Rough patch: An Apple store in New York. Sales of the iPhone, the company’s biggest moneymaker, slipped 2.4% to US$39.7bil in the third quarter, compared with a US$39.8bil estimate. — Bloomberg
LOS ANGELES: Apple Inc has posted its third straight quarter of declining sales and predicted a similar performance in the current period, hurt by an industry-wide slump that has sapped demand for phones, computers and tablets.
After the company reported a revenue decline of 1.4% in the fiscal third quarter, chief financial officer Luca Maestri said on a conference call that Apple’s performance would be similar this period.
An additional drop would mark the longest streak of declines in two decades – a startling slowdown for the world’s most valuable company.
Shares in the California-based company dropped 3.1% in New York last Friday morning, stripping it of its US$3 trillion valuation.
“The environment is challenging,” Daniel Flax, a senior research analyst at Neuberger Berman, said in an interview with Scarlet Fu on Bloomberg Television.
“Consumers face pressure from general interest rates, higher inflation. There are a lot of cross currents that Apple, like a lot of other companies, cannot outrun.”
Though Apple’s overall revenue of US$81.8bil came in just above Wall Street estimates last quarter – helped by record-setting services sales – iPhone demand was weaker than predicted.
On the call with analysts, executives blamed foreign-exchange headwinds for hurting results.
A stronger dollar has eroded the company’s revenue, most of which comes from overseas. Maestri, along with chief executive officer Tim Cook, stressed that sales would be up on an annual basis if currency were held constant.
Still, the report showed that Apple’s much-prized iPhone hasn’t evaded a downturn that has rattled rivals and partners.
Qualcomm Inc, a mobile-device chipmaker and iPhone supplier, had already sparked fears about demand with its earnings last Wednesday, sending its shares plunging ahead of Apple’s report.
It didn’t help that Apple had a dearth of new products last quarter – beyond marginal updates to its high-end desktop computers and a larger MacBook Air.
The current quarter will be a different picture, with the new iPhone 15 and Apple Watches set to be unveiled during the period.
Sales of the iPhone, Apple’s biggest moneymaker, slipped 2.4% to US$39.7bil in the third quarter, compared with a US$39.8bil estimate.
Notably, Apple’s executives admitted that the smartphone market is going through a slowdown, particularly in the United States.
Apple also has been reining in spending. The company slowed down hiring in several areas, Maestri said. “We are very pleased with our ability to decelerate some of the expense growth.”
China was a bright spot, bucking a trend among some of Apple’s tech peers.
Maestri said that wearables – including the Apple Watch and AirPods – did particularly well in the country. The iPhone also held up in China, serving as “the heart of our results there,” Cook said.
Demand for the iPhone 14 model is tapering off as the company prepares to unveil the next version, which promises to be the most significant upgrade in three years.
New iPhones typically debut in September, a few weeks before the fourth quarter ends. That means the bulk of revenue comes in the following period, Apple’s fiscal first quarter, which is invariably its most lucrative time of year.
The iPhone 15 Pro models will add new features like a titanium frame, thinner borders around the screen and a faster processor. But given the sluggish state of smartphone spending, it may still be hard to entice some consumers to upgrade.
Apple has informed suppliers that it expects shipments of the device to remain flat with the year before through the balance of 2023, at about 85 million units.
Other phone makers, including Samsung Electronics Co, have also seen sales of their devices slow or remain flat.
In the current quarter, Apple expects the year-over-year performance of the iPhone and services to improve. That will outshine the Mac and iPad divisions, which the company said would decline by a percentage in the double digits.
Touching on a hot-button issue, Cook said that the company has been researching generative artificial intelligence (AI) technologies for years.
Bloomberg reported last month that Apple has developed its own large language model – a technology like the one used for training AI chatbots such as OpenAI Inc’s ChatGPT – and is preparing a generative AI push for next year.
Such tools can create written content or images based on text prompts.
The iPad, meanwhile, suffered a sales decline of 20% last quarter. That business generated US$5.79bil, versus calls for about US$6.33bil.
Apple hasn’t updated any of its tablets since last year and won’t make any significant changes to the lineup until 2024. —Bloomberg
