Share

Apple profit up, but forecast weak

On the company’s third-quarter earnings call earlier this week, CEO Tim Cook struck a predictably optimistic tone, saying that the Watch was off to “a great start” and had “exceeded internal expectations” in terms of sales.

Advertisement

However, Apple (AAPL) didn’t sell quite as many iPhones as expected, and it disappointed analysts by not providing specific Apple Watch sales figures, rather lumping them in with the “Other Products” category which includes iPods and Apple TV.

Sales of that “other” category grew 49% to $2.64 billion. That said, when Apple released their recent figures, they conveniently omitting much mention of the Apple Watch, how it was doing and what the impact of its arrival was. Apple Chief Financial Officer Luca Maestri remarked that the Watch has sold more than the first iPhone or the iPad in a comparable period-that is, 87 days.

Some 5.3 million smartwatches were shipped in the quarter, an increase of 457 percent on the one million sold in Q2 2014, driven nearly entirely by Apple, as noted by Cliff Raskind, director at Strategy Analytics.

Apple shares tanked over 7 percent in after-hours trading following release of the company’s fiscal third-quarter earnings report.

Colin Gillis, an analyst for BGC Partners, said the “other products” category generated less revenue for the quarter than he had expected, leading him to believe the watch had underperformed. This combined with those opting for the Apple Watch over a Samsung smartwatch has resulted in what is essentially a slashing of their market share. “Apple’s own forward-looking revenue projections, too, came in below Wall Street expectations – hence the bad vibes after Tuesday’s earnings report”. A big part of that is its new-found success in China, where revenue more than doubled to $13.23 billion and sales rose 87%. While it is clearly in second place, ahead of smaller rivals such as Pebble, it still only has 7.5% of smartwatch share, with sales of around 400,000.

Advertisement

Even though the California tech giant turned in another strong performance, shareholders and analysts appear to have been concerned by the lukewarm forecast for the current period and the uncertainty surrounding the new Apple Watch. “Apple and Samsung together account for 8 in 10 of all smartwatches shipped globally”, said Rajeev Nair, Senior Analyst at Strategy Analytics.

Credits     Justin Sullivan  Getty