Wait for new iPhone crimps Apple’s profits
Usual quarterly slowdowns worsened by customers expecting anniversary version
SAN FRANCISCO— Apple’s iPhone business is sailing squarely into the doldrums between new models.
The company said Tuesday that the number of iPhones sold globally fell 1 per cent in the first calendar quarter, compared with the same period a year ago, although revenue rose to $52.9 billion (U.S.) as more customers bought the supersized, more expensive iPhone 7 Plus. Apple’s net income per share rose more than 10 per cent, as a result of cost-cutting, higher prices and the company’s continuing program to buy back its stock.
The first two calendar quarters are often sluggish for Apple, as customers await new versions of products. But unusual expectations for the 10th-anniversary iPhones, due in September, may have worsened the slowdown.
“Apple needs to make sure the next phone has that ‘wow’ factor,” said Ben Schachter, an analyst at Macquarie Securities.
That will be particularly important in China, the world’s largest smartphone market, where revenue fell 14 per cent in the three months that ended on April 1. Timothy D. Cook, Apple’s chief executive, focused on several bright spots during a call with investors. Services grew18 per cent to $7 billion, and Cook said that cus- tomers were paying for 165 million active subscription services from Apple and third parties.
“Apple Watch sales nearly doubled year over year,” Cook said. “Our active installed base of iPhones grew by double digits.”
Apple is awaiting the outcome of tax policy discussions in Washington. U.S. President Donald Trump has proposed a major cut in the corporate tax rate and has suggested he would favour a reduction in taxes for money that U.S. corporations hold abroad.
Atax cut would be “very, very beneficial,” Maestri said, but Trump’s plan remains vague and has not yet been introduced as legislation. “It’s very difficult for us to speculate at this point in time what might happen,” he said.
Jan Dawson, chief analyst at Jackdaw Research, said investors, too, are awaiting new iPhones. “What’s baked in the share price is a massive upgrade cycle,” he said.