Apple sells fewer iPhones as consumers wait
Major upgrade to unit expected later this year
SAN FRANCISCO• Apple Inc. reported falling iPhone sales in i ts fiscal second quarter, showing why it’s urgent the company make significant upgrades to the next version of the flagship device to contend with rivals like Samsung Electronics Co.
Investor confidence has been mounting ahead of a major upgrade to t he iPhone due later this year. Yet competitors released new high- end smartphones recently, exacerbating the need for Apple to deliver a device that matches or exceeds consumer expectations.
Apple sold 50.8 million iPhones in the quarter ended April 1, down from 51.2 million units in the same period a year earlier, and less than the 51.4 million predicted in a Bloomberg survey of analysts. Sales in China fell 14 per cent — less precipitously than last year.
“We expect our performance in China to continue to improve as we go through the year,” chief financial officer Luca Maestri said in an interview.
Apple stock slipped more than one per cent in extended trading, following the release of the results. The shares jumped 27 per cent this year and closed at a record Tuesday on anticipation of an iPhone 8 launch in the fall. That’s more than double the benchmark Nasdaq Composite Index. BGC Partners analyst Colin Gillis said before earnings were released that any weakness in iPhone sales might spark a sell- off in the stock.
Apple had $ 256.8 billion ( all figures US) in cash and equivalents at the end of the quarter. The company said it will return more of that to shareholders, announcing $50 billion in new buybacks and a 63- cent dividend. Analysts had forecast 62 cents, up from the 57 cents paid in its 2016 fiscal year. The company had already announced $ 175 billion in repurchases, helping main- tain the stock price in lulls between new products.
The Cupertino, Calif.based company also forecast $43.5 billion to $45.5 billion in revenue for the current quarter, below analysts’ estimates of $45.7 billion.
Much is riding on the success of the iPhone 8. Smartphone sales growth has been slowing and Apple has lost market share in China, a major source of growth before last year, amid increased competition from local rivals.
“Chinese vendors such as Huawei, Oppo and Vivo continue to make l ife really hard f or Apple in the region,” John Butler, a Bloomberg Intelligence analyst, said.
Apple benefited f r om Samsung’s recall of its Galaxy S7 smartphone last year, but the South Korean company followed up with the introduction of the well- reviewed Galaxy S8 in April. If S8 sales are strong, that may mean fewer new customers for the new iPhone and the services businesses that feed of the device.
CEO Tim Cook has repeatedly sought to highlight Apple’s services, the fastest growing part of the company last year. Sales of offerings like iCloud, the App Store and Apple Music grew 18 per cent to $ 7.04 billion in the quarter.
Apple said earlier this year that it aims to double annual services revenue to more than $50 billion by fiscal 2021.
Apple’s offshore cash reserves climbed to $ 240 billion at the start of April, according to the CFO. Cook’s plans for that money have c ome under i ncreasing focus after President Donald Trump proposed slashing the corporate tax rate on repatriated funds.
Maestri said it was too early to say how Apple might spend any cash it brings home.
APPLE STOCK SLIPPED MORE THAN ONE PER CENT.