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Apple loses 10% of value on downbeat forecast

Record revenues and iDevice sales not enough to rebuild confidence, as it warns of 20% sequential decline in current quarter

By CAROLINE GABRIEL

Published: 24 January, 2013

READ MORE: Financial | Apple | iPhone | Tablet

Apple turned in record revenues and iDevice sales, but its stock continued its recent nosedive, falling by almost 10% after its quarterly results were announced on Wednesday night. This was because, as Wall Street had feared, sales growth was down at its lowest level since 2009, the revenue figure was below analyst forecasts, and Apple offered a downbeat projection for the current quarter.

All these factors emphasize the fears that Apple's winning streak is ending. Those fears drove its stock price, once more, below the $500 level - still a price most companies would kill for, but this is a firm which, only a few months ago, was predicted to hit $1,000 in the near future. The price fell to $463.49 in after-hours trading, from $514.01 just before the results were revealed.

Apple CEO Tim Cook, on the analyst call, betrayed impatience with the poor response to the firm's highest ever quarterly sales, up 18% year-on-year at $54.5bn. "No technology company has ever reported these kind of results," he said and faced up to the biggest criticism of Apple under his leadership, that it has ceased to innovate. "Apple is in one of the most prolific periods of innovation in new products in its history," he insisted.

Net profit for the quarter was $13.1bn, roughly flat with the year-ago quarter. International sales accounted for 61% of revenue. Gross margin was 38.6%, down from 44.7%.

However, the company forecast that its sales would decline by over 20% sequentially in the current quarter. CFO Peter Oppenheimer offered projections of $41bn to $43bn, which would still be a 5% to 10% increase on the year-ago period. However, the predicted dip would represent a sequential fall of 21% to 25%, and would fall short of analyst expectations of $45.6bn - although of course there is always a dip in the first calendar quarter after the boost from the holiday season.

And that boost was clear to see at Apple, especially as the firm had suffered around the middle of 2012 as users held out for the iPhone 5 launch. In calendar Q4, it sold a record 47.8m iPhones, up 30% year-on-year and 78% on the previous period, which had largely lacked a new smartphone model. The vendor also shifted 22.9m iPads, up from 15.4m a year earlier. In decline were Macs and iPods, reflecting the crisis in PCs and standalone media gadgets - Mac sales were down to 4.1m, from 5.2m a year earlier, while iPods fell from 15.4m to 12.7m.

By region, Apple will be relieved that Chinese growth picked up, although it is still expected to see falling market share in the country for Q412. Greater China revenues were up 67% year-on-year to $6.8bn. The largest market remained the Americas, up 15% to $20.3bn, while Europe was up 11% to $12.4bn. Asia outside China remains the clearly under-tapped region bringing in just $3.9bn, up modestly at 10%, indicating Apple's ongoing challenges in India, in particular. That figure excludes Japan, where revenue leapt by 25% on expanded carrier deals and product range, to $4.4bn. Oppenheimer said iPhone sales doubled in China during the quarter and Apple opened four new stores in the country. It will also invest between $2-3m in opening a new retail store in Indonesia this year, according to local reports.

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