On Tuesday, the Cupertino company revealed that both revenue and net income only increased by 20 percent. Those numbers, despite being magical for many companies out there, missed analyst expectations and were the slowest in terms of growth for Apple in over two years. In 10 years, Apple has only missed expectations twice.
In the April to June period, Apple sold 17 million iPads and 26 million iPhones. The iPad numbers were actually above expectations, but the iPhone numbers missed the mark. It’s hard to believe 26 million sales of anything “missing the mark,” but that may tell us more about what analysts expect out of Apple than it does about anything.
“We became too confident, in our expectations, that Apple had literally a perfect pulse on end demand throughout the globe…and quite simply, that wasn’t the case this quarter,” David Rolfe, chief investment officer at Wedgewood Partners, said.
But the volume of sales wasn’t really behind Apple missing its expectations. It was the “fault” of those lousy consumers, according to the company’s chief financial officer Peter Oppenheimer. Customers were buying the less expensive versions of Apple’s products. With the new iPad arriving, older models remained in stores with reduced prices. With customers not forced to go with the latest and greatest, some actually decided to go with a less expensive model.
Apple is running into the problem of its business model. With so many new products announced and pushed out around the corner, customers are simply waiting for the “next one” and bypassing smaller incremental upgrades. Expectations for the anticipated iPhone 5 are high, even without the company’s confirmation of its existence, and that shows that customers are already used to Apple’s game.
Consumers are quite simply in the habit of getting new Apple products each year. It’s a cycle that produces loyal customers at the same time that the expectations of those customers prevent them from buying every little thing Apple drops.
Net income in the fiscal third quarter was $8.8 billion, amounting to $9.32 per share – up from $7.79 per share a year ago. Analyst expectations were in the $10.37 per share neighbourhood. Revenue was $35 billion, up 23 percent, but analysts had forecast $37.5 billion.