Apple outlook shortfall reflects product rush

Sat, Oct 27, 2012, 01:00

APPLE TRADED industry-leading margins for a revamped product line in time for the holiday shopping season, a sign of the rising costs of rivalry with Samsung, Microsoft and Amazon.com.

The trade-off was outlined late on Thursday when Apple said profit in the current quarter will be about $11.75 a share on sales of $52 billion.

That compares with $15.49 a share on sales of $55.1 billion predicted by analysts surveyed by Bloomberg.

Gross profit margin, the proportion of sales left after deducting production costs, will fall to about 36 per cent, the lowest level in more than four years, Apple said.

Apple chief executive Tim Cook has introduced a new iPhone and iPad, while updating the iPod and Mac computer lines.

The overhaul stands to give Apple products an advantage against new phones and tablets from competing electronics makers, such as Samsung, which yesterday reported record third-quarter profit on demand for its Galaxy smartphones.

It also means rising production costs and narrower profit margins.

“They are going to have a big holiday quarter, a big March quarter, and then you have to wonder after that,” said Shaw Wu, an analyst at Sterne Agee and Leach.

“They could be doing this to address competition.”

Apple fell 0.7 per cent to $605.50 in early New York trading yesterday. Before yesterday, the shares had slumped 13 per cent since reaching a record the week iPhone 5 went on sale, related partly to the company’s struggle to keep up with demand.

Profit last quarter rose to $8.67 a share, shy of the $8.75 projected by analysts. While revenue rose 27 per cent to $36 billion, operating expenses rose 29 per cent to $3.46 billion, a sign Apple spent more to refresh its entire product line ahead. Research and development costs rose 40 per cent.

Apple has traditionally given a conservative financial outlook that falls short of analysts’ predictions, though heading into last year’s holiday shopping period it exceeded expectations.

“We’ve never introduced so many new form factors at once,” Apple chief financial officer Peter Oppenheimer said. – (Bloomberg)