Apple fans pause on buying iPhones

In this file photo, Lisa Gao compares a new jet black iPhone 7, right, with her iPhone 6 at the Apple Store in Chicago. AP Photo/Kiichiro Sato

In this file photo, Lisa Gao compares a new jet black iPhone 7, right, with her iPhone 6 at the Apple Store in Chicago. AP Photo/Kiichiro Sato

Published May 3, 2017

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San Francisco - Apple reported falling iPhone

sales, highlighting the need to deliver blockbuster new features in the

next edition of the flagship device if the company is to fend off rivals like

Samsung Electronics.

Investor confidence has been mounting ahead of a major

iPhone  revamp due later this year. Yet competitors released new high-end

smartphones recently, putting pressure on Apple to deliver a device that’s

advanced enough to entice existing users to upgrade and lure new customers.

Apple sold 50.8 million iPhones in the quarter ended

April 1, down from 51.2 million units in the same period a year earlier, and

less than the 51.4 million predicted in a Bloomberg survey of analysts. 

"We’re seeing what we believe to be a pause in

purchases of iPhone, which we believe are due to the earlier and much more

frequent reports about future iPhones," Apple CEO Tim

Cook said during a conference call with analysts.

In the past, Apple changed the basic shape of the iPhone

about every two years. The iPhone 7, unveiled in September, had similar form

and features to its predecessor, extending the cycle to three years. That may

have encouraged more customers to delay purchases.

Apple stock slipped almost 2 percent in extended trading.

The shares have jumped 27 percent this year and closed at a record Tuesday on

anticipation of an iPhone 8 launch in the fall for the 10th anniversary of the

device. The company has tested a new type of screen, curved glass, stainless

steel materials, new cameras and augmented-reality features.

"We agree with the market that a bet on shares of

Apple is a bet on the company’s ability to transition from their existing

iPhone platform to an augmented reality-driven platform in the future,"

said Gene Munster, co-founder of Loup Ventures and a former veteran Apple

analyst.

Read also:  Apple has enough cash to buy Chevron

Apple had $257 billion in cash and equivalents at the end

of the quarter. The company said it will return more of that to shareholders,

announcing $50 billion in new buybacks and a 63-cent dividend. Analysts had

forecast 62 cents, up from the 57 cents paid in its 2016 fiscal year. The

company had already announced $175 billion in repurchases, helping maintain the

stock price in lulls between new products.

The Cupertino, California-based company also forecast

$43.5 billion to $45.5 billion in revenue for the current quarter, below

analysts’ estimates of $45.7 billion.

New iPhone

Much is riding on the success of the next iPhone.

Smartphone sales growth has been slowing and Apple has lost market share in

China, a major source of growth before last year, amid increased competition

from local rivals.

"Chinese vendors such as Huawei, Oppo and Vivo

continue to make life really hard for Apple in the region," John Butler, a

Bloomberg Intelligence analyst, said.

Still, in the fiscal second quarter China revenue

fell 14 percent -- less precipitously than last year.

“We expect our performance in China to continue to

improve as we go through the year," Chief Financial Officer Luca Maestri

said in an interview.

Apple benefited from Samsung’s recall of its Galaxy S7

smartphone last year, but the South Korean company followed up with the

introduction of the well-reviewed Galaxy S8 in April. If S8 sales are strong,

that may mean fewer new customers for the new iPhone and the services

businesses that feed off the device.

Cook has repeatedly sought to highlight Apple’s services,

the fastest growing part of the company last year. Sales of offerings like

iCloud, the App Store and Apple Music grew 18 percent to $7.04 billion in the

quarter. Maestri said the company aims to double annual services revenue

by 2020.

Apple’s offshore cash reserves climbed to $240 billion at

the start of April, according to the CFO. Cook’s plans for that money have come

under increasing focus after President Donald Trump proposed slashing the

corporate tax rate on repatriated funds. Maestri said it was too early to say

how Apple might spend any cash it brings home.

BLOOMBERG

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