Industry watchers took a bite out of Apple’s annual report last night and found half a worm. Revenues at the tech giant may be up 18% at $54.5bn, but this figure falls far short of analysts’ expectations. Shares fell 10% in after-hours trading, wiping $50bn from Apple’s market value.
Since September, Apple has lost about 30% of its share price and word on the blogosphere has it that Apple is finally losing its sheen for consumers. No wonder the tech community has been so desperate to get an eyeful of these results.
Out of the 50 million iPhones that Apple expected to flog at Christmas, it shifted 'only' 47.8 million. There should be no shame in these numbers: Apple sold 37 million in 2011, but the markets are a harsh critic. And despite CEO Tim Cook saying that he was ‘thrilled by the results', Wall Street shrugged. Apple usually exceeds its targets, it grumbled. Jeff Sica at Sica Wealth Management goes so far as to say: ‘The revenue number is dismal as far as what the expectations were.’
Nevertheless, Cook ploughed on through the conference call. Rory Cellan-Jones, BBC technology correspondent, says: ‘The superlatives kept pouring out. Best ever iPhone and iPad sales, record music and app sales, growth in iPhone sales in China in the triple digits – and a cash pile of $137bn…’
But it wasn’t all good news. Apple sold four million Macs, 18% fewer than last Christmas. And the late release of the iPad Mini and its latest high-resolution screen Macs have also been blamed for subdued sales figures.
However, if you break down Apple’s revenues by territory, it’s clear there are millions of affluent Apple fanboys and girls in the world today. In the US, revenues were up 15% to $20bn. In China, sales increased 67% to $6.8bn and, in Japan, sales were up by a quarter despite the country’s ongoing economic strife.
In Europe, where cash-strapped consumers simply didn’t have the euros to spare for Apple shiny gadgets, the tech giant is losing ground to rivals such as Samsung. Growth across the eurozone slowed from 55% in 2011 to 11% last year.
Let’s face it, Apple is never going to attempt to compete on price. Not even the uproar over the price of the iPad Mini, which is at least $100 more expensive than pundits expected, will shift Cook’s stance. ‘We aren't interested in revenue for revenue's sake,’ he says. ‘We could put the Apple brand on a lot of things and sell a lot more stuff. The most important thing to us is that our customers love our products, not just buy them but love them.’ To put things into perspective, Apple makes a juicy 55% profit margin on the iPhone 5….
Cook’s strategy still holds water while Apple’s products retain that must-have ‘wow’ factor. But if the company doesn’t start innovating again, bringing out some new, truly game-changing products rather than endless iterations of Jobs’s creations, it’s a ticking time bomb.
And one thing’s for sure, if the ‘incredible stuff’ Cook claims to be working on is anything less than incredible, the markets will take a very harsh view indeed.