Apple has reported its first profit decline in a decade. It earned $9.6bn in the first quarter, an 18% drop from a year earlier. Revenue rose 11% to $43.6bn. iPad sales jumped by 65% year-on-year, but iPhone revenue grew by just 6%.
The tech giant tried to appease investors rattled by the share price slide by promising to return an extra $55bn to them over three years. That comes on top of $45bn already in the pipeline. There has been a 15% hike in the dividend and the rest will come in the form of share buybacks.
What the commentators said
A slowdown in Apple’s performance seems inevitable after years of rapid growth, said Richard Blackden in The Sunday Telegraph. Earlier this year, one analyst noted that if the group sustained its annual sales growth for another five years, its revenue would match the GDP of Australia.
But now various challenges seem to have cropped up at once. For one thing, said Sheraz Mian on Zacks.com, “competitors are finally catching up with it”. Apple’s smartphones and tablets “no longer have the field to themselves”. Not only are Samsung and Nokia phones increasingly good, but they are also cheaper. No wonder Apple’s gross profit margin has fallen to a two-year low of 37.5%.
Meanwhile, Apple is struggling with product innovation, said Rolfe Winkler in The Wall Street Journal. The iPhone hardware may have improved, but the software “has remained largely the same for years”, allowing rivals to close the gap. And three years after the emergence of the iPad, Apple “is in urgent need of a new product” to make consumers “fall in love with it again”, added Blackden.
“Execution appears to be stumbling” too, said Keith Fitz-Gerald on America’s Moneymorning.com. The error-ridden mapping application on the iPhone 5 “was an unmitigated disaster and shattered Apple’s reputation for invincibility. The public noticed.”
While Apple is hardly in crisis, some are now wondering whether its days at the top of the tech pile are numbered.