News

Actions

Apple’s iPhone sales sink for the first time ever last quarter

Posted at 6:23 PM, Apr 26, 2016
and last updated 2016-04-27 00:52:23-04

NEW YORK -- Apple just announced its worst quarter in over a decade.

On Tuesday afternoon, Apple reported that its sales and profit both fell last quarter -- a rarity for a company that has been growing at a rapid pace, even as it has become the largest technology company on the planet.

The last time Apple's sales fell year over year was the first quarter of 2003. At that time, the PowerMac was still the company's bestseller. Apple had sold a grand total of 611,000 iPods. And Apple hadn't yet launched the iTunes Music Store.

Now, more than two-thirds of Apple's revenue is made up of iPhone sales. So where the iPhone goes, so goes Apple -- and last quarter was a miserable one for Apple's signature gadget. IPhone sales fell for the first time in history.

But ever-sinking iPad sales and flat-lining Mac demand didn't help Apple's case either. Neither did a strong dollar and a very weak Chinese market.

"We had a very busy and challenging quarter," CEO Tim Cook said on a conference call with investors. "Despite the pause in our growth, the results represent excellent execution by our team in the face of strong macroeconomic headwinds."

Wall Street analysts had predicted that Apple would have a somewhat lousy quarter. But they didn't think it would be quite this bad.

Apple's stock plummeted 8% in after-hours trading, to below $100 a share.

iPhone

First quarter of 2015: 61.2 million First quarter of 2016: 51.2 million, down 16%

It was going to be hard for Apple to beat iPhone sales from the same quarter a year ago, when the iPhone 6 debuted in China. Apple released the iPhone 6S to China in September along with the United States, so it didn't get the first-quarter iPhone boost that it had from Chinese customers a year earlier.

Apple actually sold slightly more iPhones last quarter than Wall Street analysts had expected. Cook said the upgrade rate for the iPhone 6S has been higher than for the iPhone 5S but slower than for the iPhone 6.

The iPhone had a few strong points, however: India iPhone sales were up 56%, and Cook said the rate of customers switching from Android was the highest ever.

iPad

First quarter of 2015: 12.6 million First quarter of 2016: 10.2 million, down 19%

IPad sales fell for the ninth straight quarter, though they inched past analysts' forecasts.

Mac

First quarter of 2015: 4.6 million First quarter of 2016: 4 million, down 12%

PC sales fell by 10% worldwide last quarter, according to Gartner. Apple had been outpacing the overall industry, but this is the second straight quarter in which Mac sales performed worse than the overall PC market.

Mac sales were relatively abysmal, badly missing Wall Street analysts' expectations. They expected 600,000 more Macs to be sold during the quarter.

Profit

First quarter of 2015: $13.6 billion First quarter of 2016: $10.5 billion, down 22%

Apple's profit hadn't fallen since the last quarter of 2013.

Last time Apple reported earnings, it posted the most profitable quarter in corporate history.

Sales

First quarter of 2015: $58 billion First quarter of 2016: $50.6 billion, down 13%

The double-digit sales loss was Apple's first since the fall of 2001. At that point, Windows 98 was the dominant computer operating system, and no one knew what an iPod was, because it hadn't been introduced yet.

But for some perspective, Apple is expected to have produced more revenue in an off-quarter than the company posted in all of 2009.

The strong dollar hurt Apple, just as it has hurt many other American companies this past quarter. Had the dollar not strengthened from a year earlier, Apple said sales would have been down just 9%.

Current quarter's sales

Second quarter of 2016 forecast: $41 billion to $43 billion in sales

Apple's forecast was well below Wall Street analysts' initial expectations. They had been expecting sales of $47.4 billion for the current quarter before Apple issued its outlook.

It's even farther below the $49.6 billion in sales Apple posted during the second quarter of 2015. Apple Chief Financial Officer Luca Maestri said the divergence between Apple and Wall Street's forecasts is due to Apple reducing its inventories to meet slumping demand. The new, cheaper iPhone SE will also drag down sales, Maestri said.

Apple analysts have their collective fingers crossed that the iPhone 7 can reboot the Apple sales growth machine. In the meantime, the next few quarters are going to be stinkers.

China sales

First quarter of 2015: $16.8 billion First quarter of 2016: $12.5 billion, down 26%

Sales in all regions fell, but none more than in China.

Services

First quarter of 2015: $5 billion First quarter of 2016: $6 billion, up 20%

One bright spot in Apple's quarter was its services business, which includes iCloud, the iTunes App Store and Apple Music. Services is now Apple's second-largest business unit, trailing only the iPhone in sales.

Cook said Apple Music now has 13 million subscribers.

Cash

Fourth quarter of 2015: $216 billion First quarter of 2016: $232.9 billion

Apple posted another record cash hoard. Some critics would like to see Apple use that cash to buy up assets that will help the company grow stronger.

As a result, Apple increased its share buyback program by $35 billion and upped its quarterly dividend to 57 cents per share.