updated 07:54 pm EDT, Mon March 31, 2014
Company may beat consensus with above-average iPhone growth
Apple has announced that it will release its Q2 results and hold its quarterly conference call with analysts on April 23 after the markets close. The company's fiscal second quarter, which just ended, is traditionally a difficult one for the company -- at least from an analyst's perspective. Sales, while still growing year-over-year and extremely robust by the standards of nearly any other company, fall precipitously from the previous holiday quarter. Apple's Q1 saw $57.6 billion in revenue, but the company guided analysts that it expects between $42 billion and $44 billion for this quarter.
The drop is seasonal and to be expected, but analysts are more worried that growth will be flat -- which would signal that expectations of iPhone sales in China and other regions haven't been met. Apple reported $43.6 billion in revenue in Q2 2013, and analysts believe the company should be able to beat that figure, given that it has expanded the market for iPhones through its year-end deals with China Mobile and Japan's DoCoMo last December.
However, plummeting iPod sales, slowing Mac sales (falling less than the PC industry as a whole, but still affected by the global PC downturn) and a lack of revamped or all-new products in recent months has left the company even more dependent on strong iPhone and iPad sales -- the only Apple products most analysts care about -- to carry the quarter than ever.
Current consensus figures from analysts believe Apple has sold 38 million iPhones, its best-selling product. However, Morgan Stanley's Alphawise -- which has had a mostly strong record of predicting Apple iPhone sales -- believes the total for Q2 will be closer to 42 million iPhones. If correct, it would be record figure for a March quarter -- and may be sufficient to appease the market, which looks strongly to sales growth in key products rather than profitability (on which Apple remains the undisputed king) or cash on hand (again, an area where Apple is uncontested).
Analysts have been harsh on Apple and its stock over recent months, complaining about a lack of revamped and (in particular) all-new products to generate the kind of phenomenal sales growth the company saw over the 2011-2013 period as the iPad went mainstream and the iPhone arrived on new carriers (notably Verizon) and with substantive functionality and feature improvements. Ironically, the company's own tremendous success makes it difficult for it to post huge jumps in sales or income anymore, as the company is hugely larger in revenue than it was when the iPad came out.
Thus, analysts believe the only path to continued large growth is a steady stream of innovative new products -- but Apple has refused to play by these "rules," with the exception of its biannual release of redesigned iPhones (the "iPhone 6," expected to arrive in the autumn, is likely to be significantly different if Apple keeps to its patterns). Investors focused on short-term gains often fail to remember that Apple's biggest products in the mobile arena actually came years apart: the iPod debuted in 2001, the iPhone came along six years later, and the iPad three years after that.
CEO Tim Cook has promised that Apple will enter "new product categories" in 2014, but did not say more specifically when -- aggravating a market that is used to roadmaps and long pre-announce times. Though the company is still growing, it did drop its rate of growth from 54 percent in 2012 to just under 10 percent in 2013.
The conference call with analysts is scheduled for 2PM PDT, 5PM EDT. It is available as a QuickTime audio stream from Apple's investor page. MacNN will post live updates and analysis of the results.