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Apple shares fall on flat earnings report, as firm warns of weaker sales ahead Apple shares fall on flat earnings report, as firm warns of a revenue slowdown ahead
(about 2 hours later)
Apple reported flat earnings in line with analyst expectations on Monday afternoon but fell short of anticipated sales of its iPhone and iPad over the 2013 holiday season, despite breaking quarterly records. Sales of Apple’s iPhone hit record levels again during the holiday season, the company reported Monday, but they still managed to miss analysts’ expectations amid flat profits and stiff competition in the smartphone market.
The company also cautioned that it is due for a sales slowdown -- a warning in line with other top smartphone firms for the coming year -- sending stocks down about 5.7 percent in after-hours trading Apple also cautioned that it is due for a slowdown in revenue, helping send its stock down nearly 8 percent in after-hours trading. The company said it forecasts between $42 billion and $4 billion in revenue in the next quarter, well below analysts’ expectations of about $46 billion.
Investors were also disappointed by conservative guidance of $42 billion from the firm for the next quarter, far below the consensus estimate of $46 billion. For its fiscal first quarter, which ended Dec. 28, the firm reported earnings per share of $14.50 on $57.6 billion in revenue, slightly better than consensus estimates of $13.47 per share on $57.5 billion in revenue.
Apple reported earnings per share of $14.50 on $57.56 billion in revenue in the December quarter, slightly ahead of consensus estimates of $13.47 per share on $57.46 billion in revenue. The company’s stock fell to $519.02 per share after closing bell. Colin Gillis, an analyst at BGC Financial, downgraded the firm from buy to hold on Monday, saying that while the technology giant has strong potential in markets such as wearable technology and mobile payments, it has to move quickly into those spaces. “Apple is lagging” in critical growth areas and not making full use of assets such as iTunes, he said.
“We are really happy with our record iPhone and iPad sales, the strong performance of our Mac products and the continued growth of iTunes, Software and Services,” said Tim Cook, Apple’s chief executive officer. Despite hitting a record, iPhone sales of 51 million during the quarter were below the 54 million expected. It also sold 26 million iPads, in line with analysts’ expectations.
The firm sold 51 million iPhones and 26 million iPads in the December quarter. Both figures set all-time quarterly sales records, but iPhone sales came in slightly below consensus estimates of around 54 million. Apple chief executive Tim Cook said that sales may have been slightly softer than expected because the firm miscalculated demand for its new iPhone 5c, a plastic-backed, slightly cheaper smartphone aimed at the mid-range of the market. Customers were more interested, he said, in the high-end iPhone 5s, which sports a fingerprint sensor, and Apple needed some time to adjust to those demands.
The warning of a future slowdown shows that Apple is facing stiff competition as more advanced smartphone markets around the world hit saturation points. “It took some time to build the mix that customers were demanding,” he told analysts on the company’s earnings call.
Top rival Samsung has seen its shares fall, as the pace of its smartphone sales is already starting to fade. The Korean tech giant reported a smaller-than-expected profit for its mobile division and cautioned that demand was likely to continue to be soft in the coming year. Still, Apple’s warning of a revenue slowdown reflect the stiff competition it is facing in the smartphone market. Apple’s iPhone sales grew 7 percent during the last year, while the smartphone market grew 14 percent, analysts often note. Rival Samsung is also facing a tough market, reporting a smaller-than-expected profit for its mobile division last week and cautioning that demand was likely to remain soft in the coming year.
Worldwide, Google’s Android mobile operating system has made gains in market share across the world, according to a report from technology analysis firm Kantar Worldpanel ComTech. Apple, while maintaining a strong share in the United States, Great Britain and China, has lost share in most countries compared with the same period of time last year. Analysts have been pushing Apple to chase after the growing lower end of the market to pick up price-conscious, first-time smartphone buyers — a driving force behind the introduction of the iPhone 5c.
Colin Gillis, analyst at BGC Financial, downgraded the firm from buy to hold on Monday, saying that while the technology giant has strong potential in markets such as wearables and payments, it has to move quickly into those spaces. But just as pressing, Gillis said, is the company’s need to “introduce new products to its customer base.”
Analysts widely expect the company to jump into the wearables market with a watch or similar device in the next two years; there is also regular speculation that the firm will launch a television or TV accessory. Apple is widely expected to jump into the wearable devices market with a watch or similar item within the next two years; there is also regular speculation that the firm will launch a television or TV accessory.
Gillis suggested “that Apple is lagging” in critical growth areas and not making full use of assets, such as iTunes. He did not suggest, as others have, that Apple needs to chase after the growing lower end of the market to pick up more the price-conscious, first-time smartphone buyers — a driving force behind the introduction of the iPhone 5c. Apple will need a major new product if it wants to revive its stock price, said Pacific Crest Securities analyst Andy Hargreaves.
Instead, Gillis said, the firm needs to “introduce new products to its customer base.” Apple’s recent deal with China’s largest carrier, China Mobile, is likely to boost sales for the iPhone and iPad in that market, Hargreaves said, but “a massively profitable new product is necessary to renew growth and drive upside to our estimates.”
Pacific Crest Securities analyst Andy Hargreaves said much of the same in his note to investors: that Apple will need a major new product if it wants to see strong stock growth. Cook has hinted that Apple has some new products in the pipeline for 2014, but he remained characteristically tight-lipped Monday about what those might be.
Apple’s recent deal with China’s largest carrier, China Mobile, is likely to boost sales for the iPhone and iPad, Hargreaves said, but “a massively profitable new product is necessary to renew growth and drive upside to our estimates.” He said Apple will invest effort only in the most promising products. “The challenge is always to focus on the very few that deserve all of our energy,” Cook said. “We’ve always done that and we’re continuing to do that.”
Apple chief executive Tim Cook has hinted that Apple has some new products in the pipeline for 2014, but has remained characteristically tight-lipped about what those might be.
“We love having the most satisfied, loyal and engaged customers, and are continuing to invest heavily in our future to make their experiences with our products and services even better,” Cook said in a statement.
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