Apple: iPad mini hurts revenue

Spencer Platt/Getty Images

(MoneyWatch) Apple (AAPL) announced revenue of $54.5 billion and earnings of $13.1 billion, or $13.81 per diluted share. Sales were up 17.7 percent from the same period the previous year, while profits were flat.

Analysts had forecast revenue for the period of $54.7 billion and earnings of $13.44 per share. Investors had been concerned because in the previous quarter profits missed analyst expectations and recent reports suggested that sales of the iPhone 5 were slowing.

"We're very confident in our product pipeline as we continue to focus on innovation and making the best products in the world," Apple CEO said in a statement.

• Is Apple signaling a bad quarter?
• Is iPad mini cannibalizing its bigger sibling?
• Google out patents Apple in 2012
• 3 reasons Apple would make a new cheap iPhone

Apple said it sold 47.8 million iPhones last quarter for total revenue of $30.66 billion, or $641 per phone. That slightly exceeded analyst expectations of 46 million to 47 million unit sales. In the previous quarter, Apple sold 26.9 million iPhones for sales of $17.13 billion, or $637 per phone. 

The iPhone is vital to Apple, with the highly profitable device driving the company's overall financial results. A recent Wall Street Journal report stirred talk that Apple had significantly reduced orders for iPhone parts, possibly because consumer demand was lower than the company internally forecast. Sales of handsets running the competing Android platform from Google ((GOOG) have continued their strong growth.

Apple reported 22.9 million iPad sales for revenue $10.67 billion, with an average sales price of $466 per unit. In the previous quarter, Apple sold 14 million iPads, generating revenue of $7.51 billion at an average of $536 per unit.

A Reuters report suggested that the iPad mini was cannibalizing sales of the full-sized versions. That could explain the significantly smaller average unit sales price for the quarter and more than $2 billion in revenue had Apple been able to sustain the higher unit price.

In after-hours trading, investors pushed shares of Apple down more than $50 to $463.39, a loss of nearly 10 percent.

[freewillybird]

Beat earnings, close on revenue, met iPhone sales, but AAPL P/E now 9.

AAPL does not need to dominate the lower end market because that is not where margins and app sales are.
How much profit does Samsung make on its phone? Google? How much does AMZN or GOOG make on tablets?

AAPL will never announce their next major innovation until it is released, but the street is convinced AAPL will never innovate again because no announcements yet.

I do have advice for Tim Cook. Spend some billions and make Siri, Maps, etc a hundred times better than they are now. I have advice for the street. If AAPL's cap-ex goes up a bit, don't freak out, they have the cash on hand.

[usbworks]

Better to cannibalize yourself then to have Google cannibalize you.

The real problem is that Google's Android is killing Apple in the low end market. Without the iPad mini and similar entry level devices from Apple, the entire low end market would now belong to Google.

[eriksherman]

Android is advancing on the low end, but also making inroads into the high end as well.

[rwsmith29456]

The iPad mini is cannibalizing sales of the iPad? I'd feel like I was in pretty good financial shape if my two of my products were outselling everybody else. Sales up 17.7%?? $13.81 profit/share rather then $13.44? And stocks valued $463.39/share..... how awful!

[eriksherman]

The stock was $700 not so long ago. Sales growth was on the low end of estimates. Yes, the profits are good, but that doesn't mean that the mini isn't cannibalizing regular iPad sales. Of course, the post didn't say that Apple was in bad financial shape, so you're setting up a straw man argument.

[ReasonableVoicesAmongUs]

Author, incomplete article. You speculate too much.

[eriksherman]

The numbers are clearly there - huge drop in the average sales price, and at the volume they sell, the difference is significant. That isn't speculation, it's arithmetic. Now, I don't Apple had a choice if it didn't want to cede that part of the tablet market to others. But this is the result.

[Strangerthan_u]

$637 for a PHONE?!?!? Somebody is totally insane, only an IDIOT would pay that. No wonder our economy is in the toilet. i wouldn't give 637 cents for the piece of junk. Sorry but i just don't see it....

[thegolfguy]

Because people don't usually pay retail for the phone. The carriers subsidize the cost with the consumer paying $150 or so. Besides, these aren't just phones, they get used more for other purposes (texting, maps, internet) than they do for conversation.

[pedalit]

"..they get used more for other purposes (texting, maps, internet) than they do for conversation."

(...walking into lampposts, putting fellow motorists lives in danger..)

[does.tv]

Their profits are down cause they don't make the huge profit margin on it like they do the rest of the products. If they moved down to the profit margins the rest of the industry deals with their profits and stock would drop even more.

[CinLA]

Well yeah. iPad Mini is a much more portable and user friendly item. We've been waiting years for this. I didn't buy a full sized iPad because it weighed nearly as much as my Macbook 13". My iPad Mini goes everywhere with me. It's become as much a part of my day as coffee and the iPhone.

[Nate650]

Both the iPad and iPad mini use the same software, so I'm not sure how the mini is more user friendly. Do you mean from a size perspective?

[pedalit]

cinla

full size ipad= 1.46 lb
macbook 13= 4.7 lb (some 13's went over 5lb)

yep, nearly as much :-D

[askagain]

There have to be more reasons than the iPad mini cannibalizing iPad sales. The markets for the iPad mini and iPads are not the same. Some people will always prefer the larger full featured iPad while others will choose the mini Ipad. Secondly, there are a number of companies offering the seven inch pads. By offering the ipad mini, Apple has a product that can more closely compete with the smaller pads. But by pricing the iPad mini higher than pads offered by Kindle and Nexus, Apple is less competitive.

[eriksherman]

I'd say that the markets probably overlap to some small or large degree, with price sensitivity increasingly becoming a factor, especially in Asia.

[IDTICIAUSA]

After a long time desire to purchase an iPad, my wife and I were seriously considering the mini because of some of the portability features. We felt we would have gotten most of the benefits we wanted for a cheaper price because the size wasn't all that important. If not for the mini, we would have bought the full sized iPad. Unfortunately, that's a direct cannibalization because Apple gave consumers a cheaper option. We're an N of 1, but I'm sure many others felt similarly.

Turns out I won an iPad in a raffle - so, we're holding off on the hold thing for a little bit. Just thouhgt I'd gloat :)