Apple Profit and Revenue Slide as it Copes With Slumping iPhone Sales--Update
October 25 2016 - 5:17PM
Dow Jones News
By Robert McMillan
Apple Inc. posted its third consecutive decline in quarterly
revenue and profit Tuesday, as the company searches for a way to
offset falling sales of its flagship iPhone.
The results also marked Apple's first decline in annual revenue
and profit since 2001.
For the fiscal fourth quarter, ended Sept. 24, Apple said net
income fell 19% to $9 billion, or $1.67 a share, from $11.1
billion, or $1.96 a share, in the same period a year earlier.
Analysts polled by Thomson Reuters had expected earnings of $1.65
per share.
Revenue fell 9%, to $46.9 billion, mostly ahead of the launch of
the iPhone 7, which went on sale a week before the end of the
quarter.
Still, Apple remains the most profitable U.S. company, with net
income of $45.7 billion for the fiscal year it just ended.
Tim Cook, Apple's chief executive, said improvements in the
company's services business and the introduction of its flagship
iPhone in particular were improving the company's outlook for the
coming quarter.
"The customer response has really been off the charts," he said
"We couldn't be more happy with how it's been received."
Apple issued a bullish forecast for the current quarter, which
includes both the holiday-shopping season and sales of its new
phone. The company said it expects revenue of $76 billion to $78
billion in the quarter, which would be an increase from $75.9
billion in the same period a year earlier. Before Apple's
announcement, analysts had been expecting revenue in the current
quarter of $74.9 billion, according to FactSet.
Apple also projected gross margin, a closely watched measure of
profitability, of 38% to 38.5%, even to slightly up from 38% in the
just-completed quarter.
Neil Cybart, an independent analyst who follows Apple, said the
revenue projection for the current quarter implies that Apple
expects iPhone unit sales to increase more than 5% from a year
earlier, when the iPhone 6S was its newest model.
The iPhone accounted for 63% of Apple's revenue in the
just-completed fiscal year, but growth in the smartphone market has
slowed recently and consumer buying habits are changing. In the
fourth quarter, Apple said it sold 45.5 million iPhones, 2.5
million fewer than a year earlier.
The company reported holding $237.6 billion in cash and
investments, up from $231.5 billion three months earlier.
Apple is running out of large untapped markets where it could
reproduce its breakneck success in China in recent years. Sales in
greater China, which includes Hong Kong and Taiwan, declined 30% to
$8.8 billion in the most-recent quarter. In the same quarter a year
earlier, Apple sales to the region grew 99%.
UBS Securities LLC says 80% to 90% of China's potential high-end
smartphone buyers already have a phone.
Mr. Cook hopes India, where iPhone sales grew by more than 50%
during the most recent year, will prove to be another giant
market.
"We still believe we're just kind of scratching the surface
there," he said. Apple includes India in its Asia Pacific region,
which reported $2.7 billion in sales, roughly even with a year
earlier.
Apple's shares fell 1.5% in after-hours trading following the
release. Apple shares are down 0.7% over the past 12 months through
Tuesday's close, but have risen more than 20% since its last
financial results were reported in July, as expectations rose for
sales of the new iPhone and rival Samsung Electronics Co. recalled
its Galaxy Note 7 smartphones following reports of battery
fires.
Sales of the company's Macintosh computers declined 17% to $5.7
billion. Apple is expected to update the Mac line on Thursday.
Write to Robert McMillan at Robert.Mcmillan@wsj.com
(END) Dow Jones Newswires
October 25, 2016 17:02 ET (21:02 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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