is a sign that Apple is looking to maintain comparatively low prices for hot-selling gadgets like the iPad, iPhone, and iPod in order to keep pace with competitors.

"We believe investors will give an appropriate amount of focus on the relatively weak gross margins," said analyst Keith Bachman, of BMO Capital Markets, in a research note.

Despite the slip in its shares, Apple posted strong fourth quarter numbers overall. The company reported a 70% increase in profits, to $4.3 billion, compared to the same period a year ago. It also posted a 66% gain in revenues, to $20.3 billion.

That led some analysts to believe Tuesday's decline was unwarranted.

"While shares of Apple may pull back today, we would be buyers based on our belief that investors will gain optimism over the next three months that the growth story will continue," said Piper Jaffray's Gene Munster, in note to clients. Munster raised his target price for Apple shares from $390 to $429.

At a conference call with analysts Monday, Apple CEO Steve Jobs said the company will likely introduce new products before the close of 2010. "We still have a few surprises left for the remainder of this calendar year," Jobs said.