The
slowdown comes as Wall Street analysts worry the company does not have
another blockbuster product to replace the iPhone. Apple does not report
Watch sales, but it does not appear to have the makings of being a hit
on the same level as the iPhone a year after launch.
And while the company is reportedly working on a car, what it plans to do in that area and when are still unclear.
The
company's shares, which have fallen 5 percent this year, bounced around
in after-hours trading and were down more than 2.6 percent.
"It's
disappointing to see them miss on an already downward adjusted sales
number and the fact is that with their iPhone growth slowing what was
needed was a product to be excited about," said J.J. Kinahan, chief
strategist at TD Ameritrade. "Pressure on the shares will continue
without a well-defined plan to grow sales or a new product."
The
company said on Tuesday it sold 74.8 million iPhones in its fiscal
first quarter, ended Dec. 26, the first full quarter of sales of the
iPhone 6S and 6S Plus. The 0.4 percent growth in shipments was the
lowest since the product was launched in 2007.
IPhone
sales were expected to fall for the current quarter compared with the
same quarter last year, Chief Executive Officer Tim Cook said on a
conference call with analysts.
But
suggesting there is still room for growth, 60 percent of people who had
an iPhone prior to the launch of the iPhone 6 have yet to upgrade to an
iPhone 6 or 6S, Cook said.
And
iPhones remain popular with American consumers. According to a
Reuters/Ipsos poll, 86 percent of iPhone owners were somewhat or very
likely to buy another iPhone.
Of
those likely to buy a phone, 15 percent are currently looking to
upgrade and 17 percent will when the next iPhone is released. The
January poll had a credibility interval of 2.0 percentage points.
While
revenue in Greater China rose 14 percent in the last quarter, Apple is
beginning to see a shift in the economy, particularly in Hong Kong,
Apple Chief Financial Officer Luca Maestri told Reuters in an interview.
"As
we move into the March quarter it's becoming more apparent that there
are some signs of economic softness," Maestri said. "We are starting to
see something that we have not seen before."
Apple
forecast second-quarter revenue of $50 billion to $53 billion, below
analysts' average forecast of $55.5 billion. In the same quarter last
year Apple reported revenue of $58 billion.
Apple's
guidance for the March quarter implies iPhone sales of 50 million to 52
million units in the March quarter, which would mark the company's
first-ever decline in sales of the gadget, said analyst Daniel Ives of
FBR Capital Markets & Co.
In the same quarter last year Apple sold 61.2 million iPhones.
The
company reported revenue of $18.37 billion from Greater China,
accounting for 24.2 percent of total revenue. Revenue from the region
had nearly doubled in the fourth quarter.
Apple's iPhone shipments fell short of analyst expectations for 75.5 million, according to research firm FactSet StreetAccount.
Apple
reported earnings of $3.28 per share, beating the average analyst
estimate of $3.23 per share, according to Thomson Reuters I/B/E/S.
Revenue increased 1.7 percent to $75.87 billion, both records for the
company.
Analysts had expected revenue of $76.54 billion.
Apple's overall performance was "slightly better than feared," said Ives at FBR.
And
despite the slowdown, Apple remains the most profitable company in the
S&P 500 and the most valuable publicly traded U.S. tech company.
The
rise in iPhone shipments in the key holiday shopping quarter was the
smallest since the second fiscal quarter of 2013, when they rose 6.8
percent, according to data company Statista.
Maestri
attributed the lackluster revenue to foreign exchange headwinds caused
by the strong U.S. dollar, which he said knocked about $5 billion off
the company's revenue.
By: Julia Love (Reuters San Francisco).
Additional Reporting: Anya George Tharakan (Bengaluru).
Editing: Stephen R. Trousdale, Bill Rigby and Lisa Shumaker.