Apple revenue, iPhone sales disappoint; shares dive

SAN FRANCISCO Wed Jan 23, 2013 6:47pm EST

1 of 2. The Apple logo is pictured at the company's flagship retail store in San Francisco, California January 23, 2013. Apple results are due after market closes around worries about the profit potential in the tech sector, increased amid questions about waning demand for Apple Inc products and a weak outlook from Intel Corp last week.

Credit: Reuters/Robert Galbraith (UNITED STATES - Tags: BUSINESS LOGO)

SAN FRANCISCO (Reuters) - Apple Inc missed Wall Street's revenue forecast for the third straight quarter as iPhone sales came in below expectations, fueling investors' worries that its dominance of the mobile industry was slipping.

Shares of the world's largest tech company fell 10 percent to $463 after-hours, wiping out some $50 billion of its market value from its $514 close.

On Wednesday, Apple said it shipped a record 47.8 million iPhones in the December quarter, up 29 percent from the year-ago period but below the 50 million shipments that analysts on average had expected.

"It's going to call into question Apple's dominance in the space. It's still one of the strong players, the others being Samsung and Google. It's still a two-horse race, but Android continues to grow rapidly," said Sterne Agee analyst Shaw Wu.

"If you step back a bit, it's clear they shipped a lot of phones. But the problem is the high expectations that investors have. Apple's conservative guidance highlights the concerns over production cuts coming out of Asia recently."

Apple projected revenue of $41 billion to $43 billion in the current, second fiscal quarter, lagging the average Wall Street forecast of more than $45 billion.

Fiscal first quarter revenue rose 18 percent to $54.5 billion, below the average analyst estimate of $54.73 billion, though earnings per share of $13.81 beat the Street forecast of $13.47, according to Thomson Reuters I/B/E/S.

Apple also undershot revenue targets in the previous two quarters, and these results will prompt more questions on what Apple has in its product pipeline, and what it can do to attract new sales and maintain its growth trajectory, analysts said.

Net income of $13.07 billion was virtually flat with $13.06 billion a year earlier.

CHINA IS BRIGHT SPOT

Investors' expectations heading into the results had already been subdued by news of possible production cutbacks by some component suppliers in Asia, triggering fears that demand for the iPhone, which accounts for half of Apple's revenue, and the iPad could be slowing.

Apple shares are down nearly 30 percent from a record high in September, in part on worries that its days of hyper growth are over and its mobile devices are no longer as popular.

Intense competition from Samsung's cheaper phones - powered by Google's Android software - and signs that the premium smartphone market may be close to saturation in developed markets have also caused a lot of investor anxiety.

Meanwhile, sales of the iPad came in at 22.9 million in the fiscal first quarter, roughly in line with forecasts.

On the brighter side, Chief Financial Officer Peter Oppenheimer told Reuters that iPhone sales more than doubled in greater China - a region that Apple Chief Executive Tim Cook has vowed to focus on as its next big growth driver.

The company will begin detailing results from that country.

"These results were OK, but they definitely raised a few questions," said Shannon Cross, analyst with Cross Research. "Gross margin trajectory looks fine so that's a positive and cash continues to grow. But I think investors are going to want to know what Apple plans to do with growing cash balance."

"And other questions are going to be around innovation and where the next products are coming from and what does Tim Cook see in the next 12 to 18 months."

(Reporting By Poornima Gupta; Editing by Bernard Orr)

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Comments (13)
JonChile wrote:
Well, I’m no economist, but I guess it’s Wall Street’s predictions that are causing the problem. What if they just let companies do their own thing? Then maybe the Stock Market wouldn’t go berserk. Blame the predictors. They don’t have to produce the “results” they come up with from without.

Jan 23, 2013 5:02pm EST  --  Report as abuse
timebandit wrote:
The only thing dumber than Apple analysts is the dog stuff you scrape off your shoe.
Cripes, the company is selling everything it makes, as fast as it can crank ‘em out. Profit margins are nearly 40%. It just began last month selling in more than 100 countries, for the first time ever, up from 22. Estimates are just that and are based on the past, which often fall short, regardless. Reality – the present and future – is what investors look to. Apple has done nothing for 5 years but grow like a screaming bullet train in the night. What this earnings report tells me is that profit margins will likely come down a bit in the future in order to broaden market share to include the even larger mass of consumers who are willing to buy an Apple product for a few bucks less than current admittedly sky high prices.

Jan 23, 2013 5:41pm EST  --  Report as abuse
timebandit wrote:
The only thing dumber than Apple analysts is the dog stuff you scrape off your shoe.
Cripes, the company is selling everything it makes, as fast as it can crank ‘em out. Profit margins are nearly 40%. It just began last month selling in more than 100 countries, for the first time ever, up from 22. Estimates are just that and are based on the past, which often fall short, regardless. Reality – the present and future – is what investors look to. Apple has done nothing for 5 years but grow like a screaming bullet train in the night. What this earnings report tells me is that profit margins will likely come down a bit in the future in order to broaden market share to include the even larger mass of consumers who are willing to buy an Apple product for a few bucks less than current admittedly sky high prices.

Jan 23, 2013 5:41pm EST  --  Report as abuse
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