Apple expected to report sales slowdown ahead of new iPhone launch

Tools

Apple's (NASDAQ:AAPL) quarterly earnings regularly wow Wall Street, but the company may be heading into a period of lowered expectations as consumers pull back on buying the iPhone in advance of a new model coming out this fall.

The phenomenon is not new or unexpected--even Apple CEO Tim Cook has forecasted lower iPhone sales--but the question is how much Apple's iPhone sales will fall off in advance of the new model, widely expected to be available in October.

Apple usually provides conservative earnings and revenue guidance and regularly beats it. Apple reports its fiscal third quarter results after the market closes Tuesday.

"No longer is Apple the company that beats every time," Tim Lesko, portfolio manager at Granite Investment Advisors, which owns Apple stock, told Reuters. "I expect Apple to beat Apple's guidance, but I don't know whether they will beat Wall Street's guidance."

"People are waiting," Pacific Crest Securities analyst Andy Hargreaves told Bloomberg. "It's going to be bad now, but great later."

Analysts have been predicted a slowdown since May. In a research note in late May, Sterne Agee analyst Shaw said Apple was already preparing its suppliers to transition to production of the next-generation iPhone. Wu wrote that he picked up from supplier checks that Apple's production plans for current iPhones have been "reduced significantly." He wrote that production is down 20 to 25 percent from the 35.1 million units Apple sold in the March quarter. "This means potential shipments of 26-28 million, which is below consensus closer to 30-31 million," he wrote.

During the company's fiscal second-quarter earnings conference call, Apple CEO Tim Cook explained that the company's iPhone 4S enjoyed a "huge January" during the company's second quarter, largely due to the gadget going on sale in locations including China. The company was able to meet much of that demand, Cook said, which means the company now expects slowing iPhones sales in the coming months.

The next iPhone is likely to have a thinner and larger screen than its predecessors, according to recent reports. The gadget will also likely include LTE connectivity for the first time.

For more:
- see this Bloomberg article
- see this Reuters article

Related Articles:
Report: Apple's next iPhone to have thinner screen
Report: European standards group picks Apple's nano-SIM design
Rumor Mill: Apple already pulling back on iPhone production ahead of refresh
Could Apple become the world's biggest handset maker?
Apple forecasts slowing iPhones sales, but remains upbeat on carrier subsidies