Apple's little wonder iPhone fails to enthuse customers

Apple Inc on Tuesday announced financial results for its fiscal 2016 second quarter ended 26 March 2016, reporting its first-ever decline in iPhone sales and its first revenue drop in 13 years as the company failed to cheer buyers in both the emerging markets and the United States.

The company posted quarterly net income of $10.5 billion, or $1.90 per diluted share and quarterly revenue of $50.6 billion in January-March 2016 against net income of $13.6 billion, or $2.33 per diluted share and revenue of $58 billion in the year-ago quarter.

Gross margin for the quarter was 39.4 per cent compared with 40.8 per cent in the year-ago quarter. International sales accounted for 67 per cent of the quarter's revenue.

Apple, which is using all gadgetries in its arsenal to drive sales, however, is facing a saturation in the US and China, its biggest markets, and is facing market resistance in India where its new iPhone model failed to achieve sales targets and distributors are looking for new ways to push sales.

Apple's sales dropped by more than a quarter in China, its most important market after the US, and it is being felt also in global revenues.

Apple sold 51.2 million iPhones in its fiscal second quarter, down from 61.2 million in the same quarter a year ago.

Its shares fell about 8 per cent, dropping below $100 for the first time since February. A hike in Apple's share buyback and dividend as well as bumper revenue from services failed to mollify investors.

Apple's results followed disappointing quarterly reports from Microsoft Corp and Google-owner Alphabet Inc, and microblog Twitter also on Tuesday reported results that missed expectations.

Apple chief executive Tim Cook told analysts that the smartphone market was not growing, reinforcing wider concerns of saturation.

Cook also conceded that the iPhone 6S was driving customers to replace phones at a much lower rate than the 6. "I don't mean just a hair lower; it's a lot lower," he said. "If we'd had the same rate on 6S as 6, it would be time for a huge party."

However, he said, the services division, which includes Apple Music and the App Store, was a bright spot with revenue growth of 20 per cent to $6 billion, surpassing iMac and iPad sales.

But Cook also said, "The future of Apple is very bright," he said. "Our product pipeline has amazing innovations in store."

Apple forecast third-quarter revenue of $41 billion to $43 billion.

Apple also said it was raising its capital return programme by $50 billion through a $35 billion increase in its share buyback authorisation and a 10 per cent rise in the quarterly dividend.

Apple released the iPhone SE, a smaller, 4-inch-screen phone featuring much of the company's latest technology, in March this year. While sales of the phone are not reflected in the second quarter results, Apple says the device is off to a strong start, particularly in emerging markets.