Apple Inc.

By Rex Crum | rcrum@bayareanewsgroup.com
Published: October 25, 2016 at 2:03 pm | Updated: October 26, 2016 at 5:44 am

CUPERTINO — For any other company, reporting annual sales of more than $215 billion would be worth celebrating. For Apple, however, it’s a reason for disappointment.

Apple on Tuesday reported annual sales that fell for the first time in 15 years. After the close of trading, Apple said that for the fiscal year ending in September, it had sales of $215.6 billion, a 7.7 percent decline from the $233.7 billion it reported a year ago.

Several quarters of declining iPhone sales have been the main source of Apple’s revenue slipping this year. In its fourth quarter, the world’s most valuable company said that it sold 45 million iPhones, but that total was down 5 percent from last year’s quarterly iPhone sales of 48 million.

For the three months that ended Sept. 30, Apple earned $1.67 a share, on $46.9 billion in revenue, compared with a profit of $1.96 a share, on sales of $51.5 billion, a year ago. Analysts surveyed by Thomson Reuters had forecast Apple to earn $1.65 a share on $46.9 billion in revenue in the quarter.

sjm-apple-1026-90But even when Apple exceeds expectations, it’s not necessarily enough because the company has set such a high bar for performance year after year. Although it surpassed analysts’ earnings estimates, and its sales were in line with Wall Street’s expectations, Apple shares shed almost 3 percent to slip to $114.90 in after-hours trading.

On a conference call, Apple Chief Executive Tim Cook worked to put a positive spin on the results, noting what he called the “incredible momentum” of the company’s services business. During the quarter, Apple reported $6.3 billion in services revenue, a 24 percent increase from last year’s $5.1 billion.

For Apple, services revenue includes sales from the App Store, Apple Music subscriptions, Apple Pay transactions, Apple Care programs and licensing and other services. Cook said that revenue from the App Store “continues to skyrocket,” while Apple Music and Apple Pay sales are going “strong.”

“We remain confident about the future of our services business. We have almost doubled (services) revenue in the last four years,” Cook said, before reiterating that he expects Apple’s services business to reach “a Fortune 100 company size” in 2017.

Still, services was the only business area for Apple that grew on a year-over-year basis. Among Apple’s other major product lines, iPhone revenue fell 13 percent, Mac sales were down by 17 percent, and iPad sales were flat with the same period a year ago.

To read expanded article, click here.