Apple Inc forecast its first revenue drop in 13 years and reported the slowest-ever increase 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 slowdown comes as Wall Street analysts worry the company does not have another blockbuster product to replace the iPhone. Apple does not report Watch sales, but it does not appear to have the makings of being a hit on the same level as the iPhone a year after launch.
And while the company is reportedly working on a car, what it plans to do in that area and when are still unclear.
The company’s shares, which have fallen five per cent this year, bounced around in after-hours trading and were down more than 2.6 per cent.
“With 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 company sold 74.8 million iPhones in its fiscal first quarter ended December 26, the first full quarter of sales of the iPhone 6S and 6S Plus. The 0.4 per cent growth in shipments was the lowest since the product was launched in 2007.
IPhone sales were expected to fall for the current quarter compared with the same quarter last year, chief executive officer Tim Cook said on a conference call with analysts.
But suggesting there is still room for growth, 60 per cent of people who had an iPhone prior to the launch of the iPhone 6 have yet to upgrade to an iPhone 6 or 6S, Cook said.
While revenue in Greater China rose 14 per cent 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.
Apple forecast second-quarter revenue of $50 billion to $53 billion. In the same quarter last year Apple reported revenue of $58 billion.
Apple’s guidance for the March quarter implies iPhone sales of 50-52 million units, 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, short of analyst expectations for 75.5 million, according to research firm FactSet StreetAccount.
Apple reported earnings of $3.28 per share, while revenue increased 1.7 per cent to $75.87 billion, both records for the company. Analysts had expected revenue of $76.54 billion.
Apple remains the most profitable company in the S&P 500 and the most valuable publicly-traded US tech company.