The iPad Air has been warmly received but is Apple losing its bite?

As growth falters and gizmos dry up, there are concerns the tech firm's boss is failing to do enough to hold off its rivals

On the face of it, it was as robust an earnings report as investors could have hoped for. Apple's latest set of quarterly numbers, posted after the market close on Monday, brought news of record iPhone sales and net profits of $7.5bn (£4.6bn) over the three months to the end of September on revenues of $37.5bn. The figures were better than what Wall Street's finest had pencilled in for the tech behemoth, which went on to forecast a strong performance over the crucial holiday selling season, anticipating revenues of between $55bn and $58bn in the three months to December.

"We are winning with our products in all the ways that are most important to us, in customer satisfaction, in product usage and in customer loyalty," Apple's chief executive, Tim Cook, crowed in a subsequent call with analysts. "Our relentless focus on providing innovation that enhances our customers' lives is evident in the extraordinary list of products that we've launched in just the last couple of months."

And yet, questions linger about the pace of growth at the business, for while the profits were strong, they were not as strong as the result during 2012. Analysts, to be sure, were expecting worse, forecasting $7.93 in earnings per diluted share. Apple delivered $8.26, which is significantly better. Nonetheless, it failed to match the $8.67 per share performance it booked in the three months to September, 2012. To add to the concern was the news that gross margins had retreated to 37 per cent from 40 per cent. They could slip lower during the holiday quarter, the company said, forecasting gross margins in the range of 36.5 per cent to 37.5 per cent. Last year, the company managed margins of 38.6 per cent during the same period (and that figure was itself lower than the 44.7 per cent result in 2011).

The comparison with past performance highlights a question that has been dogging Apple ever since Mr Cook succeeded the late Steve Jobs: can Apple, which for years delivered quarter after quarter of record growth thanks to a string of ground-breaking new products, innovate and get back on the path to growth or must investors brace themselves for further declines in performance as competitors lure fickle consumers seduced by the latest shiny-new-thing?

The issue came up during the phone call on Monday evening, when Sanford Bernstein analyst, Antonio Sacconaghi, queried Mr Cook's upbeat statement about new products. "Tim, you commented in your initial remarks about new product categories. I think this was also something you were explicit about in your April quarterly conference call where you said that consumers and investors should expect new products, including new product categories in the second half of this year and first half of 2014... can you reiterate that we should have that expectation?... I just want to make sure I understand the semantics of what you referred to as a new category?"

Mr Cook responded by referring to the new line of iPhones, the 5C and the more pricey 5S, and the new iPad Air, saying: "What I have said is – I have said that you would see some exciting new products from us in the autumn of this year and across 2014. And I obviously stand by that and you've seen a lot of things over the last couple of months."

But he did not offer anything specific on new categories, which is both understandable – Apple would not advertise a new gadget on a call with analysts – and, for the bears, potentially troubling, as Apple under Mr Cook hasn't yet branched out into a new area. Rumours of an Apple Television to take on Samsung's Smart TVs, or an Apple-branched watch, have thus far proved to be just that – rumours.

While those on the outside await more details on prospective product launches, the delay could further motive shareholders such the activist investor Carl Icahn, who want Apple's management to draw on the company's giant cash reserves to increase the scope of its share buyback plans.

Mr Icahn outlined his thinking in a letter addressed to Mr Cook last week, saying: "While the board's actions to date ($60bn share repurchase over three years) may seem like a large buyback, it is simply not large enough given that Apple currently holds $147bn of cash on its balance sheet, and that it will generate $51bn of [earnings before interest and tax] next year," he wrote, quoting consensus forecast figures and adding that "there is nothing short term about my intentions here".

(The call sparked a row of sorts of between Mr Icahn and Bill Gross, the influential co-chief investment officer at Pimco, who tweeted: "Icahn should leave #Apple alone & spend more time like Bill Gates. If #Icahn's so smart, use it to help people not yourself").

For now, Apple appears to be sticking to its guns on the buyback. But with margins falling and no sign of new gizmos, it might face additional pressure to relent in the months ahead, the forecast-beating results notwithstanding.

PROMOTED VIDEO
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

C#.NET Server Side Developer (C#, XML, WCF, Unit Testing,SQL)

£30000 - £40000 per annum + benefits+bonus+package: Harrington Starr: C#.NET ...

Junior Database developer (SQL, T-SQL, Excel, SSRS)

£20000 - £30000 per annum + benefits+bonus+package: Harrington Starr: Junior D...

Business Analyst - Banking - London - £550 - £650

£550 - £650 per day: Orgtel: Business Analyst - Traded Credit Risk - Investmen...

Data Centre Engineer - Linux, Redhat, Solaris, SAN, Puppet

£55000 per annum: Harrington Starr: A financial software vendor at the forefro...

Day In a Page

All this talk of an ‘apocalyptic’ threat is simply childish

Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
Mafia Dons: is the Camorra in control of the Granite City?

Mafia Dons: is the Camorra in control of the Granite City?

So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Emmys look set to overhaul the Oscars as Hollywood’s prize draw

Once the poor relation, the awards show now has the top stars and boasts the best drama
What happens to African migrants once they land in Italy during the summer?

What happens to migrants once they land in Italy?

Memphis Barker follows their trail through southern Europe
French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

Frank Mugisha: 'Coming out was a gradual process '

Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

Radio 1’s new top ten

The ‘vloggers’ signed up to find twentysomething audience
David Abraham: Big ideas for the small screen

David Abraham: Big ideas for the small screen

A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

Florence Knight's perfect picnic

Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

Horst P Horst comes to the V&A

The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

Mark Hix's summery soups

Soup isn’t just about comforting broths and steaming hot bowls...
Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

Tim Sherwood column

I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
Eden Hazard: Young, gifted... not yet perfect

Eden Hazard: Young, gifted... not yet perfect

Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
Tim Howard: I’m an old dog. I don’t get too excited

Tim Howard: I’m an old dog. I don’t get too excited

The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

Tom Peck on Match of the Day at 50

The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition