Apple’s quarterly profit probably fell for the first time in over a decade, thanks to new products with lower profit margins and a slowing demand for the iPhone, Bloomberg reports. Fourteen analysts have reduced their estimates for Apple in recent weeks, and on Friday, the Cupertino company’s share price fell below $400 for the first time since December 2011.
Apple will announce its second quarter results during an earnings call on Tuesday, and analysts predict that net income will have declined 18% to $9.52 billion, or $10.02 a share, over the three-month period. Revenue, however, is expected to show a small 8% rise to $42.4 billion, signaling Apple’s slowest period of growth since 2009.
“The market is in show-me mode for Apple,” said Laurence Balter, an analyst at Oracle Investment Research. “The market needs to see some evidence that the future looks bright because that candle is flickering.”
Katy Huberty, an analyst at Morgan Stanley, believes Apple may announce a dividend increase or boost share buybacks during its earnings call in an effort to placate investors. Bloomberg reports that the current quarterly dividend could rise by 17% to about $3.10 a share, based on Apple’s projected earnings and the amount of cash it has in reserve.
At the end of December, that figure stood at $137.1 billion.
Apple “probably” sold 35.4 million iPhones in the last quarter, Bloomberg reports, compared with 35.1 million a year earlier. Over the next three months that figure is expected to fall again to 25 million units. The fall in demand is being attributed to increased competition from the likes of Samsung.
“Things have changed for Apple,” said Alex Gauna, an analyst at JMP Securities in San Francisco. “The competition is more intense.”
The weakening demand is also being felt by Apple’s Asian suppliers. Earlier today, it was reported that many were trying to become less reliant on Apple as sales of the iPhone begin to fall, while Foxconn reported its biggest revenue slide in over 13 years earlier this month.
Some analysts feel Apple’s focus on secrecy isn’t helping the company, because shareholders don’t know what to expect in the months ahead. Rumors have suggested the company may launch a new low-cost iPhone, an iWatch, and maybe even a television set. But none of this has been confirmed.
“Nobody believes the secret anymore,” Balter said. “It was OK when Steve Jobs would say we have some great things in the product line, but right now that credibility has been lost.”
However, Mark Moskowitz, an analyst at JP Morgan Chase, isn’t too concerned with Apple’s share price. He believes the reason why Apple isn’t building the same anticipation for new devices that we normally see around this time of year is because it launched its latest iOS devices just last fall.
It’s also worth noting that analysts are good at underestimating Apple. The company has exceeded predictions in all three quarters since 2003, Bloomberg reports.
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