Apple posts first profit dip in ten years

Apple posted its first annual profit decline in over a decade and a 20 per cent slump in quarterly revenue yesterday as its efforts to woo first-time users hit margins.   

Apple maps

The company, however, hailed its quarterly earnings for the three months to March 30 as its “best-ever” second quarter, recording revenue of $43.6bn (£28.6bn) during the period, ahead of analyst expectations. 

This included 37.4 million iPhone sales plus iPad sales increasing 65 per cent year-on-year to 91.55 million during the period. Apple also claimed “record” quarterly iTunes and App Store revenues of $4bn (£2.6bn).

However, the increase in iPad Mini sales, which generate lower profit margins than earlier versions, plus a $20 decrease in the average selling price of its various iPhone models caused profit to decline.

Apple reported profits for the quarter of $9.5bn (£6.3bn), compared with $11.6bn (£7.6bn) in the same period a year ago, plus a gross margin of 37.5 percent – compared to 47.4 percent 12 months earlier.

Total revenue for the quarter also dipped 20 per cent compared with the three months to 29 December 2012, in line with expectations due to the seasonal trading period (see chart).


Speaking during the company’s earnings call, Apple CEO Tim Cook, said: “We acknowledge our growth rate has slowed and margins have slimmed from its earlier demands in 2012.”

However, he did add that the company had experienced growth in new markets adding the company had deliberately altered its hardware pricing throughout the period to win-over first time users.

During the call, Cook also alluded to new product announcements before the end of the year followed by more in 2014.

“I don’t want to be more specific but we have really great stuff coming in the fall and all across 2014,” he said.

Apple also announced it was to more than double efforts to offer a return capital to shareholders in a move than was largely seen as a bid to appease investors.

Apple’s iPhone has already been eclipsed in the smartphone sector by manufacturers producing devices which run on Google’s Android operating system.

EMarketer estimates Apple’s share of the US smartphone market will reach 38.3 per cent in 2013, up from 36.5 per cent last year. Android’s share is expected to reach 45.9 per cent this year according to the firm, up from 43.5% in 2012. 

Its dominance of the tablet computing sector is more concrete with the iPad commanding a 72 per cent share of the UK market in 2013, according to eMarketer.

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