apple bite2 Apples profits continue to fall

With Apple's cheaper, older devices growing in popularity among consumers, the company's profits see a substantial hit.

Apple's profits fell by a whopping 18% last quarter, with their gross profit margin falling by 10 percentage points. Wall Street analysts expected the numbers to be even worse, but even so, they've fallen well below Apple's predictions. One reason for the decline in profits is due to the tech company's older products: Older iPhones and the cheaper iPad mini are less profitable for Apple, but they're seeing good sales with consumers. Without a game-changing new product, many customers don't see a reason to buy the latest devices when the older ones are fairly similar, and come with a lower price tag.

Tim Cook in 2012 WWDC Apples profits continue to fall

Tim Cook, CEO of Apple

 

Apple's stock has fallen by nearly 24% so far this year, something CEO Tim Cook described as “very frustrating to all of us” during a post-earnings conference call made with market analysts. A lower stock price will not make investors happy, and Apple is planning to counteract this by using some of it's $144.7 billion cash reserve to increase the shareholders' dividend from the current 3% to 3.05% per share. In addition, Apple's stock buyback plan has seen a cash infusion as well, from $10 billion to $60 billion. This is the largest buyback of stock in corporate history ,according to Apple, and the company will issue debt in order to complete it. As such, credit rating agency S&P has lowered Apple's rating from AAA to AA+.

 

Apple managed to sell 37.4 million iPhones last quarter, which is an increase from the 35.1 million sold in the same quarter of last year. However, Apple has doubled its sales for the past four years, and that certainly isn't the case now. iPad sales came in at 19.5 million, compared to last year's 11.8 and their computer sales have remained flat. During the conference call, Cook remarked on the PC market, saying it "still has a lot of life in it. And we're going to continue to innovate in it."