Apple's holiday surprise: big sales, not so big profits

Tue Oct 25, 2016 8:12pm EDT
 
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By Jeffrey Dastin and Anya George Tharakan

(Reuters) - Apple Inc posted its third successive quarter of declining iPhone sales on Tuesday and forecast slimmer-than-expected profit margins over the upcoming holiday season even as it projected record sales, sending its shares down.

The world's most valuable publicly traded company said improved sales from China were around the corner, despite revenue falling almost 30 percent from the country in the latest quarter. It said sales so far to India have only scratched the surface.

But a slight miss on fiscal fourth-quarter revenue and a projection of gross profit margins a touch behind analyst targets reflected broader concerns that Apple may have lost its tech superiority, even with the refreshed iPhone 7.

"In essence, in China and elsewhere, while Apple’s products are still seen favorably, the distance between Apple and its competitors is nowhere near as great as it once was," Neil Saunders, head of retail research firm Conlumino, wrote in a note.

Apple shares fell 2.8 percent to $114.99 in after-hours trading.

Chief Financial Officer Luca Maestri said in a phone interview with Reuters it was "impossible to know" if there was any effect yet from rival Samsung Electronics Co Ltd halting production of its fire-prone Galaxy Note 7 phones earlier this month.

He also said that Apple was "supply constrained" and selling all the smartphones it could make.

"It's clear that Apple is bullish about growth in the iPhone, but there's little evidence of that growth in the actual results announced today," said analyst Jan Dawson of Jackdaw Research.   Continued...

 
A customer buys the new iPhone 7 smartphone inside an Apple Inc. store in Los Angeles, California, U.S., September 16, 2016. REUTERS/Lucy Nicholson - RTSO2V4