Print 94 comment(s) - last by Argon18.. on Jan 28 at 1:27 PM

  (Source: Goodfon)
Apple's profit is flat due to higher manufacturing costs

While Apple managed to surpass analysts' profit forecasts for the fiscal 2013 first quarter, the company's stock took a tumble as investors worry over Apple's ability to maintain steady growth with new products.

Apple reported a revenue of $54.5 billion for the quarter ended December 29, 2012, compared to $46.33 billion in the year-ago quarter. The tech giant just missed analyst expectations of $54.73 billion.

Apple also earned a net profit of $13.1 billion ($13.81 a share) compared to $13.1 billion ($13.87 a share) a year ago. Profit clearly remained pretty flat, but it exceeded analysts' expectations of $13.44 a share.

The iDevice maker also noted that it had record iPhone sales for the quarter at 47.8 million (compared to 37 million in the year-ago quarter). It also had an uptick in iPad sales, from 15.4 million in the year ago quarter to 22.9 million in the most recent quarter.

“We’re thrilled with record revenue of over $54 billion and sales of over 75 million iOS devices in a single quarter,” said Tim Cook, Apple’s CEO. “We’re very confident in our product pipeline as we continue to focus on innovation and making the best products in the world.”

While Apple did okay for the quarter, investors are concerned with the company's flat profit due to higher manufacturing costs and also worry whether Apple can keep up its momentum with product popularity. Many new devices are hitting the market at lower prices and offer newer, better features. For instance, the iPad's market share was bested by Google's Nexus 7 tablet in Japan mainly due to cost differences.

Apple's stock has lost nearly 25 percent of its value since September 2012 ($170 billion in market value).

In after-hours trading today, Apple's stock fell over 10 percent.

Looking forward to fiscal 2013 second quarter, Apple expects a revenue of between $41 billion and $43 billion.

Earlier this month, it was reported that Apple had cut iPhone screen and component orders by 50 percent for the first quarter of 2013.

Source: Apple

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RE: Flat
By Nortel on 1/23/2013 9:52:20 PM , Rating: 1
So selling 47.8 million phones isn't seen as a good thing?

The only thing worse in the iPhone 5 is the vibration alert being louder. Seriously, it has a larger screen, thinner, lighter, faster, LTE, better cameras, lightning connector and now has google maps and youtube apps. Yes people should be laughing at MS's 1 million RT tablet sales because it is 21.9 million less units vs Apple. We're back to cables now seriously? The lightning cable is fantastic, have you even used one?

desktop/laptop sales are slumping across the board compared to tablets, which have everything people want in a device.

RE: Flat
By retrospooty on 1/23/2013 10:07:42 PM , Rating: 3
Its a good sales # but people see the tide is turning. Apple is getting left behind in the "cool new phone" category. Simply put, there are better phones out there and the dull masses are starting to catch on to the fact.

RE: Flat
By TakinYourPoints on 1/24/2013 1:49:39 AM , Rating: 5
Everything you mention has nothing to do with sales figures.

I could mention things like the iPhone 5 having fastest hardware, best displays, best battery life, best apps, but it doesn't matter.

All that matters is that Apple made the same net profit on hugely increased gross revenue from the prior year, that's it. Their gross margins took a massive hit because the iPhone 5 costs so much more to produce than the iPhone 4S. It happens with most new products, it happened with the iPhone 4 and it'll happen with the iPhone 6. The "S" models are where Apple historically makes their profit.

The iPad though is a different story. iPad Mini sales are cannibalizing iPad sales, and improving margins won't help since they'll throw a retina display in there as soon as they can. Average profit might have taken a permanent hit on the tablet side.

RE: Flat
By EasyC on 1/24/2013 7:34:03 AM , Rating: 2
I could mention things like the iPhone 5 having fastest hardware, best displays, best battery life, best apps, but it doesn't matter.

You could, but you'd be wrong...

RE: Flat
By retrospooty on 1/24/2013 7:46:08 AM , Rating: 2
Never in his mind... Never. LOL.

Ill give him fastest GPU and best apps by a small margin. It's all the other things its missing entirely that I was referring to.

