The law of large numbers kicked in Wednesday for Apple, which saw overall revenue just missing analyst estimates, despite the company racking up a record $13.1 billion in profits, the first year-over-year decline in over a decade.
Apple sold 22.9 million iPads and 47.8 million iPhones over the course of its holiday quarter, which spanned October through December, garnering the Cupertino company $13.1 billion in profits. The sales numbers, astonishing by all other counts, just beat analyst expectations of around $12.8 billion.
Investors certainly weren’t wowed by the numbers, sending Apple stock down almost 10 percent in after-hours trading. Since it hit a high of $704 in September, Apple stock has plummeted almost 30 percent on fears that growth for the world’s most valuable company has finally started to slow amid saturation of smartphones in the United States and tougher competition abroad from Samsung in particular.
And even if investors didn’t get everything they wanted in the numbers, Apple CEO Tim Cook put a very positive face on the quarter just reported and the year to come. “We’re thrilled with record revenue… and sales of over 75 million iOS devices in a single quarter,” Cook said in a release. “We’re very confident in our product pipeline as we continue to focus on innovation and making the best products in the world.”
Under Cook’s guidance Apple unleashed a bevy of new products over its Q1: the fourth generation iPad, the smaller iPad mini, new iMacs. The iPhone 5, which went on sale in late September, also rolled out to additional international markets over the period including the world’s largest smartphone market China. The combination added up to massive sales.
But while the holiday season was strong, it may not have been strong enough to convince investors that Apple’s decade-long “hyper growth” period – marked by the launches of three revolutionary products: the iPod, which continues to dominate the MP3 player market; the iPhone, which became the smartphone to own for years; and the iPad, which kickstarted today’s tablet craze – can continue. The question everyone will be looking for Cook to answer this afternoon, is where will the next phase of growth come from?
Apple always provides conservative guidance for the next quarter and year to come, but today investors will be trying to discern whether what Cook says is just typical Apple conservatism or if there are signs that Apple is starting to worry itself.
For long-time tech analyst Cindy Shaw, a managing director with San Francisco-based Discern, this moment in time is reminiscent of another formerly white-hot tech company, Dell. In 2005 and 2006 Dell and its leader, Michael Dell could no wrong. Revenue was then a blistering $50 billion and Wall Street fell over itself with praise. Then the cracks started to show, customers began to voice complaints, and other options in the PC marketplace started to look pretty good. From antenna gate, to Apple’s self aggrandizing and hugely expensive new headquarters and the more recent maps snafu, Shaw is seeing a similar build-up of what she calls “small warning flags.” When the attention at Dell turned from adoration to suspicion, management had a very tough time responding in a way that satisfied investors (a trend that has clearly continued with Dell reportedly in talks to with financiers to take the company private again).
Apple is no Dell, but it’s a useful reminder of how fast and far companies can fall. Cook is in a very tough position because finding meaningful growth for a $156 billion company is going to be very tough. If he goes down market (hard for a high-end brand to do) he sacrifices margin, and the growth guys start screaming again. If he doesn’t deliver a mind-blowing new product that creates a new category, everyone screams innovation by Apple is dead. For investors the question to be asking, and the one that should have been front of mind as soon as Apple became the largest market cap company on the planet is: When do I sell?
Apple Shares Plunge 10 Percent After Hours On Earnings Decline And Revenue Miss
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Apple Shares Plunge 10 Percent After Hours On Earnings Decline And Revenue Miss
