Apple profits fall as sales growth levels off and margins decline

Apple sells more iPhones and iPads, but Mac sales fall

Apple has unveiled a third consecutive decline in earnings as sales of Mac laptops and desktop computers fell, while unit shipments of smartphones and tablet computers continued to increase.

The company sold 33.8 million iPhones, up from 26.9 million sold in the same quarter last year. Slightly more iPads were sold, too, with 14.1 million shipped compared to 14 million. But Mac sales fell from 4.9 million to 4.6 million.

As a result, while revenues rose slightly from $36bn to $36.84bn, net income fell to $8.2bn as gross margin fell from 40 per cent to 37 per cent.

The quarter included just eight days of sales of the new iPhone 5C and iPhone 5S, which can be expected to give the company a boost in the current fourth quarter - not to mention the new iPads, launched just last week alongside a refreshed line-up of Mac PCs.

In a conference call, Apple CEO Tim Cook said that he saw "an iPad Christmas" coming and added that the company was expecting revenues of between $55bn and $58bn, with gross margins slipping further to between 36.5 per cent and 37.5 per cent.

While Apple's challenges are enviable, it's easy to begin tracking a slow levelling off in Apple's growth, as its sales and margins have come under pressure from competition.

During the conference call, Cook was grilled by analysts over the price of the iPhone 5C which, while expected by many to be a ‘budget' entry in the iPhone series, actually cost only around £50 less than last year's iPhone 5 at retail.

Cook replied that it was "never [Apple's] intent" for the 5C to be a budget phone, and said instead that "generally we see the 4S as our entry level iPhone offer... There is an elasticity in the market and we will move accordingly".

However, one market that Apple still seems to be struggling to break into is China, Hong Kong and Taiwan, where sales climbed by just six per cent to total $5.7bn for the quarter. Cook's response to the figures was to admit that "we obviously want to do better".

Yet Apple still expects revenue of up to $58bn the current quarter, which would outstrip Wall Street's consensus forecast of around $55.65bn.