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Apple iPhone Sales, Outlook Come Up Short

Apple iPhone Sales, Outlook Come Up Short
January 29, 2014 9:37AM

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Even though Apple sold more iPhones and iPads than in any previous quarter, the company's results for a three-month period that encompassed the holiday season disappointed investors who were expecting even bigger things from Apple. Apple CEO Tim Cook sought to reassure investors by stressing that Apple innovation is ahead.

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It's going to take more than brisk sales of the iPhone and iPad to convince investors that Apple still has the magic touch.

Wall Street's nagging doubts about Apple's further growth prospects were magnified late Monday with the release of the company's results for a three-month period that encompassed the holiday shopping season.

Even though Apple sold more iPhones and iPads than in any previous quarter, the showing disappointed investors who were expecting even bigger things from the Cupertino, Calif., company.

The fiscal first-quarter numbers reinforced perceptions that Apple is now mostly selling its mobile devices to repeat customers who are upgrading to the next generation in the product line, instead of reeling in new converts to its technology. A similar problem also appears to be looming for Samsung Electronics, which competes fiercely against the iPhone.

"It looks like the high end of the smartphone market is becoming saturated," said Gartner analyst Van Baker.

If that is true, Apple figures to be hard pressed to lift its stock back to where it stood at its peak price of more than $700 in September 2012. That was before investors began to fret about fiercer competition in mobile devices and Apple's lack of a breakthrough product since the iPad came out nearly four years ago.

Apple's management amplified those concerns with a revenue forecast of $43 billion for the current quarter ending in late March, falling about $3 billion below analysts' predictions.

The company's projection also raised the unsettling specter of Apple's quarter revenue declining from the prior year for the first time in more than a decade. It last happened during the opening three months of 2003.

Apple's stock shed $44.50, or 8 percent, to $506 in extended trading following the release of the earnings report.

Apple CEO Tim Cook sought to reassure investors during a Monday conference call. Without providing further specifics, he reiterated previous statements that Apple plans to plow new fields in technology.

"Innovation is deeply embedded in everybody here," Cook said, adding that "we have zero issue coming up with things we want to do that we think we can disrupt in a major way."

Analysts believe Apple will broaden its horizons this year by introducing an Internet-connected "smartwatch" to establish a toehold in the still-nascent market of wearable computing. Speculation about Apple making a television set that would run on the same software as the iPhone has been circulating for years.

Devices running on Google Inc.'s Android software have been siphoning sales from the iPhone because they usually cost less and many of them feature bigger screens than the iPhone's four-inch display. An iPhone with a display screen spanning nearly five inches is being prepared for sale later this year, according to unidentified people cited in a recent report in The Wall Street Journal.

Apple earned $13.07 billion, or $14.50 per share, in the quarter ending Dec. 28. That's roughly unchanged from $13.08 billion, or $13.81 per share, in the prior year.

Revenue for the fiscal first quarter rose 6 percent to $57.6 billion.

Analysts, on average, had expected Apple to earn $14.09 per share on revenue of $57.5 billion, according to FactSet.

© 2014 under contract with NewsEdge. All rights reserved.

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