Apple misses estimates for first time in six years

MOST READ
LATEST NEWS

EVENTS

Join Orange, Amazon and Google at the Open Mobile Summit London May 29-30

MARKET PLACE

Carrier Broadband Performance: Africa & Middle East

Voice over LTE: Market Analysis and Forecasts

Advertize your telecoms job

JOBS

Experienced Event Organiser

Apple misses estimates for first time in six years

iPhone delay may cost the firm its smartphone crown in this quarter, but pent-up demand will guarantee a holiday bonanza

By CAROLINE GABRIEL

Published: 19 October, 2011

READ MORE: Financial | Apple | Handset

Apple missed Wall Street estimates for the first time in six years in its fourth fiscal quarter, with the later than usual iPhone launch seen as the main culprit. This will give Samsung hope of grasping the world number one position in smartphones for the period, if only for one quarter of glory before the iPhone 4S delivers Apple the crown again in Q4.

Apple reported profit of $6.62bn or $7.05 a share, up healthily from $4.31bn a year earlier but below analyst forecasts of $7.31 a share. This was the first time Apple failed to live up to expectations in 26 quarters, said Bloomberg.

Revenues were $28.3bn, slightly below the $28.6bn in the third fiscal quarter and about $1bn less than analyst forecasts - though up on last year's $20.3bn. For its 2011 fiscal year, Apple said its revenues were $108bn, up 66% year-on-year, and earnings were up 85% to $26bn. The firm sold 72m iPhones and 32m iPads in 12 months.

The iPhone is Apple's most important product these days and the company's fortunes track those of its famous handset, which accounted for 39% of total revenue. In Q3, many users delayed purchases until a new model arrived, which happened this year in October instead of the usual summer schedule. This meant that Apple sold 17.07m iPhones in Q3, fewer than the 20m-plus which most analysts had projected despite the ageing nature of the iPhone 4. Many had expected sales to be buoyed to a greater extent by price cuts on the model at AT&T and other carriers.

"The market was expecting very strong iPhone sales going into the product launch," Giri Cherukuri, head trader at Oakbrook Investments, told Bloomberg. "It stands to reason that a lot of people were waiting for the new iPhone to come out." Apple shares fell 6.3% to $395.50 in extended trading on Tuesday.

However, the pent-up demand should produce a bumper holiday quarter. Apple said this would be its best yet, projecting earnings per share of about $9.30 on sales of about $37bn, higher than analysts had expected. "In our wildest dreams, we couldn't have gotten off to as great a start as we did with the iPhone 4S," CEO Tim Cook said on the earnings call, though he admitted that the fall in demand for older iPhones had been "substantial".

On the call, he once again paid tribute to the recently deceased co-founder Steve Jobs. "Steve was a great leader and mentor and inspired everyone at Apple to do extraordinary things," he said. "His spirit will forever be the foundation of Apple, and we are dedicated to continuing the amazing work that he loved so much."

China is now Apple's second largest market, generating $4.5bn in sales. The iPad continued to dominate the tablet sector, with sales of 11.12m units, but the form factor is not catching fire as some had expected a year ago - while a record, iPad sales were just below forecasts of 11.5m, which had already been reduced amid uncertain market conditions.

Bloomberg's analyst survey highlighted the unquestioning attitude towards Apple's performance, expecting miracles even in quarters with no new products. "Shame on me and other investors who got lulled into complacency based on how much they've beaten estimates in the past," said David Rolfe, chief investment officer at Wedgewood Partners, while another analyst, Trip Chowdhry at Global Equities Research, commented: "It's not the company that missed, it's the people who follow Apple that are clueless."