La Jolla Cove Attractions - Apple Profit Probably Fell Amid Growth Slowdown for IPhone

Source - http://www.bloomberg.com/
By - Adam Satariano
Category - La Jolla Cove Attractions
Posted By - San Diego Hampton Inn

La Jolla Cove Attractions

Apple Inc. (AAPL)’s quarterly profit is projected to shrink for the first time in a decade, hurt by products with lower profit margins and slower iPhone-sales growth.

Fourteen analysts have reduced their estimates for Apple in the past four weeks, as shares in the world’s most valuable technology company continue their slide from a September record high. Competition from Samsung Electronics Co. (005930) is also weighing on the stock, and pressure is mounting for Chief Executive Officer Tim Cook to introduce hit products to reignite sales.

An earnings report tomorrow may show that fiscal second- quarter net income declined 18 percent to $9.53 billion, or $10.02 a share, according to analysts’ estimates compiled by Bloomberg. Revenue is projected to show a rise of 8 percent to $42.4 billion, the slowest growth rate since 2009.

“The market is in show-me mode for Apple,” said Laurence Balter, an analyst at Oracle Investment Research who is based in Fox Island, Washington, and has a buy rating on Apple. “The market needs to see some evidence that the future looks bright because that candle is flickering.”

To placate investors, Apple may increase its dividend or boost share buybacks. Katy Huberty, an analyst at Morgan Stanley, said an announcement may come with the earnings release. Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., predicts it will come later.

Apple may raise its current quarterly dividend by 17 percent to about $3.10 a share, according to a Bloomberg estimate, based on payouts of other large technology companies, Apple’s projected earnings and the amount of cash it holds.

Growth Engine

Apple had $137.1 billion in cash and investments at the end of December and has faced pressure from investors including hedge fund manager David Einhorn to return more to shareholders.

The company’s profit margins have been squeezed by higher component costs and the introduction of lower-priced products such as the iPad mini. Apple probably sold 35.4 million iPhones in the latest quarter, compared with 35.1 million a year earlier, according to estimates compiled by Bloomberg. Bernstein’s Sacconaghi predicts 25 million units will be sold in the current quarter.

The slide comes as Samsung prepares to start selling its Galaxy S4 smartphone this week. The Suwon, South Korea-based company is Apple’s biggest rival and has challenged the iPhone’s dominance by selling a slew of handsets with different styles, screen sizes and prices.

“Things have changed for Apple,” said Alex Gauna, an analyst at JMP Securities in San Francisco. “The competition is more intense.”