Apple Profit Probably Fell For The First Time In A Decade


Tim Cook, Phil Schiller and others sold Apple stock at a time when it was hitting record highs.
Tim Cook, Phil Schiller and others sold Apple stock at a time when it was hitting record highs.

Apple’s quarterly profit probably fell for the first time in over a decade, thanks to new products with lower profit margins and a slowing demand for the iPhone, Bloomberg reports. Fourteen analysts have reduced their estimates for Apple in recent weeks, and on Friday, the Cupertino company’s share price fell below $400 for the first time since December 2011.

Apple will announce its second quarter results during an earnings call on Tuesday, and analysts predict that net income will have declined 18% to $9.52 billion, or $10.02 a share, over the three-month period. Revenue, however, is expected to show a small 8% rise to $42.4 billion, signaling Apple’s slowest period of growth since 2009.

“The market is in show-me mode for Apple,” said Laurence Balter, an analyst at Oracle Investment Research. “The market needs to see some evidence that the future looks bright because that candle is flickering.”

Katy Huberty, an analyst at Morgan Stanley, believes Apple may announce a dividend increase or boost share buybacks during its earnings call in an effort to placate investors. Bloomberg reports that the current quarterly dividend could rise by 17% to about $3.10 a share, based on Apple’s projected earnings and the amount of cash it has in reserve.

At the end of December, that figure stood at $137.1 billion.

Apple “probably” sold 35.4 million iPhones in the last quarter, Bloomberg reports, compared with 35.1 million a year earlier. Over the next three months that figure is expected to fall again to 25 million units. The fall in demand is being attributed to increased competition from the likes of Samsung.

“Things have changed for Apple,” said Alex Gauna, an analyst at JMP Securities in San Francisco. “The competition is more intense.”

The weakening demand is also being felt by Apple’s Asian suppliers. Earlier today, it was reported that many were trying to become less reliant on Apple as sales of the iPhone begin to fall, while Foxconn reported its biggest revenue slide in over 13 years earlier this month.

Some analysts feel Apple’s focus on secrecy isn’t helping the company, because shareholders don’t know what to expect in the months ahead. Rumors have suggested the company may launch a new low-cost iPhone, an iWatch, and maybe even a television set. But none of this has been confirmed.

“Nobody believes the secret anymore,” Balter said. “It was OK when Steve Jobs would say we have some great things in the product line, but right now that credibility has been lost.”

However, Mark Moskowitz, an analyst at JP Morgan Chase, isn’t too concerned with Apple’s share price. He believes the reason why Apple isn’t building the same anticipation for new devices that we normally see around this time of year is because it launched its latest iOS devices just last fall.

It’s also worth noting that analysts are good at underestimating Apple. The company has exceeded predictions in all three quarters since 2003, Bloomberg reports.

Source: Bloomberg

  • AppleInvestor

    The post should be entitled simply… “Probably”

  • gted

    One significant factor affecting Apple’s bottom line and stock price is lack of expectation of new products, not just performance bump-ups but “the next big thing” Steve Jobs was working on coming in June (or August or October). We’ve had no next big things for too long a spell, suggesting Apple is losing its “next big thing” appeal. I’m turned off myself by this and I’m a dedicated Mac-only user since 1985. If the next big thing comes from Samsung or Google or Facebook instead of Apple I will be cruelly disappointed and may think about switching horses myself. Who wants to be yesterday’s next big thing?!

  • Ianthetechman

    I totally love apple products but even i find myself becoming a little bored with iphone and think apple could do with a massive design overall to keep the loyal fans happy and gain some potential new customers.
    I would hate to have to move over to a different platform just to stay current, And i absolutely shudder at the thought of having to use a android phone ! But there is only so many little changes i am gonna keep accepting and buying new devices. The last three generations of the iphone have been extremely close in design and overall experience so i am really hoping apple can bring something a little new to the table next time and surprise us instead of another iphone 5 with tiny little upgrades to the camera etc.