Apple's business model starting to collapse - SSR

By IVCPOST Staff Reporter

Jul 25, 2013 08:20 AM EDT

Apple gained a much-needed success on Tuesday when it released its fiscal third-quarter results which outdid the consensus of analysts. Its stocks climbed up to 5% during the day's after-hours session. In spite of this, Artur Pylak, Sector & Sovereign Research's analyst, published a report that showed how Apple's business model was beginning to fall apart.

Pylak observed the presence of several troubling trends that were developing. He noted that iPhone units were 19% higher than the projections but the ASPs were down by 5.2% quarter-on-quarter. The sales of iPad were 16% light in comparison with the expectations. Furthermore, a clear stock loss in the fast growing market was recorded.

He added that slowing down of sales happened in 3 straight quartiles while declining margins were recorded for 5 quarters now. The margins still dropped even if the positive mix was shifted towards iPhones. Also, the company's international sales plunged. The consensus for 2014 expected 12% sales growth and revival to 37.5% gross margins. Given the tough rivalry, Apple was said to be in need of an easier target.

"Taken in full context, the quarter was anything but good for Apple," Pylak concluded. "Apple's pace of innovation has slowed with no major product announcements since last October, and none expected until the fall. Apple may have lost the interest of consumers. A future of downward revisions and quarterly misses does not bode well for Apple investors."

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