Apple profits fall short of expectations amid new iPhone rumours and increased Android competition

Despite selling 17 million iPads, 35 million iPhones and receiving all round healthy sales of their Mac lineup of computers, Apple didn’t quite reach analyst expectations for their past 3 month’s earnings. Apple reported quarterly earnings of $9.32 per share, falling short of analyst estimates of $10.37, with many blaming the upcoming iPhone as the reason for the lower than expected results. Shares were down nearly 5% to $572 in early hours trading, down from $601 yesterday.

This is by no means a poor performance for Apple despite how it might sound. Profits were still up $1.5 billion dollars over the same quarter last year, but consistent rumours and speculation around the release of a 5th generation iPhone have led to an increased number of customers holding off from purchasing an iPhone 4S in the hope of a new iPhone, expected sometime late September to early October.

With new iPhone rumours hitting the web on a near daily basis, it’s not surprising to see a sales slump in the quarter preceding the next iPhone’s release, but that’s not the only factor worth taking into consideration. Competition and phone upgrade cycles may have also played a part in the lower than expected sales.

This summer has seen considerable competition from Android, with flagship smartphones by the likes of Samsung and HTC taking centre stage for most of this year. The Samsung Galaxy S3, for instance, has sold more than 10 million units in its first two months on the market, reaching sales figures comparable to those of Apple.

For the first time in the iPhone’s history, Apple are playing catch-up with the competition, so it’s no surprise that consumers are willing to wait a little longer for an iPhone to take on Android with a new design, additional features, and updated operating system. However, that’s not the only reason people are waiting.

Millions of iPhone 4 customers are still tied to their 2 year contracts and will be eligible for upgrades at roughly the same time as the next iPhone is announced. With such long contracts becoming the norm over the past few years, consumers are willing to wait a little longer for hardware that will last them the full 24 months. Anyone buying an iPhone 4S now would likely see two more iPhone releases before their contracts expire, making their hardware 3 generations old by the time they’re contracts run out.

With all these factors affecting last quarter’s earnings it’s no surprise Apple fell short of analyst expectations, but this will likely not be the case come next quarter’s results. Talk of a 7-8 inch ‘iPad Mini’ have been making the rounds for the past few weeks since Google’s own Nexus 7 tablet was announced. If the rumours are true we may well see this mythical iPad Mini around the same time as the new iPhone, which would no doubt have a huge impact on next quarter’s results.

Is this the beginning of the end for Apple’s unprecedented profits and earnings growth? or is this just the calm before the storm, as customers ready their wallets for Apple’s next generation mobile handset? My money’s on the latter, what do you think?

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• Zola Lloyd

  Oh what a shame about those poor profit results! I guess Apple will have to find cheaper sweatshop labour in Africa rather than those costly Chinese peasants in order to maximize profits the way their investors want

• VicTheBrit

  A dollar less than predicted? Obviously some flunky in accounts is going to find himself twiddling his thumbs at home next week. Doesn’t making a profit mean much any more? Hasn’t anyone twigged that continual growth forever is impossible?

• Fool_Brittania

  I am a person; I am not a sheep, I do not need to be told what or what I cannot do with my property.

  That is why I do not own Apple products.

  Instead, my electronic goodies reflect ME. An Android phone on which I can do many things iThingies can’t such as viewing movies of dubious content, running applications that maybe even Google doesn’t approve of.

  It must be awfully boring doing what millions of others do and more sheep or lemming like than many other human traits.