26 Jul 2012

Apple Results Disappoint

Electronics giant Apple posted reported sales of $35bn in the three months to 30 June 2012 which was up from $28.6bn in 2011 and it will pay a dividend of $2.65 per share on 16 August 2012.

While this may appear good news analysts looked under the surface and were not as impressed as the Apple figures may indicate at a first glance.

While sales of Apple’s iPad rose 84% against the same period last year with over 17 million iPads shipped, sales of their iPod music player fell by 10% and computer sales were almost flat with an increase of only 2%.

One of the issues was that sales of Apple iPhones was lower than expected. As the iPhone has higher margins, this translates into a large change on the bottom line. Apple sold 26 million iPhones. Although this represents a growth of 28%, this was slower than many analysts had hoped.

A further issue for Apple was that they forecast sales in the fourth quarter ending in September would be $34bn, down on the third quarter. Combined with some of the underlying trends for the third quarter, this disappointed investors and Apple shares fell nearly 5% in after-hours trading.

Market conditions

These Apple figures are set against difficult trading conditions. Although all companies are facing difficult times, Apple needs to produce some good figures to be able to meet the investor expectations.

One issue is the strength of the US dollar that makes sales outside the US more difficult.

Also Europe which is a major sales area is seeing a major slowdown with the Eurozone crisis which has significantly impacted sales.

A further worry for Apple is the growing popularity of Samsung products in particular, although HTC is also seeing a significant increase in market penetration.

To counter the growth of the competition, Apple is due to launch its iPhone 5 later in 2012. However to retain its market leadership, Apple will need to ensure it comes up with some revolutionary new products to shape the market rather than just move with the competition. With Steve Jobs out of the scene, will Apple be able to retain its market leadership, and retain its position as the World’s most valuable company?

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