'Innovator' Apple under pressure

Apple is under “tremendous pressure” to retain its crown as a leading innovator after posting its first profit slide in a decade, experts have warned.

'Innovator' Apple under pressure

Apple is under “tremendous pressure” to retain its crown as a leading innovator after posting its first profit slide in a decade, experts have warned.

The technology giant has revealed its second quarter profits were down $2.1bn from the same time last year.

Analysts have said the announcement of $9.56bn was not the “bloodbath” many were predicting for the company, but Ajay Bhalla, professor of global innovation management at Cass Business School in London, said the next 12 months would be “crucial” for Apple to rediscover its innovative touch.

“Apple is a more mature company than it was five years ago and with that maturity we see more stability than surges in profits and revenues,” Mr Bhalla said.

“They are under tremendous pressure to retain the crown of being an innovator. The next 12 months will be crucial for Apple to promote the view that it still has the power to create new products.”

Stuart Miles, founder of technology and gadget website Pocket-lint, said the results showed Apple’s strength in a period when it has not launched a new major product.

“I think the numbers show that Apple is able to hold sales regardless of whether they have a major launch in the quarter,” he said.

“What’s interesting is that iPad continues to sell while more and more people turn away from Apple’s MacBooks.

“It doesn’t seem to have been the bloodbath the street was rumouring. I think a lot of companies would like to have Apple’s 9.5 billion dollar profit issues.”

“All of their competitors are getting more and more aggressive,” he added. “Apple needs to make sure its next product continues the momentum of constantly moving forward – whether that’s a watch, a television, a new iPad or iPhone.”

Jan Dawson, an analyst at research firm Ovum, said Apple had beaten financial analysts’ estimates and its own guidance – something which could cause it problems in the long term.

“In some ways, beating guidance was the worst thing Apple could have done, after it had said last quarter that it would provide more realistic guidance and aim to hit rather than beat it,” she said.

“A large part of the problem with Apple’s share price is that it has trained analysts to expect two things: ever-increasing revenues and profits, and that it will beat its own guidance consistently.

“While beating guidance is a positive thing in its own right, it is likely to lead to continued overheated estimates from analysts, which is not in Apple’s longer-term interest.”

A drop in average selling prices for iPhones and iPads suggested much of the company’s growth came from lower-priced models like the iPhones 4 and 4S, and the iPad Mini, Ms Dawson said, something that could be construed as a “sign of things to come” at Apple.

She added: “As iPad and iPhone shipments, and especially revenues, grow more slowly, it needs new products to continue to deliver the sort of overall revenue growth it has historically produced, and it is not yet clear what those new products will be.”

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