Apple reports record iPhone sales but profits are still slipping

Quarterly figures will do little to lessen pressure on chief executive Tim Cook

The new iPad Air which was unveiled by Apple this month (PA)

Apple suffered its third consecutive quarter of falling earnings in the three months to September, even as it sold a record number of iPhones, with the latest figures from the technology giant reinforcing concerns about a slowdown in growth.

The Californian firm said it had booked $7.5bn (£4.6bn) in net profits, or $8.26 per diluted share, over the period, down from $8.2bn, or $8.67 per diluted share, last year. Revenues were higher at $37.5bn, against $36bn over the same quarter in 2012, with the lower profits being accounted for by the company’s gross falling to 37 per cent from 40 per cent.

The results were nonetheless better than expected, with Wall Street analysts anticipating $7.93 in per share earnings. Apple said it had sold a record number of iPhones over the quarter, shifting nearly 34 million units as it launched the new 5s and 5c range of smartphones. The company’s iPad sales were slightly weaker than expected. Apple said it had sold 14.1 million of the tablets, against expectations of 14.5 million units. Mac sales were in line with expectations at 4.6 million units.

Looking ahead to the crucial holiday quarter, the company said it expected to book revenues of between $55bn and $58bn in the three months to December, with gross margins of between 36.5 per cent and 37.5 per cent.

The company’s chief executive, Tim Cook, said the results evidenced a “strong finish to an amazing year” and trumpeted the recent updates to the iPhone and iPad product lines as attention turns to holiday sales.

But the quarterly figures will likely do little to lessen the pressure on Mr Cook as shareholders seek evidence that the company can continue to produce new products, not just updated versions of existing gadgets, and thus return to growth. Ever since he took over in 2011, Mr Cook has been under pressure to demonstrate that Apple can maintain the high rates of growth that shareholders became accustomed to during the reign of his predecessor, the late Steve Jobs, who masterminded market-defining products such as the iPod and the iPhone.

Last night, in a sign that the strong sales of the iPhone were not enough, Apple shares were lodged in the red in after-hours trading, down by more than 2 per cent following the results.

Adding to the pressure on the company was a call last week by the activist investor Carl Icahn for Apple to buy back $150bn worth of stock. In an open letter addressed to Mr Cook, he said he had increased his stake in the tech giant to 4.7 million shares, or around half a percent of the company, and pressed his case for a substantial buyback.

“While the board’s actions to date ($60bn share repurchase over three years) may seem like a large buyback, it is simply not large enough given that Apple holds $147bn of cash on its balance sheet, and that it will generate $51bn next year,” he wrote, quoting consensus figures and adding that “there is nothing short term about my intentions here.”