Hint of iPhone Sales Slowdown Tarnishes Otherwise Strong Apple Earnings Report

By Chris Preimesberger  |  Posted 2012-07-24 Print this article Print

CFO said that the sales slowdown of iPhones may be connected to continuing rumors of an iPhone 5 to be introduced later this year, and that potential buyers are holding off until that one becomes available.

Apple reported in its fiscal third-quarter earnings statement July 24 that it brought in a record $35 billion and profited $8.8 billion, but hints of a sales slowdown of its iPhones next quarter raised red flags among Wall Street analysts.

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

Apple lowered its guidance for next quarter, projecting $7.34 a share on revenue of $34 billion. 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 a share on revenue of $38.02 billion. 

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 rumors 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.

Meanwhile, the Cupertino, Calif.-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.

Cook: 'There's Incredible Anticipation Out There'

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)."

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 revenue in the quarter grew by $6.5 billion 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 rumors and speculation that you are about a new iPhone, and we think this has caused some pause in customers purchasing them," Oppenheimer said.

17 Million iPads Sold

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 a share.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel