Apple loses its shine on slowest profit growth since 2003

Thu 8:59 am by Carrie White

Apple shares tumbled over nine per cent Thursday as the company's first quarter iPhone sales and revenue fell short of estimates, while its second quarter forecast missed the mark as well.

Shares of Apple (NASDAQ:AAPL) were down over nine per cent in premarket trading Thursday, dragging Nasdaq futures down with it, after posting first quarter iPhone sales that disappointed and second quarter revenue guidance that missed expectations.

The company’s shares were down 9.82 per cent just before 9 a.m. EDT, trading at $463.53.

The tech giant late Wednesday still reported a rise in revenue, and profits that topped analyst views, but a drop in gross margin, from 44.7 per cent to 38.6 per cent, disappointed investors already concerned that the company is losing ground to its competitors.

In a conference call discussing results, the company said the drop in gross margin was driven by lower product in transitory cost, a higher mix of iPhones, a weaker dollar and leverage on the higher revenue.

For the period that ended December 29 2012, Apple reported net profit of $13.1 billion or $13.81 per diluted share, compared to $13.1 billion or $13.87 per diluted share in the year-ago period.

Revenue stood at $54.5 billion, up 18 per cent from $46.3 billion a year earlier.

Analysts polled by Thomson Reuters were calling for per share profits of $13.44 on revenue of $54.73 billion.

According to reports, the latest quarter saw the slowest profit growth since 2003, and the slowest revenue growth in three and a half years.

Apple sold a record 47.8 million iPhones in the quarter - on the low end of Wall Street estimates - compared to 37 million a year earlier.

The company also sold 22.9 million iPads, compared to 15.4 million in the year-ago quarter, but Mac sales slipped to 4.1 million from 5.2 million a year ago. Meanwhile, iPod sales also fell, down to 12.7 million, from 15.4 million a year ago.

“We’re thrilled with record revenue of over $54 billion and sales of over 75 million iOS devices in a single quarter,” said CEO Tim Cook.

“We’re very confident in our product pipeline as we continue to focus on innovation and making the best products in the world.”

Apple’s CFO, Peter Oppenheimer, said the company generated over $23 billion in cash flow from operations during the quarter.

“We established new all-time quarterly records for iPhone and iPad sales, significantly broadened our ecosystem, and generated Apple’s highest quarterly revenue ever,” he added.

Investors hoped to get a better idea of iPhone 5 demand in the quarter after reports that surfaced earlier this month said that orders for iPhone 5 components had been slashed due to weaker-than-expected demand.

Cook addressed this by saying that if one were to look at iPhone sales across the quarter, the company was “very constrained for much of the quarter on iPhone 5” as it began to produce more and ship more, and sales went up with the production. “iPhone 4 was actually in constraint for the entire quarter and sales remained strong, and so that’s helped sales progress across the quarter,” he added.

“I know there have been lots of rumors about order cuts and so forth,” Cook said in the conference call Tuesday.

“I would suggest it's good to question the accuracy of any kind of rumor about bill plans and also stress that even if a particular data point were factual it would be impossible to accurately interpret the data point as to what it meant for our overall business because the supply chain is very complex and we obviously have multiple sources for things yields might vary, supply performance can vary.”

Looking ahead, Apple said it expects second quarter revenue of between $41 and $43 billion and gross margin between 37.5 and 38.5 per cent. It did not provide per-share earnings guidance.

Analysts are calling for per share profits of $11.67 on revenue of $45.38 billion.