With Apple's (AAPL) announcement Tuesday of record iPhone sales but another
round of lackluster earnings, the pressure is turned on high.
Apple and CEO Tim Cook now face a nearly six-month trial by fire. After
changing the world with the iPhone and iPad, the tech icon has seen its
performance slow and its stock price plummet, in large part because of a glaring
absence of new products. Investor and fan fervor is cooling, and some experts
say time could be running out for Apple to prove it still has the mojo that
co-founder Steve Jobs unleashed upon the world.
"Everyone is watching and everyone knows that this is either the earnings
trough -- it better be the earnings trough -- or else Apple is in real trouble,"
said Laurence Balter, an analyst atOracle (ORCL) Investment Research. "It's
important for management to communicate to shareholders that this is not the end
for Apple, but rather the beginning of the next phase. And they really need to
say that because shareholders have lost faith."
But while analyst Colin Gillis with BGC Financial conceded that "Apple's
flagship product is doing just fine," he said that Cook, after having proved
himself to be a "fantastic" chief operating officer, needs to prove himself as
CEO.
Analysts agree that Apple must not only say the right things in coming
months, but come up with another blockbuster, such as a new and improved Apple
TV.
Balter said the next obvious chapter in the Apple story is the integration
of the iPhone into the rest of our lives, such as our cars and kitchens and
living rooms. Others think Apple could recapture the groove it found with the
2007 launch of the first iPhone by jiggering the shape and size of existing
products.
"We will be looking for signs of new products such as the low-priced
handset," Societe Generale analyst Andy Perkins wrote in a note to investors,
"and possibly the iWatch."
What Apple pulls out of its hat in the next few months could be far more
important than the comparatively tepid earnings it reported Tuesday. Its
revenues were $35.3 billion, slightly above analysts' estimates of $35 billion
and essentially flat with the same quarter last year.
It reported profit of $6.9 billion, or $7.47 a share, above analysts'
estimates of $7.33 a share in a survey by FactSet but well below the $9.32 a
share it reported a year ago.
In the most encouraging number in the otherwise lackluster earnings, the
company said it had sold 31.2 million iPhones, setting a record for the June
quarter and handily beating the 26.5 million analysts had expected it to
sell.
Before the announcement, Apple shares had closed at $418.99, down $7.32, or
nearly 2 percent. But the stock was up about 4 percent in after-hours
trading.
Meanwhile, analysts are forecasting little or no revenue growth in Apple's
current fourth quarter for the first time since the debut of the iPhone six
years ago. They expect $35 billion in revenue again.
Clearly, Apple has lost the red-hot momentum it had going into the end of
2012, when it announced the iPhone 5 to great critical acclaim.
It's been an underwhelming year so far for Apple, prompting many to wonder
if the tech icon has run adrift. Investor angst has hammered the company's stock
price, at one point dragging it below $400 a share after it was hovering near
$700 a year earlier. After years of exciting launches, including variations of
the iPhone and iPad, there've been no new product announcements in 2013.
"This has been a very tough period for Apple and it's made worse by the
fact that the company doesn't talk openly with people, so you don't know what's
really going on inside," said analyst Roger Kay with Endpoint Technologies. "But
it does seem as if there's been a dearth of announcements the entire year and
the momentum Apple had before is almost entirely dissipated."
Kay said it's now showtime. Apple needs to prove it still has the goods, he
said, and it needs to start talking about them "in the next few weeks."
Or as fellow analyst Van Baker with Gartner Research put it:
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