Apple posts surprise drop in iPhone sales - Action News
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Apple posts surprise drop in iPhone sales

Apple Inc. reported a surprise fall in iPhone sales for the second quarter on Tuesday, indicating that customers had held back purchases in anticipation of the 10th-anniversary edition launch of the company's most important product.

Expectations building ahead of Apple's 10th-anniversary iPhone range this fall

Apple said Tuesday that it sold 50.76 million iPhones in its fiscal second quarter, down from 51.19 million a year earlier. (Stefan Wermuth/Reuters)

Apple Inc. reported a surprise fall in iPhone sales for the second quarter on Tuesday, indicating that customers had held back purchases in anticipation of the 10th-anniversary edition launch of the company's most important product.

Shares of the world's most valuable listed company were down two per cent at $144.40 USin after-hours trading.

The company boosted its capital return program by $50 billion US, increasing its share repurchase authorization by $35 billion US and raising its quarterly dividend by 10.5 per cent.

Apple sold 50.76 million iPhones in its fiscal second quarter ended April 1, down from 51.19 million a year earlier.

Analysts on average had estimated iPhone sales of 52.27 million, according to financial data and analytics firm FactSet.

Apple Chief Financial Officer Luca Maestri argued the decline was not as bad as it looked, given the peculiarities of how phone sales are calculated.

The company reports what are called "sell-in" figures for the iPhone, a measure of how many units it sells to retailers, rather than "sell-through" figures, which measure how many phones are actually sold to consumers.

Maestri said the company reduced the volume of inventory going through its retail channel by about 1.2 million units in the quarter, meaning the company sold about 52 million phones to customers on a sell-through basis.

Despite the dip in unit sales, iPhone revenues rose 1.2 percent in the quarter, helped by a higher average selling price.

Looking to next iPhone

Expectations are building ahead of Apple's 10th-anniversary iPhone range this fall, with investors hoping that the launch would help bolster sales.

Apple typically launches its new iPhones in September.

A big jump in sales usually follows in the holiday quarter, before demand tapers over the next few quarters as customers hold back ahead of the next launch.

Apple's 10th-anniversary iPhone range might sport features such as wireless charging, 3-D facial recognition and a curved display.

"There is a general softening in phone demand to contend with as well as expectations of a big upgrade, all of which softens the blow of this quarter's miss," said James McQuivey, a Forrester Research analyst. "If we see Apple downplaying expectations before the next upgrade cycle, it might mean that the company isn't confident it will beat those expectations."

The company forecast total revenue of between $43.5 billion US and $45.5 billion US for the current quarter, while analysts on average were expecting $45.60 billion US, according to Thomson Reuters I/B/E/S.

Analysts on average expect the company to sell 42.31 million iPhones in the current quarter, according to FactSet.

The company's net income rose to $11.03 billion US, or $2.10 US per share, in the second quarter, from $10.52 billion US, or $1.90 US per share, a year earlier.

Analysts on average had expected $2.02 US per share, according to Thomson Reuters I/B/E/S.

Revenue rose 4.6 per cent to $52.90 billion US in the quarter, compared with analysts' average estimate of $53.02 billion US.

Apple's revenue from the Greater China region fell 14.1 per cent to $10.73 billion US in the quarter, as cheaper rivals in the region chip away at sales.

A 17.5 per cent jump in the company's services business - which includes the App Store, Apple Pay and iCloud - to $7.04 billion US boosted revenue.