Latest Apple results see growth slow down

Apple’s results for the January to March 2013 quarter were published last night. The results show for the first time in ten years that growth is slowing down. The headline net profits figure came in at $9.5 billion compared to $11.6 billion in the same period last year.

Despite the profits dip the results for the quarter (Apple’s fiscal Q2) were better than expected by many industry analysts. Strong performance of the iPad and iPhone ranges brought in increased revenues totalling $43.6 billion. However with the increasingly competitive market for such devices Apple’s margins simply aren’t what they used to be.

Fears of such a slow down have been hurting the share price in recent months. Apple’s 52 week high was $705, today its stock is valued at $406 per share. This latest set of results isn’t going to fix that but the company have a new approach to sweeten Wall Street’s view of the company. Reuters call this Apple’s “cash plan”, which it is hoped will take the heat off Apple and Tim Cook. Apple is to divert investors’ attention away from its previously unstoppable growth and offer more mature company benefits such as an increased yearly dividend payments to shareholders. In this way it plans to return $100 billion to shareholders by the end of 2015. Reuters says Tim Cook is trying to “reset heightened expectations” over Apple’s performance.

Sales of Apple's computer range were flat

Tim Cook made a statement to accompany the latest set of results. He said “The most important objective for Apple will always be creating innovative products. Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline.” On the subject of the stock price Cook said “The decline in Apple's stock price over the last couple of quarters has been very frustrating for all of us... but we'll continue to do what we do best.”

In the coming year we will see new iterations of the iPad, iPhone and Apple desktop and laptop computers but investors have hopes of new products such as the iWatch and Apple TV equipment making really big waves for the Cupertino, California based company.

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Well I'm a little bit smug about this because if you search back you'll find me nailing this one in Jan, mocking Grubers comments that it was due to down pressure of the options market.

It is hard to see where they can go, mobile phones have crested with the S3 showing how many people want an effectively cheaply made, heavily carrier subsidised device.

The 10“ tablet market I'd say is contracting. I have two, but I always either want the convenience of my 7” or an ultrabook (thout I do find myself reaching for the surface RT an awful lot now). My iPad is only used for flying now, but depending on one killer app is not a way to keep users.

The smaller tablets are a kind of race to the bottom. £150 is the price to beat. Sure you can charge an extra £100 because of the logo, but not much more. Given that lots of people want a refreshed mini, due to it losing out so badly in the specs game, I think Apple are going to find they lose even more margin (at the moment charging more for cheaper hardware is a good thing for them!).

What options do they have? Massive software refresh, iOS is really quite poor in terms of features, things like its multi-tasking are just awful compared to Andriod or WindowsRT. Even just getting a video on to the iPad is a logistical nightmare. If they made iOS a more powerful OS, they could perhaps sell new versions of the devices, by locking it in.

The only other one really is to find a new area. Apple don't want to release a cheaper devices, half of their sales go to fashion ***** who would buy the badge and not what it is, you can get a rough sense of this by the distribution of capacity of devices sold.

They can't make smaller and lower cost devices, as they might seriously disrupt their higher end.

Where is the area that will sustain sales going to come? Right now there clearly isn't anything. Unless they pull something out of the bag, it will be circling around 350 very soon.

I'd argue that $350 is where the shares should be anyway. Agree 100% with all of the above

Well the issue is how long can that go on for?

I remember upgrading my PC all the time. I've not for 3 years now. I have simply no need. I've gigabytes of SSD space on the RAID, the graphics cards haven't been significantly surpassed, and the old CPU is doing just fine. Nothing has come along to beat my 3008WFP monitors.

In fact it is looking like the Chair and Desk will last less time than the PC.

Sure laptops have some space to get smaller, lighter, with less power drain. But my 3 year old Z series, with core i7 256gb of SSD RAID and 8gb of RAM has more than enough guts, add in the very high res screen. Why do I need something a little bit lighter! Not to mention it would probably cost £1.5k+ to replace, for something a little bit lighter, the batterylife is the only reason to upgrade, but not 1,500 reasons too. It's not going to happen.

This is why I don't think I'll have much in the way of PC expenditure this year, in fact the only thing that might be replaced is my i5 Ultrabook, purely because it got a bit trashed (dropped it a bit, oh and DEET, laptops don't like DEET).

So if I'm not upgrading every 3 years. Who is?

This is the problem the PC industry has been facing, simply the devices they sold two years ago, are still great! No significant improvement or change has happened.

I remember a friend of mine joking about the iPhone 5, “will I upgrade, pfft no, I like my gmaps”. The fact is this full on apple fan didn't want to move, because there wasn't a good enough reason to, in fact they saw only the negative side of apple maps.

This is why I'm staying short Apple. Their buyback plan resulting in a flatline is a terribly worrying thing for any investor who is still holding. Apple have to switch from growth stock, to high div yielding. Or pull another must have rabbit out of the hat.

I thought folks were saying that the Apple share price was “wildly inflated” and “not sustainable” for some considerable time? In which case all that's happening is that it's drifting down to the level it should be at.

What's amusing me is the media spin on this - very much “end of the world” type stuff, whereas Apple made profits near $10bn net - it's not as if they made a loss, they're still very much a wildly profitable company. :rolleyes:

Unfortunately, it's too much to hope for that the hit on the share price will force them to be less litigious.

I suppose the other aspect is that their honeymoon is pretty much over - there's cheaper and/or arguably better alternatives to both iPad and iPhone for a lot of people, something I couldn't have said when the iPad first came out. The state of the economies around the world also don't really encourage that “upgrade every year” mentality that helped Apple - e.g. the lack of wild enthusiasm over the Galaxy S4.

You guys are right, and it has been all of the hardcore apple fans that have refused to accept the inevitable decline. I've told them time after time the profits will diminish and the shares will fall because eventually if you keep trying to rip your customers off with constant refreshes based on the bare minimum amount of advancement, even your core customer base are going to say “hang on do I really need the iphone 3SSS”. The obvious thing for them to do is be more competitive, they need to offer more features and make iOS more open so you aren't being dragged into a staggeringly restrictive eco-system - I don't see them doing that because controlling their customers has been their key design ethos for ages. Actually I think it's a good thing that they will lose their market share and hopefully some of the smaller players can take some from Samsung too - I'd like there to be a lot more competition in the future rather than Samsung and Apple taking all the pie.

Latest Apple results see growth slow down

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