Apple’s Profit Rocket Hits Air Pocket
Apple’s blockbuster revenue growth is slowing drastically, as iPhone sales plateau and the company finds itself lacking revolutionary new products.
The company’s warning, issued Wednesday as part of its financial results for the holiday quarter, sent Apple Inc.’s stock plunging by more than 10 percent, wiping out a year’s worth of gains.
Analysts said the warning suggested Apple can no longer sustain its growth without some completely new products. Its last revolutionary creation, the iPad, was launched in 2010. Co-founder Steve Jobs, who was the engine behind the creation of the iPod, iPhone and iPad, died in 2011.
"It has been an overriding concern with Apple that they would not be able to generate revenue growth just rolling out new versions of old products," said Jeff Sica, president and chief investment officer of SICA Wealth Management. "Now they’ve proven it in their numbers."
On a conference call with analysts, Apple CEO Tim Cook rebutted that idea, but as usual, gave no details.
"We’re working on some incredible stuff. The pipeline is chock full," he said.
Before he died in 2011, Apple co-founder Steve Jobs told biographer Walter Isaacson that he had figured out how to create a groundbreaking, easy-to-use TV set. Since then, company watchers have been waiting for the company to bring out something in that vein to re-energize sales. Cook said the company was still working on it.
"I tend to believe that there’s a lot we can contribute in the space, and so we continue to pull the string and see where it leads us," he said.
Apple said it expects sales of between $41 billion and $43 billion in the current quarter, which ends in March. That would usually be little cause for concern, even though analysts were expecting $45.6 billion, because Apple usually lowballs its forecasts. But Chief Financial Officer Peter Oppenheimer said the company is changing its practices and providing a reasonable range rather than a single, easily achievable number.
That means Apple is looking at sales growth of about 7 percent from last year’s January to March quarter, a striking number for a company that’s posted double-digit increases in every quarter except one since 2008.
Apple’s stock fell $55.58 to $458.43 in extended trading, after the release of the results. The shares are down 35 percent from their all-time high, hit Sept. 21, when the iPhone 5 launched.