Apple Lowers Fourth-Quarter Forecasts Amidst New Product Launches

on Oct 26, 2012

Apple (NASDAQ:AAPL), the world’s most valuable company by market capitalisation, published disappointing third-quarter results and warned investors to expect pre-Christmas profit falls.

**Apple’s Third Quarter**
Apple achieved revenues of $36 billion (£22.34 billion) for the three months to September 29, slightly higher than Wall Street’s expected $35.8 billion (£22.21 billion). Earnings however were at $8.67 (£5.38) per share which was below estimates of $8.75 (£5.43). Quarterly net profit grew by 24 percent year-on-year to $8.2 billion (£5.09 billion).

The tech giant shipped 26.9 million iPhones in the last quarter but iPad sales fell 14 million short of analysts’ forecasts as the economy remained week and consumers awaited the iPad mini.
Apple’s sales in China were a major boost for the company as quarterly revenue there rose by 26 percent and jumped nearly 80 percent to $23.8 billion (£14.77 billion) over the full year. Revenue from China accounted for 15 percent of the total so far this year and with the iPhone 5 expected to launch sometime during the December quarter, China is set to become the company’s most vital market.

**Profit Fall Warnings**
Apple warned investors that due to its rapid sequence of product launches, a stronger dollar and one week less in this years’ fourth quarter compared to last years’, the company’s profitability will be put under strain in the run-up to Christmas.
According to CFO Peter Oppenheimer, Apple’s gross profit margins on each of the new iPad mini’s are “significantly below our corporate average” as the tablet is priced “aggressively” at $329. The iPhone 5 is also less profitable than its predecessors.

The company said it anticipated earnings of $11.75 (£7.29) a share in the next quarter below analysts’ forecasts of $15.41 (£9.56) and the $13.87 (£8.61) reported a year earlier. Gross margins are expected to decline to 36 percent, well below the expected 44 percent.
!m[Tech Giant Gears Up For Massive Christmas Season Assault on the Market](/uploads/story/649/thumbs/pic1_inline.png)CEO Tim Cook said that the new line of products will account for three-quarters of sales in the October-December period and despite the forecast reductions, the company remains “very, very confident” in its strategy.

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“The demand for [the] iPhone is extremely robust,” Mr Cook said as quoted by the Financial Times. “We are in a significant state of backlog right now. Our output has improved significantly since early this month. I am very pleased with the progress we have made there.”
New Products, New Fortunes
This week Apple announced a slew of new products including its smallest and cheapest tablet to date- the 7.85-inch iPad mini.
The iPad mini is priced at $329 for the 16GB model and is expected to ship on Friday 2 November. The company also shocked the public and especially the happy owners of the six-month old iPad 3 with its announcement it will be releasing the iPad 4 with a new A6X chip that “delivers up to twice the graphics performance, without sacrificing battery life”. There was also the expected iBooks 3 update, a new 13-inch Retina MacBook Pro, a Mac Mini and, one of the things found most impressive by critics, an extremely slim iMac, which can pack some serious heat with its impressive hardware specifications.
On the legal front, Apple won yet another battle against Samsung after the $1.05bn (£652m) awarded in August. In a preliminary ruling, a US International Trade Commission (ITC) judge said Samsung infringed four of Apple’s patents including one that relates to the front face of the smartphone and one for touch-screen technology. The judge’s ruling will go in front of a full commission, which is scheduled to conclude its investigation in February.
Apple didn’t skip taking a swing at its new competitor Microsoft with Mr Cook saying the rival’s tablet Surface is “a fairly compromised, confusing product,”
“I suppose you could design a car that flies and floats but I don’t think it would do all of those things very well.” he said regarding Microsoft’s new device.

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