Apple’s iPhone sales are flatlining, the tech company said on Tuesday, as it announced a sharp slowdown in sales growth for its top-selling mobile device.
The company sold 74.8m of its flagship devices in the final three months of 2015, below analysts’ expectations. In the same period in 2014 the company sold 74.46m iPhones, meaning sales were essentially flat.
Sales of the iPhone account for about two-thirds of Apple’s revenues, which worries some investors. “Apple is a one-product company,” declared Berenberg’s Adnaand Ahmad last year, when the German bank downgraded the company’s stock to “sell”.
The Cupertino-based company posted record quarterly revenues of $75.9bn and record quarterly profits of $18.4bn but warned the revenues would fall this quarter.
As well as slowing iPhone sales Apple reported it sold far fewer iPads in the last three months of 2015, 16.1m, down from 21.4m tablets in the same quarter last year. Mac sales, too, were off, though less drastically: the company sold 4% fewer, for a total of 5.3m.
Revenues at its “other products” category, which includes Apple Watch, grew sharply to $4.4bn, up from $2.6bn in the third quarter of 2015 (when the company first reported Watch sales). Other products in the category include Beats accessories, Apple Pay and Apple TV.
The slowdown in mobile sales is not confined to Apple. Worldwide smartphone growth has declined to its lowest rate since 2013, according to research firmGartner, but signs that consumers may be tiring of new iterations of iPhones could have a profound impact on Apple and the wider US stock market.
Since Apple entered the smartphone market in the third quarter of 2007, the company has sold 821m iPhones. Sales of iPhones have been a fundamental force behind making Apple the world’s largest company.
In the past eight and a half years, the tech giant upended the mobile market, devastating the then-dominant BlackBerry and forcing the entire industry to reckon with innovations like a touchscreen interface, haptic feedback and an integrated music store.
The company is so large at this point that where Apple goes, the stock market often follows – and Apple shares are going down. “Apple comprises about 7% of the total S&P 500 earnings,” said Angelo Zino of S&P Capital IQ. “It’s going to have huge implications not only for Apple but for Apple’s supply chain. That 7% number is just for Apple. There are a lot of other companies like Best Buy that are tied to them.”
While the iPhone has been a phenomenal success, Apple has had less luck with its new products. Sales of iPads have stalled and the Apple Watch has yet to prove its mass market appeal.
No one is counting Apple out, but the news puts immense pressure on Tim Cook to make sure the iPhone 7 has a successful debut later in 2016. “Even with a miss or lower guidance, the stock has the potential to even trade higher,” Zino said. “We’ll see; people ask if this is the peak in iPhone sales, and I say no.”
The company’s introduction of the iPhone 6 Plus a year earlier makes comparisons look particularly dire; Zino said that the market and Apple’s associated businesses will expect a rebound – and then some – from the announcement of the iPhone 7.
Smartphone penetration is slowing in the US as the market matures – fewer and fewer Americans are adopting the technology for the first time, and so some growth is coming from undercutting competitors, rather than making converts.
In China, where Apple has used the nation’s economic boom to keep iPhone sales booming, the future looks even less certain. The last time Apple reported earnings, Cook told shareholders that revenue in China had nearly doubled year-over-year (and predicted more growth to come).
Ramon Llamas of tech analysis firm IDC points out that Apple is playing for wealthier consumers in China. “Apple isn’t the out-and-out leader [in China],” he said. “If you take a look at all these other vendors outside of Apple, they’re building share going into that low-cost Android market. It’s a market where a lot of people are willing to settle for good enough.”
Still, Lamas and Zino agreed: any sell-off in Apple stock is a bargain. The company is already trading at the lowest multiples of price-to-earnings in recent memory. Provided the phone’s next version doesn’t fail to impress, any further decline, the analysts said, is an opportunity to buy.
Source:The Guardian(UK.)
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