Oct 27 Apple Inc's iPhone sales and
revenue forecasts, due to be released on Monday, may offer clues
as to whether its low-cost 5C model missed the mark or whether
the world's largest tech company can continue its run of
Signs have emerged that demand for the cheaper model is
lagging the top-tier iPhone 5S - both of which went on sale in
September - because its $100 discount is proving to be
insufficient to motivate emerging market and price-conscious
But some analysts say the concerns are overblown and that a
greater proportion of iPhone 5S shipped, translates into better
margins and earnings overall.
Apple will be reporting results just a week after taking the
wraps off an incrementally improved iPad Air. But it is the
iPhone, which accounts for more than half the company's profit
and is its highest-margin gadget, that takes center stage.
Apple is expected to report sales of 33 million to 36
million iPhones in its fiscal fourth quarter that ended in
September, rising to more than 50 million in the typically
strong holiday quarter - the first full quarter of sales of the
two new phones.
"Media reports of 5C production cuts are misleading, in our
view, given what we think has been strengthening overall 5S/5C
production with 5S vectors continuing to strengthen even real
time," Timothy Arcuri, an analyst at Cowen & Co, said in a
Apple has come under pressure over the past year or two to
bolster sales of its iPhones and iPads as perennial rival
Samsung Electronics and cheaper gadgets based on
Google Inc's Android software chip away at its
once-leading market share.
Its stock has gained 12.5 percent since August, when
famously aggressive activist investor Carl Icahn disclosed a
large position in the iPhone maker and began making calls for a
new, stepped-up $150 billion share buyback program - boosting
hopes of a bigger return of cash to shareholders than
anticipated. [ID: nL1N0IE0Y5]
But the stock is still down about 1 percent this year,
vastly underperforming the S&P 500's 23 percent gain.
Longer-term, investors wonder whether the company that
revolutionized the cellphone industry and popularized the tablet
computer has another groundbreaking device left in it.
Analysts say it will take a genuinely new device - like the
oft-rumored smartwatch or some sort of TV - to revive the stock.
Investors also hope that Apple will seal a deal to sell phones
through China Mobile Ltd, gaining access finally to
the country's largest telecoms operator.
"We do see fewer positive catalysts for the stock as the
company finishes its annual product line refresh," Colin Gillis,
an analyst at BGC Financial, said in a Friday note to clients.
Apple is expected to have moved 15 million iPads in the
September quarter, which would be an increase of 1 million over
the year-ago quarter.
A month ago, on the back of strong initial sales of its new
iPhones, Apple polished its fiscal fourth-quarter financial
forecast, saying it expected revenue toward the high end of its
previous forecast for $34 billion to $37 billion.
Investors will also look at Apple's December quarter
forecasts - once ludicrously conservative but now a better
indication of management's expectations - for an idea of the
company's holiday-quarter hopes.
Apple is cutting production orders for the plastic-backed,
multi-hued model just a month after launch, a source familiar
with its supply chain said a week ago, fueling speculation its
discount to the 5S may not be enough to drive demand during the
crucial shopping season.
Pegatron Corp, which assembles the model, had seen
orders reduced by less than 20 percent, said the source, who
asked not to be identified because the information is sensitive.
Hon Hai Precision Industry Co, another major assembly
contractor for the 5C, had its orders for the same period
reduced by a third, the Wall Street Journal reported.
Beyond holiday projections, analysts want evidence on Monday
that profit margins can be sustained as the competition
intensifies, and evidence of its ability to innovate.
Wall Street is expecting fiscal fourth-quarter revenue of
$36.8 billion, up from $36 billion a year ago, and earnings per
share of $7.93, down from $8.67 a year ago, as profit margins
come under pressure.