Apple slips as supply woes weigh on holiday sales forecast

Wed Oct 26, 2016 12:52pm EDT
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By Supantha Mukherjee

(Reuters) - Apple Inc's (AAPL.O: Quote) shares slipped as much as 4 percent after the company said it was struggling to keep up with demand for its large-screen, higher-margin iPhone 7 Plus, potentially reducing sales and profits in the Christmas shopping period.

Apple Chief Executive Tim Cook acknowledged in a post-earnings conference call on Tuesday that strong demand for the phone, which features two cameras, caught the company off-guard.

"The mix that we projected on iPhone 7 Plus is short of what the reality is. So, we are chasing supply there," Cook said on the call.

The phone has a higher average selling price than the iPhone 7 variant and brings in more money for the company.

Apple forecast profit margins of 38.0-38.5 percent for the current quarter, below the average estimate of 38.8 percent.

Its revenue forecast of $76 billion to $78 billion for the current quarter was slightly higher than the consensus estimate of $75.08 billion.

Some investors, however, had expected a stronger forecast as rival Samsung Electronics Co Ltd (005930.KS: Quote) struggles to recover from a blow to its reputation after recalling its flagship Galaxy Note 7 phones due to fire hazard.

"Guidance implied iPhone units for December quarter in line with consensus, though expectations had risen into the print given recent Samsung news flow," Mizuho Securities USA Inc analysts wrote in a note.   Continued...

The Apple Inc. store is seen on the day of the new iPhone 7 smartphone launch in Los Angeles, California, U.S., September 16, 2016. REUTERS/Lucy Nicholson