Apple Inc forecast its first revenue drop in 13 years and reported the slowest-ever increase in iPhone shipments as the critical Chinese market showed signs of weakening, suggesting the technology company’s period of exponential growth may be ending.
The slowdown comes as Wall Street analysts worry the company does not have another blockbuster product to replace the iPhone. Apple does not report Watch sales, but it does not appear to have the makings of being a hit on the same level as the iPhone a year after launch.
And while the company is reportedly working on a car, what it plans to do in that area and when are still unclear.
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“It’s disappointing to see them miss on an already downward adjusted sales number and the fact is that with their iPhone growth slowing, what was needed was a product to be excited about,” TD Ameritrade chief strategist J.J. Kinahan said. “Pressure on the shares will continue without a well-defined plan to grow sales or a new product.”
The company on Tuesday said it sold 74.8 million iPhones in its fiscal first quarter that ended on Dec. 26, the first full quarter of sales of the iPhone 6S and 6S Plus. The 0.4 percent growth in shipments was the lowest since the product was launched in 2007.
IPhone sales were expected to fall for the current quarter compared with the same quarter last year, Apple CEO Tim Cook said on a conference call with analysts.
However, suggesting there is still room for growth, 60 percent of people who had an iPhone prior to the launch of the iPhone 6 have yet to upgrade to an iPhone 6 or 6S, Cook said.
Moreover, iPhones remain popular with US consumers. According to a Reuters/Ipsos poll conducted this month, 86 percent of iPhone owners were somewhat or very likely to buy another iPhone.
Of those likely to buy a phone, 15 percent are currently looking to upgrade and 17 percent will when the next iPhone is released. The poll had a credibility interval of 2 percentage points.
While revenue in Greater China rose 14 percent in the past quarter, Apple is beginning to see a shift in the economy, particularly in Hong Kong, Apple chief financial officer Luca Maestri said in an interview.
“As we move into the March quarter, it’s becoming more apparent that there are some signs of economic softness,” Maestri said. “We are starting to see something that we have not seen before.”
Apple forecast second-quarter revenue of US$50 billion to US$53 billion, below analysts’ average forecast of US$55.5 billion. In the same quarter last year Apple reported revenue of US$58 billion.
Apple’s guidance for the March quarter implies iPhone sales of 50 million to 52 million units in the March quarter, which would mark the firm’s first-ever decline in sales of the gadget, FBR Capital Markets & Co analyst Daniel Ives said.
In the same quarter last year Apple sold 61.2 million iPhones.
It reported revenue of US$18.37 billion from Greater China, accounting for 24.2 percent of the total. Sales from the region nearly doubled in the fourth quarter.
Apple’s iPhone shipments fell short of analysts’ expectations of 75.5 million, according to research firm FactSet StreetAccount.
Apple reported earnings of US$3.28 per share, beating the average analyst estimate of US$3.23 per share, according to Thomson Reuters I/B/E/S. Revenue increased 1.7 percent to US$75.87 billion, both records for the company.
Analysts had expected revenue of US$76.54 billion.
The rise in iPhone shipments in the key holiday shopping quarter was the smallest since the second fiscal quarter of 2013, when they rose 6.8 percent, according to data company Statista.
Maestri attributed the lackluster revenue to a strong US dollar, which he said knocked about US$5 billion off the company’s revenue.
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