Apple profits slump

26 Jul

Apple profits slump -

Apple’s iPhone sales were slightly better than expected, Cupertino revealed in a quarterly earnings release, but profits sharply declined.

Apple managed to sell 20 percent more iPhones than the same time last year at 31 million in total – but these were largely bolstered by sales of older models in emerging markets. Other devices did not perform as well at all: iPad sales plunged 14 percent year on year while demand for Macs dropped seven percent.

Analysts expected iPad sales to be around the 18 million mark but fell well short at 14.6 million. Apple blamed this on inventory problems among channel partners and the recent launch of the third generation iPad last year. Competition clearly stepped on Apple’s toes too, but it’s not the sort of company to acknowledge that.

Total profit fell 22 percent to $6.9 billion while revenue was mostly flat at $35.3 billion. Assets were still enormous at $146.6 billion in cash and investments.

Consumers in emerging markets helped bolster iPhone sales – tending to buy older models such as the iPhone 4 rather than the latest iPhone 5. Growth in China, however, had slowed down, particularly as inexpensive local models profligate.

Cupertino believes Q4 revenue will be somewhere between $34 and $37 billion. Analysts’ prior expectations were $37 billion, the Wall Street Journal reports.

In an analyst conference call, chief executive Tim Cook declared there is still opportunity for Apple, including in premium-priced phones. People clearly are buying premium smartphones, but the iPhone is no longer the de facto choice. Android devices finally out evolved the iPhone on all fronts: pricing, appearance, features, spec, and usability.

Cook will have to really impress with the next iPhone, expected October – adding a virtual assistant just won’t do the trick any more. The rumoured cheaper iPhone could help Apple tackle the mid-range market.

Analyst group CCS Insight did not show as much optimism as Apple. In a note, Geoff Blaber, director of devices, said the revenue slowdown was “as expected” but clearly “points to the effects of mounting competition” and a “lack of impetus from new products”.

“The slump in iPad sales will have been a disappointing result, especially since the tablet market is seeing healthy volume growth,” Blaber said. “This plateau in sales shows Apple is suffering from a lack of new product impetus in contrast to the same quarter last year. The sustained shift in consumer preferences to 7 and 8 inch tablets that we are seeing presents a challenge for Apple given the iPad’s margin contribution versus the iPad mini.”

Apple, CCS believes, is desperately in need of positive PR – and that can only be achieved with the usual hype-fest surrounding new products, expected later this year.

But one has to wonder – is Apple’s time at the top almost over? A problem with Cupertino’s arrogance is that people will buy new devices purely because of the brand, but Apple does not seem to have realised there are other players on the branding war, and they’re doing rather well indeed.

On the contrary, a recent Apple ad campaign was?widely slammed for being “depressing”.?


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