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Wednesday, 24 July 2013 09:25

Tame Apple press rushes to defend Apple results

Written by Nick Farrell

How to make something bad look good

The Tame Apple Press has been issuing statements which appear to cover the fact that Apple has had another bad round of results. If you are dumb enough to believe everything you read about Apple you would think that Jobs’ Mob had turned in a good quarterly report card thanks to the fact that the iPhone had done well.

In fact shareholders did, and Apple shares actually rallied on the backs of stories with headlines like “Profits beat estimates as iPhones surge” from the BBC. However what these reports did not point out that Wall Street is having a cow about Apple’s results and is worried about sliding margins and a dramatic revenue drop-off in its No. 2 market of China. Apple sold 31.2 million units of the iPhone or about 20 percent more than analysts had envisioned.

But that is not as important as the news that revenue from all Apple products in greater China plummeted 43 percent from the previous quarter and 14 percent from a year earlier. Apple needs China as it is one of the few places in the world where smartphone penetration is still low. The rest of the developed world is pretty saturated. Analysts are concerned that growing competition in a maturing global smartphone market, coupled with the rising number of lower-priced devices in Apple's line-up, such as iPad minis and older-model phones, pushed third-quarter profit margins to below 37 percent from more than 42 percent just a year earlier.

Apple is dogged by issues such as lower selling prices and an uncertain product pipeline, said Colin Gillis, an analyst with BGC. Gillis said that there is not likely to have any new product shipping in June and average selling prices (ASP) "are declining and margins are going to be under pressure. These things look like the realities. Apple has been fairly up front about its woes. It said that its average selling price during the quarter was $581, which is about $27, or 4 per cent, down from the previous year. Apple attributed this decline to the "mix of products" - the company saw significant growth in the lower-priced iPhone 4 - and foreign exchange problems.

Apple CEO Tim Cook blamed the problems on the economy and said he remained bullish on China. Another worrying thing for Apple is that the iPad underperformed. Apple shipped 14.6 million tablets in the quarter, a few million below rough estimates.

Analysts themselves are a little confused about the iPad. It appears that they are having trouble reconciling the fact that sales are falling with the rubbish they have been parroting from Apple for the last couple of years. Frank Gillett, principal analyst at Forrester, for example said that it would appear that the tablet market was reaching saturation.

"But you can't believe that as the idea of a tablet is very compelling," he said.

No, it means that all those who want a keyboardless notebook own one, and you are still believing the hype Frank.

Nick Farrell

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