Apple posts flat profit as competition builds

Despite posting another quarter of sustained growth in sales,  Apple’s profit remained flat in the first quarter of 2013 highlighting competitive pressure and concerns over innovation.

For the quarter ended December 29, 2012, the company saw quarterly revenue grow by 18 per cent to $54.5bn, compared to revenue of $46.3bn posted in 1Q12. However, gross margin fell from 44.7 per cent to 38.6 per cent, meaning that net profit stayed flat at $13.1bn.

The firm sold 47.8 million iPhones in the quarter, an increase of 29 per cent year-on-year on the 37 million sold in the same quarter of 2012.

Apple’s market leadership in the tablet market also continued with a 48.1 per cent year-on-year increase in overall tablet sales following the launches of the latest generation iPad and the introduction of the iPad Mini. It sold 22.9 million iPads in 1Q13, compared to 15.4 million in the 1Q12. However, that increase in sales volume was offset by a sharp 21.3 per cent decline in average revenue per unit from 4Q11.

Furthermore, just 4.1 million Macs were sold in 1Q13, 1.1 million less than the 5.2 million sold in 1Q12, and12.7 million iPods were sold, compared to 15.4 million in the year-ago quarter.

The growing competitive pressure Apple is facing in the smartphone market will weigh heavy on the average revenue per iPhone, according to Andy Castonguay, principal analyst at Informa Telecoms & Media. He believes that as this will become increasingly evident as the company expands its business in China and other growth markets, where demand for lower-priced models is expected to outstrip iPhone 5 sales.

“Apple’s performance was also hampered by increasing competition from Samsung and other manufacturers vying for the premium consumer market,” he said. “With modest but growing sales of Windows Phone devices as well as a revived product line expected from BlackBerry, Apple’s products have begun to lose their “innovative” top luster, even while still representing the competitive standard in the industry.”

There have been growing concerns about innovation at Apple since the loss of some of the company’s key people. Aside from Steve Jobs, Scott Forstall, one of the original architects of the Mac OS X operating system and head of the team responsible for the software platform at the heart of the iconic iPhone device left late last year.

The company did not expand on his reasons for leaving, but rumours suggest personality clashes at the top, as well as the fallout from the Maps debacle and ongoing issues with Siri.

But it wasn’t only Forstall that was for the chop. John Browett also left after only five months as head of retail. A search for a replacement is underway, but in the interim the retail team will report directly to Tim Cook. Again, the rumour-mongers suggest that Browett made some serious mistakes in his short tenure which didn’t do him any favours.

In other movements, famed designer, Jony Ive, who was responsible for everything from the iMac to the iPhone and iPad design is now going to “provide leadership and direction for Human Interface (HI) across the company in addition to his role as the leader of Industrial Design.” Meanwhile, Eddy Cue, senior vice president of Internet Software and Services, will take on the additional responsibility of Siri and Maps, placing all online services in one group along with iTunes, the App Store, the iBookstore and iCloud.

And Craig Federighi, senior vice president of Software Engineering, will lead both iOS and OS X development. Bob Mansfield, senior vice president of Technologies, will lead a new group, which combines all of Apple’s wireless teams across the company in one organisation and will also include the semiconductor team.