Apple’s shares plummet on flat profits

By on January 29, 2014

Record sales aren’t good enough for Apple’s demanding shareholders.

Apple shares fell as much as nine percent in US after-hours-trading yesterday, despite the fact that it reported record quarterly sales. The problem? Profits were flat – and it lowered its sales outlook for the next quarter.

The Californian company sold a record 51 million iPhones and 26 million iPads in the quarter to December 28, pushing revenue up 5.6 percent to an all-time quarterly high of US$57.6-billion (R629.9-billion). However, analysts surveyed by Bloomberg said they had expected 54.7 million iPhones to be shifted (but what are a few million phones between friends, eh?).

Net profit was US$13.1-billion (R143.3-billion) in the first quarter, the same as the previous year. Apple also said revenue next quarter will be US$42-billion (R459.3-billion) to US$44-billion (R481.2ibillion), compared to the average analyst estimate of US$46-billion (R503.1-billion).  

Those lower-than-expected iPhone sales over the lucrative Christmas period are clearly fuelling investors’ concerns that Apple has run out of crunch. However, given continued record-beating revenues, it looks like shareholders haven’t quite weaned themselves off the double-digit revenue growth the tech giant has posted over the last few years.

Apple’s Chief Exec Tim Cook made sure not to sound too concerned in his accompanying statement. 

“We are really happy with our record iPhone and iPad sales, the strong performance of our Mac products and the continued growth of iTunes, software and services,” he said. “We love having the most satisfied, loyal and engaged customers.” 

Whether Apple has “satisfied, loyal and engaged” shareholders is another matter. The company announced that it was paying out a cash dividend of US$3.05 per share (R33.36 per share), pointing out that it is has returned over US$43-billion (R470.3-billion) to shareholders to date (in April, it unveiled plans to pay out more than US$100-billion (R1.2-trillion) by 2015, up from the $55-billion (R602.2-billion) it announced in August 2012).

However, the fall in Apple’s share price is likely to increase support for activist investor Carl Icahn’s calls for a US$50-billion share buyback scheme. The plan will be voted on at Apple’s annual meeting next month.

Apple is currently sitting on a cash mountain of US$147-billion – an eye-popping 10 percent of all the cash held by non-financial companies in the US, according to Moody’s.

Investors might be better pleased with Apple’s performance in China, with revenue up 29 percent in the greater China region (including Taiwan, China and Hong Kong). The results of Apple’s deal to sell iPhones to China Mobile’s 750 million customers, which was announced in December, are yet to really filter through.

Apple is still trailing arch-rival Samsung, with around 15 percent of the global mobile market compared with the latter’s 31 percent, according to research firm IDC. Smartphone shipments topped 1 billion last year, a 38.4 percent jump from 2012 – but Apple’s sales grew just 15.9 percent compared with 42.9 percent for its South Korean nemesis, IDC said.

To be fair, it hasn’t been plain sailing for Samsung recently either, as competition in the smartphone market continues to heat up. The world’s largest mobile maker reported its first quarterly profit decline in two years last week.

Nonetheless, with Samsung signing a patent-sharing deal with Google and sorting out copyright disputes with Ericsson yesterday, it seems to be focussing its energies on the next round in its never-ending legal battles with Apple, rather than on the other competitors nipping at both their heels.

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