By Paresh Dave, Los Angeles Times
The last time Apple Inc. announced a quarterly sales decline, Steve Jobs was celebrating the laptop going mainstream.
Bullish prospects countered the 1 percent fall reported in April 2003, pushing down the company’s stock, already near a bottom, only slightly.
Now, falling interest in the iPhone is expected to bring Apple’s first year-over-year revenue drop since then when it reports earnings Tuesday. Estimates say Apple generated $2 in earnings per share and $52 billion in revenue during the first quarter, which would mark a 10 percent decline from a year ago, according to a survey of 47 analysts by research firm FactSet.
But though shares endured a 3 percent hit last week, investors are mostly holding on this time around too, even though the company hasn’t outlined when and how it can return to robust growth.
“With valuation currently reflecting long-term growth challenges … we view shares as fairly valued and maintain our hold,” Deutsche Bank analyst Sherri Scribner told clients last week.
Apple has become so big — delivering the largest profits ever among the world’s publicly traded companies — that the huge revenue bumps of recent years have become difficult to replicate. The company says there are still people out there who want and can afford new $700 iPhones. But its outlook has been met with an outpouring of skepticism.
For instance, Scribner is concerned that Apple won’t be able to get price-conscious buyers in India and China to take up the iPhone fast enough to make up for the steadying number of Americans and Western Europeans buying new iPhones.
More than 70 percent of smartphones sold in China cost less than $300. In India, 80 percent are below $150. Neither statistic augurs well for Apple, whose smartphones sell at a huge premium.
Analysts on average expect Apple to sell 217 million iPhones in the 12-month period ending Sept. 30. That would mark a 6 percent decline from last year — in line with the 7 percent drop predicted across the smartphone industry in 2016. Annual smartphone sales growth has never before dipped into the single digits, research firm Gartner said.
Apple Chief Executive Tim Cook forecast in January an iPhone sales decline for the quarter, though he refused to offer predictions for the rest of the year.
Some experts are now worried that Cook will say Tuesday that sales for the April-through-June quarter will be more underwhelming than expected. The evidence includes reports that Apple’s suppliers have stuck to reduced production cycles, suggesting there’s no big sales uptick in sight.
“This overall market is slowing,” IDC’s mobility research director Ryan Reith said of smartphones. “Apple has had ridiculous growth where they have outpaced the market and that has to change at some point.”
The earnings announcement, originally scheduled for Monday, moved to Tuesday so that Apple employees could attend the memorial service for Bill Campbell. The former Apple marketing executive and board member died a week ago at 75.
©2016 Los Angeles Times Distributed by Tribune Content Agency, LLC.
