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Apple sees second iPhone slump

by on03 May 2017


Cash cow on life support


The fruity tax-dodging cargo-cult Apple has finally fessed up that its iPhone cashcow is on life support.

The Tame Apple Press is unable to spin the news that iPhone sales fell for the second quarter, although Reuters did claim that customers may have held back purchases in anticipation of “the 10th-anniversary edition of the company's most important product later this year”.

Apple did its best to cover the news with lots of unsexy “deals” to keep shareholders happy. It boosted its capital return programme by $50 billion, increased its share repurchase authorization by $35 billion and raised its quarterly dividend by 10.5 percent.

However, shareholders were unmoved, sending shares down 1.9 percent at $144.65 in after-hours trading. It is not as if they were not warned. Fudzilla has been telling the world+dog that the iPhone cash cow has been propped up by some dodgy accounting and some strong armed tactics on suppliers to increase margins for a while now.

The first sign that something was seriously wrong was when Apple announced it was putting its sales in China together with world-wide sales to make it look like iPhone sales were increasing , when it would otherwise have looked like they fell. They could not get away with that cunning plan again, and have booked falling sales ever since.

Apple sold 50.76 million iPhones in its fiscal second quarter ended April 1, down from 51.19 million a year earlier. Analysts on average had estimated iPhone sales of 52.27 million, according to financial data and analytics firm FactSet.

Apple Chief Financial Officer Luca Maestri argued the decline was not as bad as it looked and tried to bamboozle the Tame Apple Press with some rather transparent accounting terms.

He said that the figures were what are called "sell-in" figures for the iPhone, a measure of how many units it sells to retailers, rather than "sell-through" figures, which measure how many phones are actually sold to consumers.

Maestri said the company reduced the volume of inventory going through its retail channel by about 1.2 million units in the quarter, meaning the company sold about 52 million phones to customers on a sell-through basis.

Confused as to how that is a good thing? Yeah it isn’t. So Reuters had another go and cheered the fact that iPhone revenues rose 1.2 percent in the quarter, helped by a higher average selling price.

So basically Apple jacked up the price to cover its falling sales. It also continued to make money by improving its margins by forcing some of its suppliers to provide their gear at a discount.

The Tame Apple Press was then trying to spin a yarn that Apple would make a killing from its “much anticipated launch” later this year. However early signs indicate that the new iPhone will not be much different from the current one.

The company forecast total revenue of between $43.5 billion and $45.5 billion for the current quarter, while analysts on average were expecting $45.60 billion.

Analysts on average expect the company to sell 42.31 million iPhones in the current quarter, according to FactSet.

For the second quarter, the company's net income rose to $11.03 billion, or $2.10 per share, compared with $10.52 billion, or $1.90 per share, a year earlier.

Revenue rose 4.6 percent to $52.90 billion in the quarter, compared with analysts' average estimate of $53.02 billion.

Apple's revenue from the China region fell 14.1 percent to $10.73 billion in the quarter, as cheaper rivals in the region chipped away at sales. This figure was crucial to Apple’s future as the outfit had bet the farm on China. The fact that sales are sliding behind the bamboo curtain means that the market will not be the game changer Apple needed.

Apple's gross margin hit 38.9 percent, slightly ahead of analysts' average expectation of 38.7 percent, despite higher prices for memory chips. The company said it expects gross margins next quarter between 37.5 percent and 38.5 percent, versus analysts' expectation of 38.3 percent, according to FactSet.

Last modified on 03 May 2017
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