Has Apple lost momentum? Analysts predict fall in profits

Jan 21, 2013

'Apple fever' not over, says one analyst, but sales of new products are falling off too quickly

THE FACT that Apple is held to different standards than other tech companies will be underlined on Wednesday when the release of its "second strongest set" of financial results is likely to be "overshadowed" by concerns that profits are not increasing quickly enough.

The Daily Telegraph says strong sales of the iPhone 5 are likely to have helped Apple reap a $12.4 billion profit in the final three months of last year.

Even so, the once unassailable master of the tech universe may be about to announce its first drop in profits in nine years, analysts say. As a result, Tim Cook, the company's chief executive, will "face a blitz of questions" over how Apple can "sustain its momentum".

CNN Money says the consensus view is that Apple will announce a "three per cent year-over-year decline" in profits on Wednesday. But in the Apple universe nothing is certain and predictions of its financial result are "all over the place". The gloomiest assessments suggest a 14 per cent fall in earnings, while the most bullish analysts are tipping a 12 per cent rise.

Some Wall Street analysts have been "ratcheting down their expectations" of the company's performance for months, says CNN Money, and there are signs the shine has come off the company despite the fact it is close to selling 50 million iPhones.

Its share price dropped in January when it "cut back" on orders for some of the components used in its flagship product, the iPhone 5, due to "less than healthy demand" and some analysts estimate intense competition from players such as Samsung could see iPhone sales tumbling by 5 million units a quarter this year.

Also putting downward pressure on Apple's share price – which has fallen 20 per cent in the past three months to around $500, as The Guardian reports - is stiff competition for its iPad from the plethora of inexpensive tablets running Google's Android operating system. UPI says it's also costing the company more to make some of its newest products such as the iPhone 5 and the iPad mini because they use brand new components rather than the "evolutionary" technology inside the iPhone 4s and larger iPads.

Walter Piecyk, a technology analyst at BTIG, told the Guardian that Apple's real problem is that sales of its new products "fall off" much more quickly than they used to after they are launched with all the traditional hoopla. "Apple fever" has not evaporated, he says, but there are "worrying signs" that Apple has "lost the ability to build on the momentum of those launches".

Explaining the fall in Apple's share price, the Telegraph says: "Investors have sold out of the business amid concern that Apple is not doing enough to dazzle customers with its products, in the way it has over the past few years."

Apple may yet silence its critics. UPI points out the company has a history of leaking "conservative" estimates of its performance, then dazzling analysts with better-than-expected financial results.

Sign up for our daily newsletter

Disqus - noscript

The sooner Apple is gone, the quicker humanity can re-cooperate the loss of its intelligence.

Could not agree better!