Apple Falls After Sales Forecast Drop

Apple Inc. fell in early trading after forecasting a sales decline for the first time in more than a decade, adding to evidence that the market for smartphones is becoming saturated and that expansion in China is no longer enough to maintain the company’s unprecedented run of growth.

Revenue in the first three months of the year will be $50 billion to $53 billion, Apple said Tuesday, the first quarterly drop since 2003 and below analysts’ estimates for $55.5 billion. That follows a holiday quarter in which overall sales and iPhone shipments fell short of projections, reinforcing concerns that Apple is reaching the limits of iPhone growth and that a push in China won’t make up for a slowdown in the rest of the world — a sentiment that’s fueled a stock slide of 20 percent in the past six months.

While Apple remains immensely profitable — generating a record $18.4 billion in net income on sales of $75.9 billion in the December quarter — it’s no longer benefiting as much from the rapid adoption of smartphones around the world. Mobile-phone rival Samsung Electronics Co. also recently reported weaker-than-expected results. Apple Chief Executive Officer Tim Cook has expanded in China and released new services and products such as Apple Watch to help broaden the business, but the company’s dependence on the iPhone leaves it vulnerable to any deceleration in demand.

“They have other products, and have the potential to launch other products, but the hole left from an iPhone slowdown is too big to fill,” said Abhey Lamba, an analyst at Mizuho Securities USA. “Its future is whatever is happening in the smartphone space.”

Apple shares dropped 4 percent in early trading in New York Wednesday to $96.

In addition to the iPhone, Apple’s other product lines are also stalling. iPad purchases continued to decline, falling to 16.1 million tablets during the holiday quarter, compared with a projection of 17.3 million. Mac sales fell to 5.31 million, compared with the 5.8 million estimated. IPhone sales rose to 74.8 million units, compared with the average 75 million predicted by analysts.

Luca Maestri, Apple’s chief financial officer, said the company is feeling the effects of a “very different” economic environment around the world. Apple is beginning to see “softness” in China, particularly in Hong Kong, he said.

“You need to take into account the business opportunities that we have, but also the realities of an economic environment that is not ideal right now,” he said. Brazil, Canada, Japan and Russia also are showing signs of slowing down, he said. “There are a lot of economies around the world that are in recession.”

Bloomberg