Apple shares slip as iPhone 5C sales lag, Q4 profit down

Apple reported a fourth‑quarter net profit of $7.51 bn, down from $8.22 bn a year earlier, and its shares slid more than 3 % in after‑hours trading as investors reacted to the earnings decline and uncertainty over the new iPhone 5C [1].

Q4 results and market reaction

Apple’s revenue of $37.5 bn beat the Thomson Reuters consensus of $36.8 bn, but the profit drop signaled a slowdown in earnings growth for the third straight quarter. The company’s iPhone shipments rose to a record 33.8 million units, a 26 % increase over the same quarter last year, yet the broader market remained uneasy. Analyst Colin Gillis of BGC Partners noted that “the market is hard to satisfy” and that Apple’s guidance, while “a bit better,” still fell short of some investors’ expectations [1].

iPhone 5C concerns and product mix

The earnings release coincided with mounting doubts about the iPhone 5C, a lower‑priced, plastic‑backed model launched in September. Early sales data from Localytics showed the premium iPhone 5S outselling the 5C in every market, with the 5S capturing 67 % of U.S. sales in its first month and even higher shares in Europe and China (71‑87 %). Apple’s own pricing placed the 5C at $549 in the U.S. (or $99 with a two‑year contract), while the unsubsidized 5S cost about $866 in China, underscoring the limited price gap [1].

Tim Cook emphasized that the 5C was “never our intent” to serve as the entry‑level iPhone, positioning the older 4S as the low‑end offering instead [1]. Analysts such as Bernstein’s Toni Sacconaghi warned that without a truly low‑priced device for emerging markets, Apple risks remaining a “high‑end niche player” [1].

What to watch

• Holiday‑quarter guidance: Apple expects $55‑$58 bn revenue and a 36.5‑37.5 % gross margin for the crucial Christmas period.
• 5C production adjustments: Suppliers have been asked to cut 5C output, suggesting Apple may recalibrate its low‑cost strategy.
• Competitive market share: Android and Windows Phone continued modest gains in Q2 2013, while Apple’s global smartphone share fell YoY, a trend to monitor in upcoming quarters.

Apple’s heavy reliance on iPhone revenue means that any sustained weakness in its entry‑level segment could pressure margins and give competitors room to erode its market share, leaving the company’s next earnings season a key test of its product‑mix strategy.