News

Apple suffers first profit slump in a decade

Caroline Baldwin

Apple’s revenue growth continues but profits have dropped for the first time in 10 years due to increasing market competition.

Computer and smartphone manufacturer Apple saw an 18% drop in its quarterly net profit during the months of January to March 2013. Apple saw a profit of $9.5bn during the same period, dropping from $11.6bn in the same quarter of last year.

However, the technology giant still reported growth in its products with overall revenue at $43.6bn up 11.2% from last year.

The company sold 37.4 million iPhones at the beginning of this year, compared with 35.1 million in the same quarter last year. Apple also sold 19.5 million iPads, compared to 11.8 million, a year ago.

These figures show that Apple is still continuing to grow, but competition in the market from alternative smart devices and cheaper handsets is affecting the company’s profit margins.

Jan Dawson, chief telecoms analyst at Ovum, said: “Average selling prices for iPhones and iPads both fell, which suggests that much of the growth has come from lower-priced models like the iPhones 4 and 4S, and the iPad Mini. That's a sign of things to come, as Apple has to pursue secondary markets for both of these products. Primary markets have become saturated, and that in turn will have an impact on margins.”

Four million Mac computers were sold between January and March 2013, which stayed fairly consistent compared with the same period last year.

“Apple saw good strength in the Mac line. At a time when other PC makers are really struggling with falling sales, Apple maintained consistent sales year-on-year, and increased average selling prices significantly due to the launch of the retina display MacBook models,” said Dawson.

“This is a sign of the 'halo effect' Apple is able to achieve across its product lines through the increased adoption of iPhones and iPads among traditional Windows PC makers, and the difference between the performance of high-end computers when contrasted with lower-priced machines priced at levels similar to the iPad, which is causing significant cannibalisation in PCs.”

Apple has also announced that it will be returning a total of $100bn to shareholders by the end of 2015. 

This is an increase of $55bn from the original programme announced last year, which equates to an average rate of $30bn per year from the time of the first dividend payment in August 2012 through December 2015. 

In anticipation of seeing a drop in its share prices, Apple also decided to increase its share repurchase authorisation to $60bn from the $10bn level announced last year.


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