Apple reports slowest iPhone sales as Chinese market weakens

The most valuable publicly traded US tech company said on Tuesday it sold 74.8 million iPhones in its fiscal first quarter, ended Dec. 26, the first full quarter of sales of the iPhone 6S and 6S Plus.

Reuters| Last Updated: Jan 27, 2016, 22:14 PM IST
Apple reports slowest iPhone sales as Chinese market weakens
File: In this September 9, 2015, photo, Apple CEO Tim Cook discusses the new iPhone 6s and iPhone 6s Plus during the Apple event at the Bill Graham Civic Auditorium in San Francisco.

San Francisco: Apple Inc forecast its first revenue drop in 13 years and reported the slowest-ever growth in iPhone shipments as the critical Chinese market showed signs of weakening, suggesting the technology company`s period of exponential growth may be ending.

The company`s shares, which have fallen 5 percent this year, bounced around in after-hours trading and were down 0.7 percent as a call with analysts was underway.

 

"It`s disappointing to see them miss on an already downward adjusted sales number and the fact is that with their iPhone growth slowing what was needed was a product to be excited about," said J.J. Kinahan, chief strategist at TD Ameritrade. "Pressure on the shares will continue without a well-defined plan to grow sales or a new product."

The most valuable publicly traded US tech company said on Tuesday it sold 74.8 million iPhones in its fiscal first quarter, ended Dec. 26, the first full quarter of sales of the iPhone 6S and 6S Plus. The 0.4 percent growth in shipments was the lowest since the product was launched in 2007.

iPhone sales were expected to fall for the current quarter over a year ago, Chief Executive Tim Cook said on a conference call with analysts. 

While revenue in Greater China rose 14 percent in the last quarter, Apple is beginning to see a shift in the economy, particularly in Hong Kong, Apple Chief Financial Officer Luca Maestri told Reuters in an interview.

 

"As we move into the March quarter it`s becoming more apparent that there are some signs of economic softness," Maestri said. "We are starting to see something that we have not seen before."

Apple forecast second-quarter revenue of USD 50 billion to USD 53 billion, below analysts` average forecast of USD 55.5 billion. In the same quarter last year Apple reported revenue of USD 58 billion.

Apple`s guidance for the March quarter implies iPhone sales of 45 to 50 million units in the March quarter, which would mark the company`s first-ever decline in sales of the gadget, said analyst Daniel Ives of FBR Capital Markets & Co.

 

In the same quarter last year Apple sold 61.2 million iPhones.

The company reported revenue of USD 18.37 billion from Greater China, accounting for 24.2 percent of total revenue. Revenue from the region had nearly doubled in the fourth quarter.

Apple`s iPhone shipments fell short of analyst expectations for 75.5 million, according to research firm FactSet StreetAccount.

Apple reported earnings of  USD 3.28 per share, beating the average analyst estimate of USD 3.23 per share, according to Thomson Reuters I/B/E/S. Revenue increased 1.7 percent to USD 75.87 billion, both records for the company.

Analysts had expected revenue of USD 76.54 billion.

Apple`s overall performance was "slightly better than feared," said Ives at FBR.

The rise in iPhone shipments in the key holiday shopping quarter was the smallest since the second fiscal quarter of 2013, when they rose 6.8 percent, according to data company Statista.

Maestri attributed the lackluster revenue to foreign exchange headwinds caused by the strong U.S. dollar, which he said knocked about USD 5 billion off the company`s revenue.