Adam Satariano San Francisco

APPLE chief executive Tim Cook is feeling the heat.

Eighteen months after taking over from Steve Jobs, Cook is facing rising production costs, competition from Samsung Electronics and slowing growth in smartphones, threatening profits for the world’s most valuable company.

An earnings report today may show that fiscal first-quarter net income slipped 2 percent from a year earlier to $12.8 billion (R113.5bn), or $13.48 a share, according to analysts’ estimates compiled by Bloomberg. In all except one quarter since 2003, profit has jumped more than 10 percent. Analysts project sales will rise 18 percent to $54.8bn, the slowest growth rate since 2009.

Apple’s shares have dropped almost 30 percent since September last year, erasing about $190bn in market value, on concern that demand for iPhones and iPads is ebbing.

Cook overhauled most of the company’s product line ahead of the holiday shopping season, and results for the period will show for the first time whether the effort paid off.

“Sentiment could not be worse,” said Peter Karazeris, an analyst at Thrivent Financial.

Apple often reports results that surpass even the most optimistic projections, and the company could possibly do so again today. The company has exceeded analysts’ estimates for earnings in all but three quarters since at least 2006.

Yet, in a sign that investors are turning more bearish on Apple, the company is trading at a 52 percent discount to the Nasdaq Composite index on a price-to-earnings basis, a spread that has widened from a 20 percent discount last October.

Apple hit a record high of $705.07 on September 21. It rose less than 1 percent to the equivalent of $501.04 in Frankfurt yesterday morning, after closing at $500 in New York on Friday.

Many analysts have reduced their estimates amid signs, such as a drop in component purchases, that demand may be weakening for the iPhone, which accounts for more than half of Apple’s sales and profit. In the past three months, analysts’ median profit prediction for Apple for fiscal 2013 has declined 7.5 percent to $46.3bn.

In January 2012, Apple posted record first-quarter results, generating $13.1bn in profit on sales of $46.3bn.

One potential reason for the decline is the increasing prevalence of smartphones worldwide, especially in developed countries, meaning growth is slowing as the market becomes saturated.

Apple probably sold about 48 million iPhones during the quarter, analysts predict. They forecast sales of 22.4 million iPads, including both the iPad mini and the larger screen model, and 5.1 million Macs.

Six years after the iPhone debuted and almost three years after the iPad’s launch, many investors are asking where Apple’s next growth area will be.

One possibility is in developing countries such as China, where Apple is considering introducing a lower-cost iPhone, according to some sources.

Barclays analyst Ben Reitzes said Apple had the potential to generate new sales if it introduced a more comprehensive television product linked to the iPhone and iPad. – Bloomberg