Apple Reports Slowing Growth in iPhone Sales--Update
Source: Dow Jones News
By Daisuke Wakabayashi
Apple Inc. said iPhone sales grew at the slowest pace since its introduction in 2007 and forecast that revenue in the current quarter will decline at the steepest rate in 15 years, signaling an end to its recent period of hypergrowth.
IPhone sales boomed last year after the introduction of larger-screen models in late 2014, but Apple's newest iPhones incorporate fewer noticeable changes and haven't ignited as much enthusiasm among consumers. Apple also said its results suffered from the effects of the strong dollar.
The slowdown in iPhone sales, which account for roughly two-thirds of Apple's revenue, raises questions about Apple's growth. Sales of the iPad have been falling for two years, and sales of Mac computers, a recent area of strength, fell in the most recent quarter.
Apple has struggled to get a highly anticipated streaming TV service off the ground. It is working on an electric car, but that project is years away, and its leader is leaving the company.
In an interview with The Wall Street Journal, Apple Chief Executive Tim Cook said he sees future gains for iPad, continued growth from services such as Apple Music and other projects.
"We don't live in 90-day quarters, and we don't invest in 90-day quarters," said Mr. Cook. "I'm so convinced that the things we are doing is right and the assets we have are enormous."
The company said it sold 74.77 million iPhones in its fiscal first quarter ended Dec. 26, surpassing sales of 74.5 million units a year earlier. The less-than-1% increase fell short of analysts' estimates of 76.54 million units in the quarter.
For the current quarter ending March, Apple said it sees revenue of $50 billion to $53 billion, well below estimated revenue of $55.47 billion from analysts polled by Thomson Reuters. At the midpoint of $51.5 billion, that would mark an 11% decline from the same quarter a year earlier, the worst such decline at Apple since the summer of 2001.
Profitability will suffer, too: Apple projected its gross margin, the portion of revenue after production costs, would be between 39% and 39.5%, compared with consensus estimates of 39.97%.
Shares of Apple, down 13% over the past three months, added 29 cents to $100.28 in after-hours trading.
For the three months ended Dec. 26, Apple said net income rose 1.9% to $18.36 billion from $18.02 billion in the year-ago period. Earnings per share rose more sharply, to $3.28 from $3.06, reflecting Apple's active share-buyback program.
Revenue rose 1.7% to $75.87 billion from $74.6 billion in the same period a year earlier. That was the slowest rate of growth since June 2013--just before the introduction of the iPhone 5S--when Apple's revenue rose 0.9%.
Analysts polled by Thomson Reuters estimated that Apple would post earnings of $3.23 a share on revenue of $76.6 billion.
Apple said the rising value of the U.S. dollar had hurt revenue. Without the currency effect, Apple said revenue would have risen 8% compared with a year earlier. Two-thirds of Apple's revenue comes from overseas.
Apple said what would have been $100 in foreign revenue in September 2014 amounted to $85 at the end of December 2015.
Apple said it has implemented currency hedges, raised prices in several markets, and squeezed suppliers for certain concessions to combat the currency impact.
With its shares down 24% since July and concerns about the company fixated around iPhone sales, Apple on Tuesday sought to reframe the way investors see the company.
For the first time, Apple disclosed that it surpassed about one billion active devices, including iPhones, iPads, Macs, Apple TV and other devices. Apple said the statistic includes only devices on which users had "engaged with" such as downloading an app, song or movie in the past 90 days.
The company said those devices generated $5.5 billion in services revenue in the quarter ended December, up 15% from the same period a year earlier. Apple said this business has margins in line with what it announced for the entire company.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
(END) Dow Jones Newswires
January 26, 2016 16:57 ET (21:57 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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