Apple Inc. (NASDAQ:AAPL) sales declined during the company’s Q3 results, owing to increased speculation over the release date of the latest iPhone, alias iPhone 5. According to a report on ABC News, Apple Chiefs, the CEO Tim Cook and the CFO Peter Oppenheimer, said that the company’s sales went down as buyers opted to hold on to their cash, waiting for the new iPhone model.
Oppenheimer is quoted saying, “the fall transition is driving most of the decline in gross margin, it’s not something we are going to talk about in any level of detail.” referring to the scheduled release of new iPhone gadgets, including iOS 6 and new Mac computers.
However, it is really unclear whether this was the sole reason for the disappointment that befell Apple’s investors, who expected so much from the company. China and the U.S provide a huge chunk of revenue for the tech giant, and its failure to match analyst’s projections is significantly tied to sales from these two countries.
The earnings, released on July 24 as we earlier reported, put Apple in the category of tech companies that have underperformed or disappointed investors in the recent series of released results. It joined Zynga Inc (NASDAQ:ZNGA), Facebook Inc (NASDAQ:FB), Nokia Corporation (NYSE:NOK), and Research In Motion Limited (NASDAQ:RIMM), among others; although, its earnings, year on year grew significantly.
Nonetheless, the biggest question is whether China and the U.S’s slow down had anything to do with missed targets. If it was entirely because of iPhone 5 speculation in general, then investors would be certain of a rebound in the fourth quarter, that’s if, the anxiously awaited device is released into the market before then. However, if it had more to do with China and U.S slowdowns, then the investors could be in for more disappointments. This pegs Apples performance on the two countries’ sales.
Apple Inc. (NASDAQ:AAPL) recently said that China, has become its second greatest source of revenue after the U.S, and according to Asia Times, iPhone sales for the company were 48% higher, when compared to the same period last year. However, this figure was down 28% from the sales reported in the 2nd fiscal quarter. Additionally, the report also notes the deteriorating economy in the euro zone markets as having a negative impact on Apple’s sales in Europe.
The slow down in the U.S and Chinese markets is nothing to be pushed aside in favor of speculation, as a major force toward the missed targets. In fact, this is the second time Apple has missed wall street targets in less than a year, notes MSNBC News. Additionally, Apple has structured its device releases in such a way that it has created a cyclical wave, which is likely to affect its sales as buyers anticipate new improved gadgets.
However, Tim Cook still refuses to acknowledge that sales have hit a snag in the U.S and China segments, its main markets. He said, “We are certainly seeing a slowdown in business in that area,” Cook said of Western Europe. “Fortunately, the U.S. and China, although I realize it’s getting a lot of press, we’re not seeing anything there that we would classify as an obvious economic issue,” citing Europe as a concern in Apple’s prospective sales, while admitting that U.S and China sales have been on the spot in the media.
However, an analyst from Sterne Agee is quoted highlighting various past scenarios, where Apple Inc has been able to maneuver through without a scratch. He notes that Apple’s growth is part of its recent wall street target woes, and the tech giant is now more vulnerable than before. “When they were small enough, they could power through it,” Sterne Agee analyst, Shaw Wu, said. “Now it’s so pervasive that it’s a lot harder,” notes MSNBC.
It really does appear that Apple, despite its obvious increase in earnings for the third fiscal quarter, year on year, the expectations are what analysts are looking up to. This is well reflected in the 4.3% decline in the company’s stock price after its missed analyst targets.
Furthermore, this justifies that investors are pegging their expectations on analysts’ projections rather than historical trend and statistics. This sets such a big challenge for the tech giant, because with its massive expansion, comes great analyst expectations, from which, investors base their decisions.