RE: Flat
By maugrimtr on 1/24/2013 11:24:35 AM , Rating: 2
He lost me at the lightening cable. It's non-standard, expensive to buy, requires adapters to keep using docks and other peripherals (incl. in-car support and other non-replaceables), and the specification is so tightly held that most of the reliant market missed out on Holiday season sales of new products

RE: Flat
By TakinYourPoints on 1/24/2013 3:49:33 PM , Rating: 2


In any case, it still doesn't matter, they released a phone during their holiday quarter with drastically reduced profit margins than the prior one. The last time they made a major revision to the iPhone it was released during the summer quarter.

RE: Flat
By Cheesew1z69 on 1/24/2013 8:23:49 AM , Rating: 2
I could mention things like the iPhone 5 having fastest hardware, best displays, best battery life, best apps, but it doesn't matter
You do, almost every post...


RE: Flat
By maugrimtr on 1/24/2013 11:28:42 AM , Rating: 3
Started laughing when he mentioned the S version of phones being historically the profit makers. You mean the history of one other phone, the 4s? One data point, a trend does not make.

RE: Flat
By retrospooty on 1/24/2013 11:58:14 AM , Rating: 2
LOL... Ya, he's kind of lost in this iMentality, where he needs to prove its the best. Logic and reason seem to go out the window in favor of trying to prove a point at all costs. I think it makes him feel better about his purchases... I dunno. Whatever.

RE: Flat
By Cheesew1z69 on 1/24/2013 3:42:46 PM , Rating: 2
"not an ifan"

but sure defends like one...

RE: Flat
By TakinYourPoints on 1/24/2013 3:44:29 PM , Rating: 2
Its true though. The move to the iPhone 4 was reflected in a drop in profit margins due to new manufacturing process while margins improved with the iPhone 4S. Same happens with any of their other new products.

Hell, the same happens in all sorts of industries, tech in particular, just look at chip fabs when they go to a new process. This isn't rocket science.

RE: Flat
By Nortel on 1/24/2013 4:53:35 PM , Rating: 2
Lol, who was the guy who gave you a vote? There have only been a handful of iPhones and you forgot about the "iPhone 3s".

RE: Flat
By augiem on 1/24/2013 5:36:11 PM , Rating: 2

RE: Flat
By TakinYourPoints on 1/25/2013 6:02:45 PM , Rating: 2
This place is a circlejerk, always some idiot fanboy who'll upvote a terribly reasoned post because hurr durr Apple

RE: Flat
By Cheesew1z69 on 1/26/2013 7:59:32 AM , Rating: 2
And you are a loser, your point?

RE: Flat
By ritualm on 1/23/2013 10:11:12 PM , Rating: 3
Selling 47.8 million phones isn't enough. You must beat the results of the previous quarter or your stock price gets flogged. Apple used to do just that even during a general downturn.

Oh how the mighty has fallen.

RE: Flat
By TakinYourPoints on 1/24/13, Rating: 0
RE: Flat
By retrospooty on 1/24/2013 7:29:54 AM , Rating: 2
You are also forgetting who buys the phones. Most of them arent sold to users, they are sold to ATT, VZW and Sprint (and many others worldwide). Apple made itself sweetheart deals with the major carriers as it was the best thing around. Deals that keep Sprint 6 years away from being profitable. So the end user gets the phone for the same price, but the carriers were eating the cost. Those sweetheart deals wont be made anymore as the competition has surpassed Apple and the zeitgeist fades.

RE: Flat
By TakinYourPoints on 1/24/2013 8:00:58 PM , Rating: 2
That scenario is a hypothetical, and right now data isn't pointing in that direction.

2/3 of Verizon's smartphone sales are iPhones. 80% of AT&T's smartphone sales are iPhones. They make up over half smartphone sales in the US and the majority of high-end smartphones globally (net traffic, app downloads, and Google's mobile ad revenue corroborate this).

