Daily Management Review

Apple Found Itself in "Unprecedentedly Extreme Conditions"


Apple Inc. has reported for the first quarter of its fiscal year and also presented outlook for the second quarter. Both reporting and forecast showed disappointing: the company recorded the lowest growth rate in the first quarter. As for the second quarter, the management even warns of probably the first - since the introduction of iPhone – fall in sales. CEO Tim Cook attributes this to the "unprecedentedly extreme (market) conditions".

After close of New York trading, Apple Inc. has reported on its activities in the first quarter of the financial year, as well as projections for the future. According to these data, the company sold 74.8 million smartphones during the reporting period, compared with 74.4 million a year earlier. This is the lowest growth rate in sales during iPhone’s existence. To make matters worse, the company expects the very first decline in iPhone sales for the next quarter. Apple estimates that figure will be $ 50 - $ 53 billion, while it was $ 58 billion a year ago.

Representatives of the company tried to highlight good news and the fact that the quarter, despite the problems with smartphones, has appeared a record for Apple. Total revenues for the period totaled $ 76.9 billion, net profit - $ 18.4 billion. Both figures are maximum for the company throughout its existence.

CEO Tim Cook declared the "all-time record sales of iPhone, Apple Watch and Apple TV», which, however, did not reassure investors and analysts. IPhone sales accounted for approximately 68% of all sales, and the predicted decline in key products sales is disturbing observers and investors. Moreover, the company observed drop in sales of other products. IPad sales fell to 16.1 million units in the pre-season (forecast 17.3 million), Mac sales decreased to 5.31 million (forecast 5.8 million units).

At that, declaration of Apple’s top managers left investors and analysts without hope that the situation will suddenly improve somehow. Mr. Cook said that the company got in "extreme conditions not seen before." In turn, the Chief Financial Officer Luca Maestri warned that iPhone sales will be reduced in the next quarter, yet declined to mention the third quarter, saying that the company is not making any predictions about this. "We are in an extremely challenging macroeconomic environment," - he added. According to him, the company sees a subsidence in China, especially in Hong Kong. In addition, there are signs of a slowdown in the key countries such as Brazil, Canada, Russia, the US and Japan. In addition, the company put pressure on other factors, such as strong dollar. According to Mr. Maestri, the dollar’s course costed the company about $ 5 billion.

Experts acknowledge that the company suffered a major setback. There are other products and potential to launch them. However, the room left by slowing IPhone is too large to be filled in with something"- Abhey Lamba, Mizuho Securities, quoted by Bloomberg.

Apple Inc. shares fell 2.7% after the announcement.

source: bloomberg.com

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