Wednesday, January 23, 2013
Apple shares dive
* iPhone disappointment spurs fears of slowing growth * Investors worry about 2013 pipeline * Loses $50 bln of market value after hours as shares tank Apple revenue, iPhone sales disappoint; shares dive SAN FRANCISCO, Jan 23 (Reuters) - Apple Inc missed Wall Street's revenue forecast for the third straight quarter as iPhone sales came in below expectations, fueling investors' worries that its dominance of the mobile industry was slipping. Shares of the world's largest tech company fell 10 percent to $463 after-hours, wiping out some $50 billion of its market value from its $514 close. On Wednesday, Apple said it shipped a record 47.8 million iPhones in the December quarter, up 29 percent from the year-ago period but below the 50 million shipments that analysts on average had expected. "It's going to call into question Apple's dominance in the space. It's still one of the strong players, the others being Samsung and Google. It's still a two-horse race, but Android continues to grow rapidly," said Sterne Agee analyst Shaw Wu. "If you step back a bit, it's clear they shipped a lot of phones. But the problem is the high expectations that investors have. Apple's conservative guidance highlights the concerns over production cuts coming out of Asia recently." Apple projected revenue of $41 billion to $43 billion in the current, second fiscal quarter, lagging the average Wall Street forecast of more than $45 billion. Fiscal first quarter revenue rose 18 percent to $54.5 billion, below the average analyst estimate of $54.73 billion, though earnings per share of $13.81 beat the Street forecast of $13.47, according to Thomson Reuters I/B/E/S. Apple also undershot revenue targets in the previous two quarters, and these results will prompt more questions on what Apple has in its product pipeline, and what it can do to attract new sales and maintain its growth trajectory, analysts said. Net income of $13.07 billion was virtually flat with $13.06 billion a year earlier. CHINA IS BRIGHT SPOT Investors' expectations heading into the results had already been subdued by news of possible production cutbacks by some component suppliers in Asia, triggering fears that demand for the iPhone, which accounts for half of Apple's revenue, and the iPad could be slowing. Apple shares are down nearly 30 percent from a record high in September, in part on worries that its days of hyper growth are over and its mobile devices are no longer as popular. Intense competition from Samsung's cheaper phones - powered premium smartphone market may be close to saturation in developed markets have also caused a lot of investor anxiety. Meanwhile, sales of the iPad came in at 22.9 million in the fiscal first quarter, roughly in line with forecasts. On the brighter side, Chief Financial Officer Peter Oppenheimer told Reuters that iPhone sales more than doubled in greater China - a region that Apple Chief Executive Tim Cook has vowed to focus on as its next big growth driver. The company will begin detailing results from that country. "These results were OK, but they definitely raised a few questions," said Shannon Cross, analyst with Cross Research. "Gross margin trajectory looks fine so that's a positive and cash continues to grow. But I think investors are going to want to know what Apple plans to do with growing cash balance." "And other questions are going to be around innovation and where the next products are coming from and what does Tim Cook see in the next 12 to 18 months." Apple reported earnings that edged past Wall Street's estimates on Wednesday but its revenue fell slightly short of forecasts during the crucial holiday quarter. After the earnings announcement, the company's shares fell in extended-hours trading. (Click here to get the latest quotes for Apple after the closing bell.) For the fiscal first quarter, it posted net income of $13.07 billion, or $13.81 a diluted share, compared to $13.06 billion, or $13.87 a share, a year earlier. This is the first time in years that Apple didn't post a double-digit earnings increase. Revenue increased 18 percent to $54.51 billion from $46.33 billion a year ago. "The revenue number is dismal as far as what the expectations were," said Jeff Sica president and chief investment officer of SICA Wealth Management. But he added that it's an "incredible number" on its own and Apple has "fallen victim to the curse of high expectations." Analysts had expected the company to report earnings of $13.47 a share on $54.73 billion in revenue, according to a consensus estimate from Thomson Reuters. Apple sold 47.8 million iPhones during the period, up from 37 million a year ago; 22.9 million iPads, up from 15.4 million a year ago; 4.1 million Macs, down from 5.2 million a year ago; 12.7 million iPods, down from 15.4 million a year ago. Tim Cook, the company's CEO, said during the earnings call that the iPhone 4 was in constraint for the entire quarter but sales remained strong. IMac supplies were "significantly constrained" and inventory was at three to four weeks, below the target of four to five weeks, he added. Play Video Apple Earnings Out What Apple's Q1 earnings suggest, with Gene Munster, Piper Jaffray; James Brehm, Compass Intelligence; Daniel Morgan, Synovus Trust; and James Ramelli, KeeneOnTheMarket.com trader. CNBC's Jon Fortt, offers insight on the numbers. Apple's report comes as investors show concern that the company's rocket-like growth may stall as consumers purchase a growing number of cheaper smartphones from competitors such as Samsung. Apple's stock has plunged more than a fourth from its all-time high in September. Last week, the stock fell below $500 for the first time in 11 months. There's speculation that the company will produce a cheaper iPhone, but that would cut into its stunning profits, which are the whole reason it's become the world's most valuable company. DoubleLine CEO Jeffrey Gundlach predicts that the stock will continue its downward slide and hit $425 this year, probably during the current quarter, he added. "I really think it's ultimately going through that number," Gundlach told CNBC. "I think this is really a broken company that's incredibly over-owned." Apple's gross margins fell to 38.6 percent from 44.7 percent a year ago. Following earnings beats from both Google and IBM on Tuesday, investors were looking to Apple's quarterly report to gauge how the company's market share fared during the crucial holiday season. In its fiscal second quarter, Apple forecast revenue in a range of $41 to $43 billion and gross margins of between 37.5 percent and 38.5 percent. The company has routinely lowballed its forecasts in the past, but the outlook will likely prompt analysts to lower their own expectations, which were $45.38 billion, according to a consensus estimate from Thomson Reuters. During the company's earnings call, the company stressed that its guidance is real now, although it said it used to offer what it was likely to achieve. Apple has been known for keeping analysts' expectations low and then blowing past them with its actual results. Apple had warned that the holiday quarter's profits would be lower than Wall Street was initially expecting, because it had so many new products coming out, including the iPhone 5 and iPad Mini. New production lines are more expensive to run and yield more defective products that need to be redone or thrown out rather than sold. The company also revealed that its cash war chest increased even more during the quarter. Apple now sits on $137 billion in cash, roughly 30 percent of its market capitalization. That's up almost 9 percentage points from last quarter and about 5 percentage points from a year ago.