The carrier investment in high-end smartphones like the iPhone or Samsung GS3 (devices like that and the Droid DNA cost carriers about as much as the iPhone) is done for a reason: to get customers hooked on expensive data plans. It isn't like Verizon and AT&T are just rolling the dice and hoping things work out, they've done the analysis and they turn a profit in the end. Is it a coincidence that the only major US carrier that was in trouble in 2012, T-Mobile, also didn't carry the iPhone?

Selling smartphones at "premiums" (similar to Samsung's mind you) to carriers won't go away as long as they sell well and get more people into data plans.

Something else important to note is that 1/3 of iPhone 5 buyers were owners of previous iPhones, 1/3 were people switching over from other smartphones, and 1/3 were people buying their first smartphone. The last statistic is an important one, that 30% upgrading to a smartphone data plan is what phone companies want, and that's why they'll keep paying up for the hardware.

Hell, if some people weren't so concerned about being "ripped off" by contracts then they wouldn't buy unsubsidized devices like the Nexus 4, right? Carriers are clearly benefiting from the arrangement.

RE: Flat
By retrospooty on 1/24/2013 9:52:54 PM , Rating: 2
"That scenario is a hypothetical, and right now data isn't pointing in that direction"

Of course not... They are profiting today from the sweetheart deals made years ago. When time comes to re-negotiate the contract, Apple has less sway. It's not hypothetical. It's first and foremost on every carriers mind. "We don't have to get raped by Apple this time, since now there is comparable products on the market". Put yourself in Verizon's boat a few years back and you are negotiating a contract for the iPhone and Apple wont budge on price. They really had no competition, now they do. Sprint got screwed hard and wont make a cent for an estimated 6 years from signing, not one cent for 6 years per Sprints own financial record. Anyhow, I am not getting into yet another endless debate with someone who's mind is so closed. I don't even care, I was just making a point, so lets just say this. The nest 5 years wont be as kind to Apple as the last 5... Unless of course they do something unexpected and innovate again, or maybe release a kickass iPhone mondo with a larger screen and higher res. Hell, throw in at least an SD card slot and I would even buy it. Maybe it would even get rid of that enormous iBezel :P

RE: Flat
By TakinYourPoints on 1/25/2013 5:35:38 PM , Rating: 2
They really had no competition, now they do.


Anyhow, I am not getting into yet another endless debate with someone who's mind is so closed.

This isn't about how I feel personally, it is about trends and where the numbers are. Fact is that an iPhone 4S from over a year ago outsold the GS2, GS3, and GN2 combined, and the latest model is outselling that one by a substantial amount. Using Android's higher marketshare doesn't work either as that number is mostly low end devices, a completely different market from devices like the iPhone, GS3, or Droid DNA. Its like using the significantly higher number of dumbphones to downplay the importance of smartphones, its a bad argument.

Your argument is completely based on "maybes" and "what-ifs", not what is actually happening.

Reality doesn't bend to your personal desires, feelings, or bias.

RE: Flat
By Nortel on 1/24/2013 7:54:19 AM , Rating: 2
Last time I checked, last years quarter they sold 37 million so what are you going on about? Also there was one less week in this quarter. This is all negative spin, eps was fantastic.

RE: Flat
By TakinYourPoints on 1/24/2013 8:04:12 PM , Rating: 2
Their sales are massive, the news is that profit margins are down because of increased production costs.

Even the sub-headline above says it, "Apple's profit is flat due to higher manufacturing costs", but it flies over so many people's heads here and all they can say is "iPhone isn't selling, zeitgeist, random thesaurus word, hurr durr"

RE: Flat
By clayshooter on 1/24/2013 9:17:57 AM , Rating: 2
I know, thats exactly what all the people who reviewed the iPhone 5 on Jimmy Kimmel said about it too. Oh wait, they were actually looking at the 4s.

Sorry, but the game of releasing the same product with a different sticker again and again is catching up to them. Now their idea of innovation is to change the size and call it the "Mini".

Also, you can't compare the Surface sales to iPad sales as RT has only been on the market for 3 months, and Pro is yet to be released...AND.... MS actually allows other manufacturers to make Windows tablets, so all of those sales will need to be tallied some day as well.

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