Apple suffers as customers wait on new iPhone
Apple blamed customers waiting for the the next iPhone for a drop in sales that contributed to lower-than-expected revenues.
The news was not the sort of welcome the company would have wanted for its Mountain Lion OS, which officially arrives today, and was a rare glitch for a company that has generally outperformed investor expectation in recent years.
Although the company posted improved revenues from the same period last year, $35 billion, it was $2bn below market expectations, sending shares crashing by 5%.
Apple blamed the shortfall on muted consumer purchases in Western Europe and a pause in demand as consumers wait for a new iPhone model that many expect will be launched this autumn.
It really is the iPhone company. The iPad is not strong enough to beat numbers
“Clearly it was a disappointment,” said Channing Smith, Co-Manager of Capital Advisors Growth Fund. “We expected a lot of consumers will probably delay their upgrade and their purchases until the iPhone 5 comes out. We saw a similar trend occur last year with the iPhone 4S.”
From April to June, Apple shipped 26 million iPhones, well below the 28 million to 29 million that Wall Street analysts had predicted, even taking into account a pause in buying ahead of the upcoming iPhone. It was a far cry from the 35.1 million that moved in the March quarter.
“Apple is in that rarest of all positions where the Street will punish them for anything less than an excess of success,” CCS Insight analyst John Jackson said. “If there’s a positive spin on the iPhone story, it is one of latent demand.”
Apple has a lot riding on its next iPhone, the product that yields more than half its revenue and helps shore up overall margins.
Apple has seen Samsung – now the world’s largest seller of smartphones – and other handset manufacturers using Google’s Android software chip away at its market share.
As consumers wait for the new iPhone, Samsung’s Galaxy is expected to keep chalking up robust numbers. Analysts say profit from Samsung’s mobile division is likely to have more than doubled from a year ago, with sales of around 50 million smartphones in the same quarter.
Fans are expecting Apple to launch a completely redesigned phone that has a bigger screen, rather than just add or change a few features as it did with the current model.
The iPhone sales were partly offset by robust sales of the iPad – 17 million in the fiscal third quarter, above expectations. Apple also sold four million Mac computers, the same as in the previous quarter.
“It really is the iPhone company. The iPad is not strong enough to beat numbers,” said BGC Partners analyst Colin Gillis. “The iPhone 5 is already the most hyped device and for it to exceed expectations is going to be really hard.”