Apple results hit by supply chain woes

CEO Tim Cook says holiday quarter impact will be worse

Apple CEO Tim Cook said the quarter ended September 25 had "larger than expected supply constraints" as well as pandemic-related manufacturing disruptions in Southeast Asia. File Picture

Supply chain woes cost Apple $6bn in sales during the company's fiscal fourth quarter, which missed Wall St expectations, and chief executive Tim Cook said that the impact will be even worse during the current holiday sales quarter.

Mr Cook said the quarter ended September 25 had "larger than expected supply constraints" as well as pandemic-related manufacturing disruptions in Southeast Asia. While Apple had seen "significant improvement" by late October in those Southeast Asian facilities, the chip shortage has persisted and is now affecting "most of our products," Mr Cook said.

"We're doing everything we can do to get more (chips) and also everything we can do operationally to make sure we're moving just as fast as possible," Mr Cook said.

He said the company expects year-over-growth for its quarter ending in December. Analysts expect growth of 7.4% to $119.7bn.

"We're projecting very solid demand growth year over year. But we are also predicting that we're going to be short of demand by larger than $6bn," Mr Cook said.

Shares of the company, which had risen nearly 15% this year, slumped 5% in extended trading on Thursday. The dip in Apple shares could make Microsoft the world's most valuable company after a run-up in Microsoft shares on the strength of its cloud computing business.

Apple's results were mixed in a fiscal fourth quarter seen as a lull before the high-sales holiday end of year.

Apple said revenues and profits for the fiscal fourth quarter were $83.4bn and $1.24 per share, compared with analyst estimates of $84.8bn and $1.24 per share, according to IBES data from Refinitiv.

The results were a rocky end to a fiscal year of above-expectations sales led by its iPhone 12 models and strong sales of Mac computers and iPads for working and learning from home during the Covid-19 pandemic.

Apple told investors in July that chip constraints would start to hit its iPhone and iPad line-ups for the first time in the fourth quarter.

Apple posted its results shortly after retailer Amazon.com forecast holiday-quarter sales well below Wall Street expectations, citing labor supply shortages and global supply chain issues in part.

MISSES 

Apple missed expectations in two key categories. Apple said fourth-quarter iPhone sales were $38.9bn, short of estimates of $41.5bn, according to Refinitiv data.

Mr Cook said that chips made with older technology remain the key supply constraint. He said that Apple remains unsure whether the shortages will ease after the holiday shopping season.

"Most of what we design are leading-edge (chip manufacturing) nodes, but all of the products have some legacy node components in them as well. And so that (shortage) continues into (fiscal) Q1, and we'll see what it looks like beyond that. It's very difficult to call."

The company's accessories segment, which contains fast-growing categories like its AirPods wireless headphones, came in at $8.8bn, half a billion dollars lower than analyst expectations of $9.3bn, according to Refinitiv data.

Other segments fared better. Sales for iPads and Macs were $8.3bn and $9.2bn, compared with analyst estimates of $7.2bn and $9.2bn, according to Refinitiv data.

The company's services segment - which contains its App Store business - had sales of $18.3bn in revenue, up 26%, compared with analyst expectations of $17.6bn. Mr Cook said Apple now has 745m paid subscribers to its platform, up from the 700m it disclosed a quarter ago.

Another bright spot in the company's results were its sales in China, which were up 83% to $14.6bn.

The company said it returned $24bn to shareholders during the quarter.

Reuters