Apple Inc's fourth quarterly earnings report for fiscal year 2013 has been released with the company reporting strong iPhone sales with declining profits. The news of Apple's profit and margin decline has prompted a brief but sharp selloff of the company's stocks. Disappointed investors tried to benefit from some of Apple stocks' recent gains.
Before Apple Inc's Q4 earnings report was due for release, Wall Street was hoping for a strong fourth quarterly earnings after Apple predicted in September that its margins and revenue will be at the high end of its earnings forecasts.
In a conference call with analysts, Apple CEO Tim Cook had predicted a "really great" holiday shopping season. The holiday season will be crucial for Apple as the new iPad Air and iPad Mini with retina display will go up against Amazon's Kindle Fire. The iPhone 5S and iPhone 5C will compete for buyer attention with Samsung's low-cost smart phones and other players in the same category using Google's Android OS.
According to reports, Apple Inc's iPhone 5C lagged behind the premium iPhone 5S which caused investors to worry over the iPhone's market positioning and the growing competition. The close of the fiscal year 2013 resulted in a gross profit margin of 37 per cent down from 40 per cent in 2012 as Apple is feeling the effects of strong competition coming from rivals like Korean electronics giant Samsung. Apple's gross profit margin in the recent quarter was roughly the same with analysts' average forecast of 36.9 per cent.
Brian Colello, an analyst for Morningstar, said analysts expected a higher gross profit margin due to Apple's higher priced smart phones and the market's strong preference for the iPhone 5S. He also said analysts had expected a higher gross profit margin to boost Apple for the December quarter.
Looking forward with China Mobile
Apple investors are looking beyond the holiday quarter and continue to hope that the company that disrupted the revolutionised the mobile phone industry and popularize tablets can once again create a stellar device to propel its remarkable growth in the previous years.
Apple Inc continues to face stiff competition from rivals. Strategy Analytics had released estimates in Oct. 28 that the company market share went down to 13.4 per cent in the third quarter of 2013 from its previous 15.6 per cent. Samsung had the highest market share for that quarter with 35.2 per cent.
Meanwhile, Stifel analyst Aaron C. Rakers said Apple Inc will soon announce a deal with China Mobile, China's largest mobile carrier. Analysts expect a rise in earnings per share at $4 to $8 per share in annual earnings over the next year if the deal will push through.
According to analysts, China Mobile's third quarterly earnings were strong with overall mobile subscribers climbing to 1.209 billion, 3G subscribers at 377.5 million. Despite the decline in profitability, analysts believe the reason may be its building of TD-LTE networks. Apple Inc's new iPhones support that type of technology. This may be the reason of analysts expecting a deal between the two companies in the coming days.
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