Consumers are delaying iPhone upgrades as they wait for the expected launch of the iPhone 8 and that’s hitting Apple’s bottom line, according to CEO Tim Cook.
Apple shares have been hammered in after-hours trading after iPhone sales failed to meet Wall Street estimates, with Mr Cook blaming the iPhone 8 rumour mill.
“We’re seeing what we believe to be a pause in purchases of iPhone, which we believe is due to the earlier and much more frequent reports about future iPhones,” Mr Cook said during a second-quarter earnings call. “That part is clearly going on … We are seeing that in full transparency.”
Apple sold 50.76 million iPhones in the quarter, down from 51.19 million in the previous year and short of the 51.5 million expected.
Investors reacted strongly to the news, sending Apple shares down 2.2 per cent in after-hours trading.
The company’s forecast for the current quarter also disappointed, with Apple projecting sales of $US43.5 billion to $US45.5bn, when Wall Street had been expecting $US45.6 billion.
The iPad meanwhile is faring even worse, with sales falling for another quarter down to 8.9 million units, representing a year-on-year sales drop of 13 per cent.
Rumours around the upcoming iPhone 8 have been rampant in recent months, with new features said to include wireless charging, an edge-to-edge display, and augmented reality features.
The device is expected to launch in October.
Analyst and Telsyte managing director Foad Fadaghi said the ‘pause’ factor was being felt Down Under.
“Apple enjoys a greater than 80 per cent repeat purchase intention in Australia, however its users are typically holding onto their handsets longer,” Mr Fadaghi told The Australian.
“Telsyte believes a replacement cycle will commence later this year as software support for older models ends.”
In better news for the company its AirPods seem to be selling well with Mr Cook declaring “We are not coming close to meeting demand for Airpods.”
Meanwhile app store revenue grew 40 per cent in the past year.
Another point in Apple’s favour is its hoards of cash. As of December, the company had $US246.09 billion total cash, cash equivalents, and securities. Apple, like many big American companies, parks most of that cash offshore rather than paying US taxes on its overseas profits.
The swelling war chest, however, has fuelled hopes for bigger deals to vault Apple in new directions such as self-driving cars and entertainment.
With $US250 billion, Apple could buy both Tesla and Netflix and still have plenty left over.
With Dow Jones.
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