Apple Sales Miss Target After iPhone Slowdown

The much anticipated arrival of the iPhone 5 has impacted the financial performance of Apple.

Apple reported in its fiscal third-quarter earnings statement 24 July that it brought in a record $35 billion (£22.6bn) in revenues and posted a very healthy $8.8 billion (£5.7bn) profit. However hints of a sales slowdown of its iPhones next quarter raised red flags among Wall Street analysts.

Analyst Expectations

The quarterly profit worked out to a healthy $9.32 (£6.01) a share, but another fly in the ointment was that Wall Street was expecting a dollar more per share in net earnings ($10.37 or £6.69) based on revenue of $37.2 billion (£23.9bn).

Apple lowered its guidance for next quarter, projecting $7.34 (£4.73) a share on revenue of $34 billion (£22bn). Wall Street analysts, who often complain that Apple is too conservative in its projections based on previous performance metrics, are expecting a lot more: fourth-quarter earnings of $10.23 (£6.60) a share on revenue of $38.02 billion (£24.5bn).

Analysts cited an anticipated iPhone sales drop-off as the reason for the scaled-back expectation.

Apple CFO Peter Oppenheimer acknowledged on the conference call to analysts that a potential sales slowdown of iPhones may be connected to continuing rumours of an iPhone 5 to be introduced later this year, and that potential buyers may be holding off until that model becomes available.

Apple has made no such announcement about a new iPhone coming this fall.

Handset Sales

Meanwhile, the Cupertino, California-based company recorded excellent iPhone sales in Q3, selling 26 million units worldwide during the quarter – a solid 28 percent improvement over Q3 a year ago.

Asked if he could quantify how much the anticipation of an iPhone 5 might cut into current iPhone 4 and 4S sales, CEO Tim Cook said that “it’s difficult to sort this out. There’s incredible anticipation out there for future products, given what we’ve been able to deliver in the past.

“I think it’s a reasonable amount (of non-sales, due to waiting for the new product).”

Economic Worries

Oppenheimer said “given what’s going on around us, we are happy with the quarter. Sales of each of our products exceeded what we had factored into the guidance; that was especially true of the iPad, which set a new sales record. The $35 billion (£22.6bn) revenue in the quarter grew by $6.5 billion (£4.2bn) year over year.”

Oppenheimer cited the economy in Europe as being a factor in a possible future drop in iPhone sales, in addition to some problems in the natural resource-based economies of Australia, Brazil and Canada.

“Regarding the iPhone, we’re reading the same rumours and speculation that you are about a new iPhone, and we think this has caused some pause in customers purchasing them,” Oppenheimer said.

Apple said it sold a record 17 million iPads during the quarter, up a whopping 84 percent over Q3 2011. It also reported moving 4 million Macs, up 2 percent year-over-year, and 6.8 million iPods, a 10 percent unit decline from the year-ago quarter.

Apple also declared a quarterly dividend of $2.65 (£1.71) a share.

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