Apple profits decline despite iPhone sales boost

Apple has reported a fourth quarter profit
of $7.5bn (£4.6bn), beating analysts'
expectations.
Although iPhone sales surged 26% to 33.8
million, profits slid for a third consecutive
quarter as margins fell.
On an annual basis, Apple ended its fiscal year
with its first earnings decline in 11 years as
net profit slipped to $37bn.
Nonetheless, Apple boss Tim Cook insisted that
"business was stronger than ever" on an
earnings call.
But analysts were disappointed by forward
guidance given by the company, which
indicated that future profits might continue to
slide.
Apple said it expected revenue next year to be
somewhere between $55 - $58bn.
It indicated that the gross margin on its
products - the difference between the amount
the company spends to make a products
versus how much consumers pay - would be
between 36.5% - 37.5%, less than analysts
were expecting.
Peter Oppenheimer, Apple's chief financial
officer, explained that this was partly because
it cost more to manufacture the company's
new iPads and Macbooks and that prices
weren't boosted accordingly.
'Game changer'
The company also said it had more than
$146.8bn in cash on hand, adding to its
considerable reserves.
It indicated that it would be returning more of
that money to shareholders in the coming
weeks.
Apple's stock briefly slid before recovering in
after hours trading. It remains down by more
than 13% for the year.
"We're at the point that people are getting
anxious to see the next big game changer that
Apple has," says Evan Niu of the financial
website The Motley Fool.
"Overall, this is a transitional quarter with the
new iPads and iPhones coming out. This
coming quarter will be the real test," added Mr
Niu.
Chinese market
These were the first earnings to include sales
of Apple's new iPhone models: the iPhone 5s
and the cheaper iPhone 5c, meant to appeal to
the Chinese market.
Revenue in the greater China region - which
includes Tawain - rose by 24%, however the
company did not break out sales figures for
the iPhone 5c.
Overall, Apple has said that 9 million new
iPhones were sold in the first weekend of
availability.
Mr Cook insisted that the iPhone 5c was not
meant to be the company's "cheaper" model,
and defended the company against criticisms
that it had made the phone too expensive to
appeal to consumers.
"I realise that some people were reading
rumours that the entry iPhone would be the
5c but that was not our intent," said Mr Cook.
"Our entry iPhone was the iPhone 4s."
Mr Cook touted the number of new products
Apple has released in the past few months,
almost completely refreshing its product line.
The releases include the new iPhone models,
an iPad mini with retina display, the new iPad
air, updates to its Macbook laptops, and a
release of an update to its operating system,
iOs7.
"We're excited to go into the holidays" with
these new models said Mr Cook in a statement
to discuss the earnings.