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Apple's growth lower than expected

More consumers are buying the least expensive versions of Apple's iPhones and iPads, a new phenomenon that is causing the company's breakneck growth rate to slow.

Apple revealed that both revenue and net income posted increases of just over 20% - cause for celebration at most companies, but meagre by Apple standards. Apple's growth was the slowest in more than two years and failed to meet analyst expectations.

Net income in Apple's fiscal third quarter was 8.8 billion US dollars (£5.67 billion), or 9.32 dollars (£6) per share. That was up 21% from 7.3 billion dollars (£4.71 billion), or 7.79 dollars (£5) per share, a year ago. Analysts polled by FactSet were expecting earnings of 10.37 dollars (£6.69) per share.

Revenue at the California company was 35 billion dollars (£22.58 billion), up 23%. Analysts were expecting 37.5 billion dollars (£24.19 billion). Apple routinely blows past analyst expectations. It has only come in under their earnings expectations twice in 10 years.

Investors sold off Apple shares, but the reaction was muted compared with the earnings miss. Apple shares fell 31.92 dollars (£20.59), or 5.3%, to 569 dollars (£367) in after-hours trading, after the release of the results.

It was not so much the volume of sales that disappointed: Apple sold 17 million iPads in the April to June period, beating expectations, and 26 million iPhones, at the low end of expectations. But Apple's average selling prices for the gadgets declined to levels last seen in 2010 for the iPhone and the lowest levels ever in the case of the iPad.

Part of the reason was that consumers bought less expensive versions of the devices, said Apple's chief financial officer Peter Oppenheimer. Apple introduced a new iPad in March, but kept the older model in stores while cutting its price.

The strengthening dollar also meant that overseas sales at constant prices translated into fewer dollars for Apple.

Sales in China, which have been a growth engine for the company, also declined compared with the previous quarter. CEO Tim Cook said that was because the iPhone 4S went on sale in China during the quarter that ended in March, and the company stocked inventories in the country. Mr Cook said he did not see any effect of the economic slowdown in China. The troubles in Europe were evident, however. Sales to the continent grew just 16%.

Mr Cook also blamed the tepid iPhone sales - up 28% from a year ago, but down from the previous quarter - on anticipation building for the next iPhone model. Apple has not said when it is arriving, but most company watchers now expect it in October.

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