Apple forecasted that it will experience its first sales decline since 2003, with the company stating that the dip is due to the slowdown of iPhone sales within a smartphone market that is becoming increasingly saturated. Apple predicted revenue would fall to between $50bn and $53bn during Q2, below the $58bn in the same quarter in 2015.
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The news was preceded by weeks of dark predictions, with media reports claiming Apple had cut manufacturing orders from the companies that build the iPhone because inventory of the smartphone was backing up in retail channels.
Though the company continued to be extremely profitable during the December quarter, with record net income of $18.4 billion through sales of $75.9 billion in the December quarter, Apple’s advantage from the accelerated adoption of smartphones across the globe is reducing.
Tepid demand for the latest iPhones – that succeeded blockbuster sales of the iPhone 6 and 6 Plus – led Apple to sell 74.8 million iPhones in the first quarter.
In its earnings call this afternoon, Apple CEO Tim Cook said that 40% of iPhone users are on the iPhone 6, 6s, 6 Plus, or 6s Plus – the phones announced within the a year ago and a half. But Tuesday’s forecast implies Apple doesn’t expect to match the 61 million iPhones sold in last year’s January-March quarter. So, this means that Apple once again reported the most profitable quarter in history.
Looking at the next fiscal quarter of 2016, Apple projects revenue between $50 billion and $53 billion; gross margin between 39% and 39.5%; operating expenses between $6 billion and $6.1 billion; and a tax rate of 25.5%.
Recently, Apple sent an application to the Department of Industrial Policy and Promotion to get approval for setting up retail outlets in India.
Sales have dwindled even in China, which has been one of Apple’s most reliable strongholds during its historic stretch of technology dominance. The iPhone 6s and 6s Plus models, didn’t sell in markets such as the US and China as well as the company had hoped. That would probably mean a decline from the $58 billion in the same period of 2015. Unit sales typically drop over the next few quarters, picking up after the next iPhone launch.
India is fast emerging as one of the key markets for Apple globally as its sales take a beating across many key regions and China looks gloomy due to uncertainty over economic growth.
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“Pretty great to be Apple”, he said in a tweet.
