Falling iPhone sales lead to Apple’s worst quarter since 2003

Falling iPhone sales led Apple Inc. to post its first quarterly loss since 2003 today, officially bringing a remarkable 13-year growth streak to an end.

From Jan. 1 until March 26, Apple sold 51.19 million iPhones, a decline of nearly 10 million compared to the 61.17 million iPhones sold during the same period last year, according to data provided by the company. Its quarterly revenue, meanwhile, was $50.6 billion USD – down from the $58 billion USD in revenue that it posted at this time last year.

Despite the (relatively) disappointing numbers, which fell within Apple’s own projections, during an April 26 presentation CEO Tim Cook said the company’s future looked bright: he praised Apple’s developers and sales staff alike for their resilience in the face of what he called “strong macroeconomic headwinds,” and noted that while the company posted a decline in product revenue during the second quarter of fiscal 2016, the value of its services division grew by 27 per cent over the same period last year, to $9.9 billion USD.

Moreover, Cook said, Apple’s user base of 1 billion devices continues to grow, particularly among three key iPhone demographics: existing customers upgrading their handsets (upgrade rates for the 6S cycle have been higher than the 5S cycle a year ago, Cook noted – and the company’s data indicates that Apple customers remain 95 per cent loyal to the company); users who switch from Android (Cook said the company had seen its highest-ever number of converters since October); and those who are buying their first smartphone.

Nor did the quarterly results include sales of the four-inch iPhone SE, which was released on March 31 and has been exceeding the company’s expectations, Cook said.

As usual, Apple did not release sales numbers for the Apple Watch, which celebrated its first year of release, with Cook saying only that unit sales met the company’s expectations.

Another significant source of revenue growth was Apple Pay, which recently launched in China, and which Cook said was growing at a rate five times greater than last year.

Thanks partly to the company’s substantial cash reserves, which reached $153 billion at the end of last quarter, Apple will still be able to provide shareholders with a return on their investment, he noted: the company’s board of directors have authorized the transfer of $50 billion USD in capital funds to cover shareholder returns.

Cook also said that in response to the latest revenue report, Apple would be lowering its inventory for next quarter, and that this would affect its projections as well, with the company now expecting revenue between $41 billion USD and $43 billion USD from April to June.

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Jim Love, Chief Content Officer, IT World Canada

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Eric Emin Wood
Eric Emin Wood
Former editor of ITBusiness.ca turned consultant with public relations firm Porter Novelli. When not writing for the tech industry enjoys photography, movies, travelling, the Oxford comma, and will talk your ear off about animation if you give him an opening.

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