Fall in iPhone sales pares results at Apple

Apple CEO Tim Cook at a company event last month. Apple on Tuesday reported a fall in second-quarter revenue which Mr Cook described as a "pause", not a fundamental change in the firm's business. He said: "This, too, shall pass."
Apple CEO Tim Cook at a company event last month. Apple on Tuesday reported a fall in second-quarter revenue which Mr Cook described as a "pause", not a fundamental change in the firm's business. He said: "This, too, shall pass."PHOTO: REUTERS

Tech giant's 13-year run of quarterly revenue growth ends amid slower growth in key markets like China

SAN FRANCISCO • From the iPod to the iPhone and the iPad, Apple created more than a decade's worth of new gadgets to fuel its historic growth. But the technology giant's dazzling 13-year run of quarterly revenue growth ended on Tuesday - a casualty of Apple's already immense size, weakness in key global markets like China and the lack of another hot product to pry open the wallets of customers.

Apple said revenue for its second fiscal quarter, which ended in March, fell 13 per cent to US$50.6 billion (S$68 billion) as sales of its flagship product, the iPhone, fell, with little else to take its place.

Nearly half of the smartphones sold in the United States are iPhones, and Apple may be reaching the saturation point among potential customers in other developed countries. Rival smartphone makers using Google's Android operating system continue to challenge the company with powerful, less expensive devices.

Overall, Apple sold 16 per cent fewer iPhones in the quarter compared with the same quarter last year. "There's no question that Apple's best days are behind it," said analyst Toni Sacconaghi at Bernstein brokerage. "The company grew at astronomical rates, and it's now so big its ability to grow at those rates doesn't exist anymore."

Apple's chief executive Tim Cook called the decline a "pause", not a fundamental change in the firm's business. "This, too, shall pass," he said in a call with Wall Street analysts to discuss the results. "The future of Apple is very bright." But investors were not so sure.

Net income fell 22 per cent to US$10.5 billion, or US$1.90 a share. Apple's results fell well short of Wall Street expectations, and its shares were down as much as 8 per cent in after-hours trading. That wiped out about US$47 billion in stock market value.

Sales fell faster in greater China, which includes Hong Kong and Taiwan, than in any other region, down 26 per cent compared with the previous year.

Sales in mainland China, Apple's second-largest market after the US, fell 11 per cent as the country struggled with a slowing economy.

The company projected revenue of US$41 billion to US$43 billion. That is much worse than Wall Street had been predicting.

RBC Capital Markets' analyst Amit Daryanani said Apple may be entering a period of slowing replacement sales, similar to what happened in the personal computer market a decade ago.

He also noted that many companies had been hurt by the strong US dollar, which makes American products more expensive overseas.

Apple has high hopes for some of its consumer-oriented services, such as Apple Music and iCloud, as well as for its nascent Watch accessory, but those have yet to turn into giant businesses. The iPad, once a powerful revenue generator for the company, has had disappointing sales in recent years, despite new, larger professional versions.

Apple said it would raise its quarterly dividend 10 per cent to 57 US cents a share and increase the amount of stock it buys back to US$175 billion.

NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on April 28, 2016, with the headline 'Fall in iPhone sales pares results at Apple'. Print Edition | Subscribe