The company unveiled its first fall in annual sales since 2001, with turnover for the year to the end of September declining to US$216bn from US$234bn in 2015, largely due to waning sales of its cash cow, the iPhone.
In the final quarter of the financial year the company shifted a still-impressive 45.5mln iPhones, but this was down from 48mln in the corresponding quarter of the previous year, raising fears that the market is close to saturation, while users are becoming less inclined to upgrade as new “must have” features become less common.
Strong competition in China from local operators has bitten into the California company’s sales in the People’s Republic.
Sales of iPhones in China were down 30% year-on-year in the fourth quarter but Apple’s chief executive, Tim Cook, has high hopes of reigniting sales growth in this massive market, citing a growing middle class in the country as a major opportunity.
Fourth quarter earnings of US$9.01bn equated to US$1.67 a share, down from US$11.12bn (US$1.96 a share) in the same period of 2015. The earnings per share were a penny higher than the consensus forecast of US$1.66.
Revenue declined for the third quarter on the spin, to US$46.85bn from US$51.50bn the year before, and was a shade below Wall Street’s expectations.
The company expects revenue in the next quarter will be in the region of US$76bn to US$78bn.
“The headline-grabber is that annual sales declined for the first time in 15 years but that belies the optimism of behind Apple forecasting another return to sales growth in the final quarter. The iPhone 7 is a bigger upgrade than the 6S and the nightmare of exploding batteries at top rival Samsung should see Apple enjoy better Christmas sales than last year,” said Jasper Lawler at spread betting firm CMC Markets.
Richard Windsor of Edison Investment Research said: ” Although Apple remains supply constrained on the iPhone 7, I suspect that the reality is that there is a slight mix shift towards the older and cheaper models.
“For an income investor, this is a great place to be but anyone looking for short term capital growth should probably look to Microsoft, Tencent or Baidu.”
Story by ProactiveInvestors