Apple: shock of the dull Premium

Apple earnings, as it turns out, can be boring. This will take some getting used to for observers who, first, relished the vicious thrashings the company gave analyst expectations in 2011 and 2012, then sat in growing horror during the past year as earnings growth slowed, then went negative.

For the quarter reported on Tuesday, Apple delivered roughly the numbers that were expected, and guided to about what was expected in the September quarter. Unit sales of the iPhone were a bright spot, with 31m shipped against an expectation of 27m or so. By contrast, iPad sales were a mild disappointment, at 15m units versus the hoped for 18m. Margins fell, but only a bit. The shares rose 4 per cent – an indifferent signal, given the 40 per cent drop from last year’s peak.

The iPad figures are cause for reflection. Not only did average sale prices of iPads fall (as expected, given the introduction of the cheaper iPad mini) but unit sales fell year-over-year for the first time, just two-and-a-half years after the product was introduced. After six years, the iPhone has yet to report a year-over-year unit decline. This further reinforces the point that the iPhone – the source of half of Apple’s sales – is an exceptional product that, should it fade, will prove hard to replace. Also of note: a third straight quarter of sales declines for Apple’s personal computers, which for a while looked as if they would resist the declines that other PC makers are suffering. Macs generate less than a sixth of Apple’s revenue, but their struggles show the limits of the brand’s mystique.

Apple’s shares will probably remain in a holding pattern. At 11 times trailing earnings, with a dividend yield of 3 per cent, they trade like shares in a huge, slow-to-no-growth tech company. And until that next revolutionary product rolls around, that is precisely what Apple is.

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