July 25, 2012 in Business

Apple’s growth slows

Sales solid but lower prices disappoint investors
Peter Svensson Associated Press
 
New system

 Apple Inc. will release its new operating system for Mac computers today, with features borrowed from mobile devices and a tighter integration with online file storage.

 Dubbed Mountain Lion, the new software makes Mac personal computers work more like iPhones and iPads. It will cost $20 and will be sold only as a download. Only computers running the two most recent versions of Mac OS, Lion and Snow Leopard, can be upgraded.

NEW YORK – Consumers are buying cheaper Apple products. That’s a disappointment for investors who thought the company would keep boosting profits and revenues at its previous breakneck pace.

On Tuesday, Apple Inc. revealed that both revenue and net income posted increases of just over 20 percent – cause for celebration at most companies, but meager by Apple standards.

The growth was the slowest in more than two years, and failed to meet analyst expectations.

It wasn’t so much the volume of sales that disappointed: Apple sold 17 million iPads in April to June period, beating expectations, and 26 million iPhones, at the low end of expectations.

But Apple’s average selling prices for the gadgets declined to levels last seen in 2010 for the iPhone and the lowest levels ever in the case of the iPad.

Part of the reason was that consumers bought less expensive versions of the devices, said Apple’s chief financial officer, Peter Oppenheimer. Apple introduced a new iPad in March, but kept the older model in stores while cutting its price. The strengthening dollar also meant that overseas sales at constant prices translated into fewer dollars for Apple.

Sales in China, which have been a growth engine for the company, also declined compared to the previous quarter. CEO Tim Cook said that was because the iPhone 4S went on sale in China during the quarter that ended in March, and the company stocked inventories in the country.

Cook said he didn’t see any effect of the economic slowdown in China. The troubles in Europe were evident, however. Sales to the continent grew just 16 percent.

Cook also blamed the tepid iPhone sales – up 28 percent from a year ago, but down from the previous quarter – on anticipation building for the next iPhone model. Apple hasn’t said when it’s arriving, but most company watchers now expect it in October.

Net income in Apple’s fiscal third quarter was $8.8 billion, or $9.32 per share. That was up 21 percent from $7.3 billion, or $7.79 per share, a year ago.

Analysts polled by FactSet were expecting earnings of $10.37 per share.

Revenue at the Cupertino, Calif., company was $35 billion, up 23 percent. Analysts were expecting $37.5 billion.

Apple shares fell $31.92, or 5.3 percent, to $569 in after-hours trading, after the release of the results.

Apple forecast earnings of $7.65 per share for the current quarter, well below the average analyst forecast at $10.26. Normally, Apple’s forecasts are ignored, because the company routinely exceeds them. But for the just-ended quarter, Apple’s cautious forecasts were more accurate than those of analysts.

© Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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