Apple sees first sales dip in more than a decade as super-growth era falters

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Apple iPhones Sales Are Down In Latest Quarter

SAN FRANCISCO (Reuters) - Apple Inc forecast its first revenue drop in 13 years and reported the slowest-ever increase in iPhone shipments as the critical Chinese market showed signs of weakening, suggesting the technology company's period of exponential growth may be ending.

The slowdown comes as Wall Street analysts worry the company does not have another blockbuster product to replace the iPhone. Apple does not report Watch sales, but it does not appear to have the makings of being a hit on the same level as the iPhone a year after launch.

And while the company is reportedly working on a car, what it plans to do in that area and when are still unclear.

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The company's shares, which have fallen 5 percent this year, bounced around in after-hours trading and were down more than 2.6 percent.

"It's disappointing to see them miss on an already downward adjusted sales number and the fact is that with their iPhone growth slowing what was needed was a product to be excited about," said J.J. Kinahan, chief strategist at TD Ameritrade. "Pressure on the shares will continue without a well-defined plan to grow sales or a new product."

The company said on Tuesday it sold 74.8 million iPhones in its fiscal first quarter, ended Dec. 26, the first full quarter of sales of the iPhone 6S and 6S Plus. The 0.4 percent growth in shipments was the lowest since the product was launched in 2007.

The greatest moments Apple has ever had on stage:

The 11 greatest moments Apple's ever had on stage
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Apple sees first sales dip in more than a decade as super-growth era falters

1. When Jobs returned to Apple in 1997, the crowd erupted with applause and cheer as he walked back on stage for the first time.

(Photo via YouTube)

2. The introduction of the first iMac was a milestone for Apple. It was the first computer that seemed cool and not focused on the enterprise. The crowd ate it up.

(Photo via YouTube)

3. The crowd went nuts when Jobs demonstrated how WiFi works back in 1999.

(Photo via YouTube)

4. Jobs showed the world the iPod for the first time at an intimate event in 2001.

(Photo via YouTube)

5. Conference attendees went ballistic when apple unveiled the iPhone in 2007.

(Photo via YouTube)

6. He even prank called Starbucks on stage and ordered 4000 lattes to show how well phone calls worked on the iPhone.

(Photo via YouTube)

7. Apple debuted the iPad in 2010 at half the price most people expected.

(Photo via YouTube)

8. One of Jobs' most memorable "one more thing" announcements was the first Facetime demo in 2010.

(Photo via YouTube)

9. Jobs perfectly summed up the company's approach to mobile with a simple image of a street sign.

(Photo via YouTube)

10. Apple CEO Tim Cook used Jobs' famous "one more thing" line for the first time when he unveiled the Apple Watch.

(Photo via YouTube)

11. When Apple bought Beats Electronics for $3 billion last year, Dr. Dre and renowned record executive Jimmy Lovine were brought on as official Apple employees.

(Photo by Andy Kropa/Invision/AP, File)


IPhone sales were expected to fall for the current quarter compared with the same quarter last year, Chief Executive Officer Tim Cook said on a conference call with analysts.

But suggesting there is still room for growth, 60 percent of people who had an iPhone prior to the launch of the iPhone 6 have yet to upgrade to an iPhone 6 or 6S, Cook said.

And iPhones remain popular with American consumers. According to a Reuters/Ipsos poll, 86 percent of iPhone owners were somewhat or very likely to buy another iPhone.

Of those likely to buy a phone, 15 percent are currently looking to upgrade and 17 percent will when the next iPhone is released. The January poll had a credibility interval of 2.0 percentage points.

While revenue in Greater China rose 14 percent in the last quarter, Apple is beginning to see a shift in the economy, particularly in Hong Kong, Apple Chief Financial Officer Luca Maestri told Reuters in an interview.

"As we move into the March quarter it's becoming more apparent that there are some signs of economic softness," Maestri said. "We are starting to see something that we have not seen before."

Apple forecast second-quarter revenue of $50 billion to $53 billion, below analysts' average forecast of $55.5 billion. In the same quarter last year Apple reported revenue of $58 billion.

Apple's guidance for the March quarter implies iPhone sales of 50 million to 52 million units in the March quarter, which would mark the company's first-ever decline in sales of the gadget, said analyst Daniel Ives of FBR Capital Markets & Co.

In the same quarter last year Apple sold 61.2 million iPhones.

The company reported revenue of $18.37 billion from Greater China, accounting for 24.2 percent of total revenue. Revenue from the region had nearly doubled in the fourth quarter.

Apple's iPhone shipments fell short of analyst expectations for 75.5 million, according to research firm FactSet StreetAccount.

Apple reported earnings of $3.28 per share, beating the average analyst estimate of $3.23 per share, according to Thomson Reuters I/B/E/S. Revenue increased 1.7 percent to $75.87 billion, both records for the company.

Analysts had expected revenue of $76.54 billion.

Apple's overall performance was "slightly better than feared," said Ives at FBR.

And despite the slowdown, Apple remains the most profitable company in the S&P 500 and the most valuable publicly traded U.S. tech company.

The rise in iPhone shipments in the key holiday shopping quarter was the smallest since the second fiscal quarter of 2013, when they rose 6.8 percent, according to data company Statista.

Maestri attributed the lackluster revenue to foreign exchange headwinds caused by the strong U.S. dollar, which he said knocked about $5 billion off the company's revenue.

(Additional reporting by Anya George Tharakan in Bengaluru; Editing by Stephen R. Trousdale, Bill Rigby and Lisa Shumaker)

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