Apple results disappoint putting CEO under pressure to innovate

Apple missed Wall Street's target for iPhone sales over the crucial holiday shopping season and offered a weaker-than-expected forecast for this quarter, sending its shares down 6 per cent after hours yesterday.

Apple said that it sold a record 51 million iPhones for its fiscal first quarter ended December 28th, falling short of analysts’ estimates of 54.7 million handsets. The company also said revenue will be $42 billion to $44 billion in the current quarter, with gross margins of 37 per cent to 38 per cent. Analysts had predicted sales of $46.1 billion and a margin of 37.3 per cent.

The iPhone sales over the holidays indicate that demand may be ebbing for new models of the high-end smartphone -- which is Apple’s primary revenue source -- as competitors flood in with new handset and tablet offerings. The numbers are highly anticipated by Apple’s investors because the end-of-year shopping season is usually the company’s most lucrative period.

“There’s a perception problem that they aren’t innovating,” said Brian Blair, an analyst at Wedge Partners Corp. in New York. “That’s why new product announcements will be so critical this year.”

Profit was $13.1 billion, or $14.50 a share, for the quarter, little changed from $13.1 billion, or $13.81 a share, a year earlier, Cupertino, California-based Apple said. Sales rose 5.7 per cent to $57.6 billion.

Apple chief executive officer Tim Cook is under pressure to boost financial results that have stagnated without the introduction of an entirely new product since the iPad's debut in 2010. In its last fiscal year, the company posted its first annual profit decline in at least a decade.

Apple's forecast for the current quarter also raised questions as they offer a glimpse of how sales are faring after the release earlier this month of the iPhone on China Mobile Ltd.

"The revenue guidance is a little bit lower than what everybody expected," said Laurence Balter, chief market strategist at Oracle Investment Research, who has the equivalent of a buy rating on Apple shares.

Yet he said “the good thing is the margins came in good, the revenue came good, the profits came in solid.” Sales last quarter were fueled by the iPhone 5s and 5c, as well as the iPad Air and iPad mini, which all made their entrances in time for the holiday rush. The new iPhones were available in 100 countries by the end of 2013.

Apple sold 26 million iPads compared with analysts’ estimates for 25 million units.

Apple’s sales in the Americas region fell 1 per cent to $20.1 billion, while sales in greater China rose 29 per cent to $8.84 billion.

Apple also declared a cash dividend of $3.05 a share and said it had returned more than $43 billion in payments to date. The company has been pressured to return more money to shareholders.

Reuters