Supply chain woes cost Apple Inc US$6 billion in sales during the company’s fiscal fourth quarter, which missed Wall Street expectations, and chief executive Tim Cook said that the impact is likely to be worse during the current holiday sales quarter.
Cook on Thursday said that the quarter that ended on Sept. 25 had “larger than expected supply constraints” as well as COVID-19 pandemic-related manufacturing disruptions in Southeast Asia.
While Apple had seen “significant improvement” this month in those facilities, the chip shortage has persisted and is now affecting “most of our products,” Cook said.
“We’re doing everything we can do to get more [chips] and also everything we can do operationally to make sure we’re moving just as fast as possible,” he said.
Cook said the company expects year-on-year growth for its quarter ending in December. Analysts expect growth of 7.4 percent to US$119.7 billion.
“We’re projecting very solid demand growth year-over-year, but we are also predicting that we’re going to be short of demand by larger than US$6 billion,” Cook said.
Shares of the California-based company, which had risen nearly 15 percent this year, fell 3.4 percent in extended trading on Thursday. The dip could make Microsoft Corp the world’s most valuable company after a run-up in Microsoft shares on the strength of its cloud computing business.
Apple’s results were mixed in a fiscal fourth quarter seen as a lull before the high-sales holiday end of year.
Apple said that revenues and profits for the fiscal fourth quarter were US$83.4 billion and US$1.24 per share, compared with analyst estimates of US$84.8 billion and US$1.24 per share, data from Refinitiv showed.
The results were a rocky end to a fiscal year of above-expectations sales led by its iPhone 12 models, and strong sales of Mac computers and iPads for working and learning from home during the COVID-19 pandemic.
Apple told investors in July that chip constraints would start to hit its iPhone and iPad lineups for the first time in the fourth quarter.
Apple has “managed to navigate the problems fairly well, but hasn’t escaped unscathed, and an extended duration of these problems is likely to spell trouble, especially because the market is unforgiving when it comes to Apple’s performance,” Hargreaves Lansdown equity analyst Sophie Lund-Yates said.
Apple missed expectations in two key categories.
Fourth-quarter iPhone sales were US$38.9 billion, short of estimates of US$41.5 billion, Refinitiv data showed.
Cook said that chips made with older technology remain the key supply constraint. He said that Apple remains unsure whether the shortages are to ease after the holiday shopping season.
“It’s very difficult to call,” Cook said.
The company’s accessories segment, which contains fast-growing categories like its AirPods wireless headphones, came in at US$8.8 billion, half a billion dollars lower than analyst expectations of US$9.3 billion, the data showed.
Other segments fared better. Sales for iPads and Macs were US$8.3 billion and US$9.2 billion, compared with analyst estimates of US$7.2 billion and US$9.2 billion, the data showed.
The company’s services segment — which contains its App Store business — had sales of US$18.3 billion, up 26 percent, compared with analyst expectations of US$17.6 billion. Cook said that Apple now has 745 million paid subscribers to its platform, up from 700 million a quarter ago.
“Services were strong, and it shows the beauty and durability of software and services, as there are better margins and no supply issues, since software doesn’t arrive on a container ship,” said Hal Eddins, chief economist at Apple shareholder Capital Investment Companies.
Another bright spot in the company’s results was its sales in China, up 83 percent to US$14.6 billion.
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