Apple Bites Itself: Q2 Numbers Fall Short of Expectations

by Holly Shoemaker

On Tuesday, Apple reported its Q2 2012 numbers, falling short of analyst’s expectations.

Numbers at a Glance

• Apple posted revenue of $35 billion. While the figure shows an increase of 23 percent compared to Q2 2011, the figure fell short of expectations by $2 billion.
• The company said its net income increased by 21 percent from Q2 2011 to $8.8 billion. This fell short of expectations by approximately 10 percent.
• iPad sales increased 84 percent to 17 million units sold.
• Apple shipped 26 million iPhones from April to June 2012. While this showed an increase of 28 percent, analysts predicted the company would sell 28 to 29 million smartphones. Apple sold 35.1 million iPhones in the previous quarter. Tim Cook, Apple’s CEO, and many analysts attributed the drop to the upcoming iPhone 5 or new iPhone release.
• Sales in Greater China totaled $5.7 billion, which was an excepted drop of $2.2 billion from January through March.

The Continuing China Factor

China will continue to play a key role in the smartphone global market battle. The iPhone 4S has limitations for Chinese consumers as Siri does not speak Mandarin or Cantonese. The iPhone 5 will feature these languages and should boost sales.

The unexpected decline has resulted in many questioning if Apple products do not hold the same appeal in China as the new iPad launch in China last week failed to generate the usual excitement of an Apple launch.

Other companies have taken advantage of Apple’s gap in the market for Chinese consumers. The Samsung Galaxy S III and HTC One X have appealed to consumers because of their wider screens, enhanced camera feature and available apps.

Concluding Thoughts

Apple will continue to see a decline in iPhone sales as consumers will wait to purchase the iPhone 5. Apple generates more than half its revenue from iPhone sales and when the next iPhone debuts, Apple should recoup some of its losses. Samsung also continues to take away from Apple’s market share. Its move to launch the Galaxy S III earlier than the iPhone 5 paid off. However, Samsung will likely see a decline in some numbers after the iPhone 5 debuts as newer and popular brands generate demand, at least in the short term. The battle comes down to how long the hype lasts.