Tepid sales, aging products knock Apple

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br SMARTPHONE Reuters A customer tests an iPhone 5c at an Apple store in Beijing earlier this month. Apple's chief executive says sales in North America were weaker than expected in the holiday season, partly because the less-expensive iPhone 5c released last year isn't as popular as the higher-end iPhone 5s. Photo: Reuters

San Francisco - Apple’s roster of devices is hitting a sales ceiling, underscoring why it is crucial for chief executive Tim Cook to deliver the company’s first new products since 2010 to revive growth.

Apple shares dropped after the company reported iPhone sales for the holiday season that missed analysts’ estimates, in what is typically its most lucrative period of the year.

Apple also projected revenue in this period might fall from a year earlier, in what would be the first quarterly sales decline since 2003. Last year Apple posted its first profit drop in more than a decade.

The figures indicate that demand may be ebbing for Apple’s mobile devices – which were once reliable growth engines – as competitors flood in with their smartphones and tablets. Cook said sales in North America were weaker than expected, partly because the cheaper iPhone 5c released last year was not as popular as the higher-end iPhone 5s.

The stagnating growth is putting pressure on the company to release new hit products, be it a wearable computer or a way of paying for things with an iPhone or a television.

“What we have gotten over the last year or so [are] impressive products, but they are really enhancements of current products and not necessarily the next new thing,” Jack Ablin, the chief investment officer with BMO Private Bank, said. “Apple investors want the next new thing – that’s the catalyst that people are waiting for.”

Apple fell 7.8 percent to the equivalent of $507.96 (R5 656) in German trading at 9.16am in Frankfurt yesterday. It had closed at $550.50 in New York on Monday, but lost as much as 9.1 percent in extended trading after the results were released.

For its fiscal first quarter to December, Apple said it sold a record 51 million iPhones, missing analysts’ estimates of 54.7 million handsets. Even after releasing the iPhone through top carrier China Mobile this month, Apple said revenue would be $42 billion to $44bn this quarter, while analysts estimated $46.1bn. Anything short of $43.6bn would amount to a year-on-year sales decline.

Apple’s quarterly profit and revenue still beat projections. Profit last quarter was $14.50 a share, slightly up on $13.81 a year earlier. Sales rose 5.7 percent to $57.6bn. Analysts had predicted profit of $14.07 a share on sales of $57.5bn.

While Apple’s stores were crowded during the festive season, many consumers were seeking cheaper smartphones.

Last year iPhone shipments increased 13 percent, while the broader market rose 41 percent, researcher Strategy Analytics said. Apple’s share fell from 19 percent to 15 percent last year, while Samsung captured 32 percent, the firm said.

Cook said Apple’s sales were growing in emerging markets and new products were coming. – Bloomberg


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