Apple Inc’s quarterly profit is projected to shrink for the first time in a decade, hurt by new products with lower profit margins and slower growth in iPhone sales.
Fourteen analysts have reduced their estimates for Apple in the past four weeks, as shares in the world’s most valuable technology company continue their slide from a September record high. Competition from Samsung Electronics Co is also weighing on the stock, and pressure is mounting for chief executive officer Tim Cook to introduce hit products to reignite sales.
An earnings report today may show that fiscal second-quarter net income declined 18 percent to US$9.53 billion, or US$10.02 a share, according to analysts’ estimates compiled by Bloomberg. Revenue is projected to show a rise of 8 percent to US$42.4 billion, the slowest growth rate since 2009.
“The market is in show-me mode for Apple,” said Laurence Balter, an analyst at Oracle Investment Research who is based in Fox Island, Washington, and has a “buy” rating on Apple. “The market needs to see some evidence that the future looks bright because that candle is flickering.”
To placate investors, Apple may increase its dividend or boost share buybacks. Katy Huberty, an analyst at Morgan Stanley, said an announcement may come with the earnings release. Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co, predicts it will come later.
Apple may raise its current quarterly dividend by 17 percent to about US$3.10 a share, according to a Bloomberg estimate, based on payouts of other large technology firms, Apple’s projected earnings and the amount of cash it holds.
Apple’s profit margins have been squeezed by higher component costs and the introduction of lower-priced products such as the iPad mini. The company probably sold 35.4 million iPhones in the latest quarter, compared with 35.1 million a year earlier, according to estimates compiled by Bloomberg.
The slide comes as Samsung prepares to start selling its Galaxy S4 smartphone this week. The South Korea-based company is Apple’s biggest rival and has challenged the iPhone’s dominance by selling a slew of handsets with different styles, screen sizes and prices.
Evidence of weakening demand has been trickling out from Apple’s suppliers. Hon Hai Precision Industry Co (鴻海), which manufacturers the iPhone and iPad in China, reported its biggest revenue slide in at least 13 years this month. Cirrus Logic Inc, a maker of chips, reported an inventory glut that suggested slowing iPhone sales. Verizon Wireless also reported last week that it sold 2 million iPhone 5s, weaker than some analysts had predicted.
Investors sent the stock below US$400 last week, the first time it has traded below that level since December 2011. Apple shares fell less than 1 percent to US$390.53 on Friday, leaving the stock down 45 percent from a September record high.
Apple’s devotion to keeping details of products secret before they are unveiled has contributed to shareholder concerns, Balter said. While a new television product and watch-like wearable computer are possible, investors are not showing faith in the post-Steve Jobs management team to come up with a breakthrough gadget, he said.
“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.”
Nonetheless, the company remains the most profitable in the technology industry. Apple’s projected quarterly profit is more than what Google Inc and Microsoft Corp reported last week combined. In the smartphone market, Apple accounted for about 70 percent of all profits last year, according to Canaccord Genuity.
Investing in Apple by weighing its continued profitability against slowing growth and declining shares is a classic “falling knife” dilemma, according to Alex Gauna, an analyst at JMP Securities in San Francisco.
“The people who are brave enough to catch a falling knife properly, at the bottom of a decline like this, tend to be rewarded,” Gauna said. “Those who try to catch it too early will lose a finger.”
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day
Thousands of parents in Singapore are furious after a Cordlife Group Ltd (康盛人生集團), a major operator of cord blood banks in Asia, irreparably damaged their children’s samples through improper handling, with some now pursuing legal action. The ongoing case, one of the worst to hit the largely untested industry, has renewed concerns over companies marketing themselves to anxious parents with mostly unproven assurances. This has implications across the region, given Cordlife’s operations in Hong Kong, Macau, Indonesia, the Philippines and India. The parents paid for years to have their infants’ cord blood stored, with the understanding that the stem cells they contained