Apple's iPhone Sales Disappoint But Profit Beats Targets

The long-feared iPhone slowdown is finally here, and what do investors think about it? It could have been worse.
Apple shares fell about 2% in after hours trading Tuesday after Apple reported that it sold 74.77 million iPhones in the fiscal first quarter of 2016, which ended on Dec. 26. That represents a less-than 1% increase from a year ago, and it is the slowest growth rate since the iPhone was introduced in 2007. Analyst forecast that Apple would sell 76.54 million units.
Apple’s revenue also fell short of targets, but the company’s income beat forecasts.
Perhaps more important, Apple is predicting it will face more headwinds: revenue is likely to decline more than 10% in the current quarter compared with the same quarter a year earlier, the biggest drop in 15 years, and iPhone sales will drop for the first time ever. Apple’s hyper-growth days, it seems, are now behind it.
Apple AAPL +0.58% said net income for the first quarter was $18.4 billion, or $3.28 a share, and revenue grew to $75.9 billion. Analysts on average expected Apple to report net income of $18.14 billion in the first quarter on revenue of $76.6 billion, according to Thomson Reuters TRI +%.
In a statement, Apple CEO Tim Cook said: “Our team delivered Apple’s biggest quarter ever, thanks to the world’s most innovative products and all-time record sales of iPhone, Apple Watch and Apple TV. The growth of our Services business accelerated during the quarter to produce record results, and our installed base recently crossed a major milestone of one billion active devices.”
For its second fiscal quarter, Apple gave the following forecast:
• revenue between $50 billion and $53 billion
• gross margin between 39 percent and 39.5 percent
• operating expenses between $6 billion and $6.1 billion
• other income/(expense) of $325 million
• tax rate of 25.5 percent
The numbers are below the $55.6 billion in second-quarter revenue analysts had forecast, according to FactSet.
 Apple shares closed at $99.99, up 55 cents or 0.55%, during regular trading. They are down sharply from a 52-week high of $134.54.

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