First drop in iPhone sales, Apple revenue streak ends

SAN FRANCISCO, USA – Apple on Tuesday, April 26, reported its first-ever drop in iPhone sales since launching the smartphone in 2007 as the tech giant’s long streak of rising revenue ended.

Apple said iPhone sales dropped year-over-year for the first time, slipping to 51.19 million in the recently ended quarter compared with 61.17 million in the same period a year ago.

Profits fell as well: Apple reported net income of $10.5 billion in the fiscal quarter to March 26 from $13.6 billion last year.

With iPhones the main driver of sales for the company, revenue fell on a year-to-year basis for the first time since 2003: $50.6 billion from $58 billion a year earlier.

Apple shares dove more than 8% to $95.72 in after-market trades that followed release of the earnings figures.

Sales of iPhones, the heart of Apple’s mobile age money-making machine, were down 16%, according to the earnings report.

While Apple is the world’s largest company by profit and market value, it has been shifting its focus in anticipation of the slowdown.

“Our team executed extremely well in the face of strong macroeconomic headwinds,” said Apple chief executive Tim Cook.

“We are very happy with the continued strong growth in revenue from services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices.”

Analysts said it was not surprising to see the drop given the saturation of the global smartphone market.

“Following a rapid expansion into new markets over the years from 2007-2011, Apple was approaching saturation of the available distribution channels, and many of those already in the smartphone market who could afford to buy an iPhone had one or one of its high-end Android competitors,” said Jan Dawson at Jackdaw Research.

Dawson said Apple managed to boost sales in a slow-growing market with its large-screen models, but that it is unclear if it can regain momentum.

Apple also announced that its board has authorized $35 billion more to be spent on buying back shares, along with money for the dividend to be increased to 57 cents per share.

Apple has been making inroads into wearable technology with its Apple Watch and moving into services such as music subscriptions, but remains largely dependent on the iPhone for profit and revenue.

“While Wall Street was disappointed with Apple missing core revenue and earnings numbers, we aren’t talking about a company in trouble,” said Patrick Moorhead, president and principal analyst at Moor Insights and Strategy.

“Apple is still driving iPhone market share in nearly region, and we will shortly know if the iPhone SE enables continued market share gains in the mid-range.”

The analyst noted that Apple rivals Samsung, LG, HTC,and Huawei have “dramatically amped up their smartphone games” and the effect of that should be seen in the current quarter.

Apple last month went small, cutting prices as well as screen size with the introduction of a new iPhone and iPad aimed at first-time buyers and customers in emerging markets.

Eye on India

A new iPhone SE recently debuted at $399 for US customers without a contract subsidy, a significant cut from the price of Apple’s larger iPhones.

The iPhone SE did not launch in time for sales to be included in the quarterly earnings, but Apple executives said that demand has outpaced supply.

The new iPhone model was seen as having strong potential in international markets beyond China, particularly in India.

Even though the price tag is higher than low-cost Android handsets that dominate the market, it puts the cherished Apple brand within better reach to people in developing economies.

Revenue from Apple sales in China were down 26% to $12.5 billion in a year-over-year comparison for the quarter, but up 56 percent in India.

“I view India as where China was 8 or 10 years ago, and think there is great opportunity there,” Cook said during an earnings call.

“I think China is not weak,” Cook said during an earnings call.

“We may not have the wind at our backs that we want, but it is a lot more stable than what I think is the common view of it.”

Cook noted that the bulk of the revenue drop for Apple in Greater China was in Hong Kong, where currency linked to the strong US dollar crimped sales while the company fared better on the mainland.

Cook saw tremendous potential for Apple in India, where he expected iPhone sales to accelerate with the broader rollout of high-speed telecommunications networks.

“I think there is great opportunity there,” Cook said, stressing that Apple still had great faith in the China market. – Glenn Chapman, AFP / Rappler.com