Crunch time for Apple as offshore sales take a hit

The news on Tuesday was not particularly good for Apple: revenue was flat, profit was lower, and even iPad sales were down.

The news on Tuesday was not particularly good for Apple: revenue was flat, profit was lower, and even iPad sales were down.

Investors, however, did not seem to mind, sending the company's shares about 4 per cent higher in after-hours trading on Wall Street. Strong iPhone sales helped beat analysts' expectations.

But Apple's earnings report highlighted some of the challenges as it continues to expand overseas. Apple sells plenty of devices in the US, but sales have lagged in some larger markets abroad, which are crucial for growth.

China has been especially problematic, with sales of Apple devices down 4 per cent compared with the same quarter last year. And in Hong Kong, Apple's sales were down about 20 per cent - a trend chief executive Timothy Cook found puzzling.

"Hong Kong is an international shopping haven," Mr Cook said. "We saw some dramatic downturn there. It's not totally clear exactly why that occurred."

Gaining a foothold in foreign markets is becoming increasingly vital for Apple. Its growth has slowed in the most recent quarters, as its devices have largely saturated the US and some of the leading markets in Europe.

The tepid growth has led many investors to call for a new blockbuster product to lift Apple's sagging stock price. But no such product has yet been announced, though Mr Cook has suggested there are plenty in the pipeline.

The company could decide to introduce a cheaper iPhone, or even a so-called smartwatch that would compete in a brand new market of wearable computers.

"Competition is heating up," said Laurence Isaac Balter, chief market strategist at Oracle Investment Research, which has clients that own Apple shares. "They need to come up with some game-changers pretty soon."

Apple sold 31.2 million iPhones in the latest quarter, up from 26 million in the same period a year ago. It helped generate net income in the third quarter of $US6.9 billion, down from $US8.8 billion last time. Revenue was flat at $US35.3 billion.

Analysts closely watch Apple's gross profit margins. For the third quarter, the margin was 36.9 per cent, down from 42.8 per cent a year ago. The squeeze is being caused by strong sales of cheaper iPads and older iPhones.

Even with the addition of the iPad Mini to its product line-up, Apple's iPad sales were a disappointment, coming in at 14.6 million for the quarter, missing analysts' estimates for 16.7 million. Mac sales were also down slightly, at 3.8 million, from 4 million a year ago.

Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles