Apple blames Europe for missed targets

Apple, the world’s largest public company, identified Europe as a considerable part of the problem that caused it to miss its first quarterly forecast in almost ten years. Chief executive Tim Cook, who has led the consumer electronics firm since last August, said: “Europe did not perform well. But there was a marked difference between the various countries. France, Greece and Italy were particularly poor. And Germany only managed single-digit growth.” Of the major European countries Cook only singled out the UK as “relatively solid” with sales growth of about 30 per cent compared with a year ago. Overall European sales fell 6 per cent for the maker of iconic products such as the Mac computer, the iPod and the iPad. By comparison US sales slipped 3 per cent while the Asia-Pacific region slumped 22 per cent. However, Cook blamed the shortfall in Asia on one-off inventory problems for the iPhone 4S that had built up in China and had now been resolved. Cook said that looking ahead into the final quarter of the year he saw no significant slowdown in growth for its Chinese and US operations. But for the next three months in Europe he said: “We are certainly seeing a slowdown in growth in that area.” This led the consumer electronics giant to post third-quarter income up 21 per cent from a year ago at £5.7 billion (Dh32.4 billion), but analysts on Wall Street had expected £6.3 billion. Sales also grew 23 per cent to £22.6 billion, but again the market had expected £23.8 billion. Most worrying of all was that sales of its iPhone, which account for half of the firm’s sales, rose 28 per cent to 26 million, though forecasts had expected sales of 28 million. These results are only the second time Apple has missed quarterly sales and profits estimates since 2003. Apple’s stock slumped £18.46, or almost 5 per cent, to £369.81 in early trading on Wednesday. “Apple is in that rarest of all positions where the Street will punish them for anything less than an excess of success,” said CCS analyst John Jackson. Sales of the firm’s tablet computer, the iPad, performed ahead of expectations. The California-based company said sales leapt 84 per cent to 17 million units during the period, ahead of 15.4 million devices the market estimated. Apple virtually invented the tablet category of computers a few years ago, and data body IDC said the iPad now accounts for 62.5 per cent of the global market. This compares to 58.2 per cent share a year ago. However, analysts say that the iPad is sold at a lower margin than the iPhone, and so is less lucrative to the group. However, the market was concerned with the slowdown of iPhone sales. Cook said sales of its current smartphones were hit by consumers holding off buying a new handset until the iPhone 5 is launched later this year. The iPhone 5 is expected to be in the shops by September or October and will be a largely redesigned phone, with a bigger screen. Cook said consumers waiting for the iPhone 5 account for a “reasonable amount” of the drop in sales for its current model. In a bid to placate investors Apple announced a rare dividend of £1.71. Apple has a huge cash pile, which rose £4.5 billion during the three-month period to £75.5 billion. The firm also saved cash by avoiding paying up to £1.6 billion in taxes last year by legally channelling funds through low-tax states such as the British Virgin Islands and Luxembourg. In the past the business has preferred to keep cash in hand to use on research and development and for acquisitions. The move to pay a dividend comes on the back of a March announcement to hand back £6.5 billion to investors in the form of a share buyback over the next three years. Analysts say these two moves to hand back cash to investors will buy the management time to prepare for the launch of the iPhone 5, which will face stiff competition from Samsung’s Galaxy S3 and HTC’s One X smartphones. Apple’s bullish chief financial officer Peter Oppenheimer said: “We are extremely confident about our strategy and the investments we are making in our business.” Apple’s iPhone 5 launch later this year will show if the firm can again use the upgrade of one of its iconic products to sweep all before it. From gulfnews