Analysts: China Could Brighten Apple’s Rotten Day

Analysts say success in the Chinese market is a bright spot in a bad day for the Silicon Valley giant.

by / January 28, 2014

Apparently, 51 million iPhones isn’t enough for Wall Street. 

Despite record sales for the popular smart phones, along with 26 million new iPad sales the past quarter, Apple shares dropped almost 8 percent Tuesday to end the day at $506.50 per share. 

Analysts had expected between 55 million to 57 million iPhone sales for the last quarter, but a decline in North American sales triggered the selloff Tuesday. During an investor conference call, Apple CEO Tim Cook said sales slumped in part because cell phone providers were making consumers wait a full two years before upgrading.

“Some carriers changed their upgrade policies,” Cook said. “And this affected last quarter, and will have some effect on this quarter. This restricted customers who were used to upgrading earlier.” 

Regardless, investors soured on Apple, with analysts wondering what the company’s next move for the iPhone will be in North America. 

“Basically, the question is, ‘Has everyone already bought one?’” said Morningstar Equity Analyst Brian Coello. “Because it’s growing at a slower rate than we expected.”

Apple continues to dominate in the high-end smartphone market, but is still far behind rival Samsung in overall smartphone sales. Apple is looking to grow in more cost conscious markets, especially in China and India. 

The company has also partnered with China Mobile to bring Apple’s products into as many as 300 Chinese markets, while introducing the relatively less expensive iPhone 5c. Some analysts said the price of the 5c is still out of reach for many consumers in those developing countries, and Coello expected Apple’s deal with China Mobile to help mitigate what is historically a weaker quarter for the company. 

That didn’t happen.

“Overall, it was a good quarter,” said Coello. “Apple has a loyal customer base. The question down the road is China and other [emerging] markets, and there’s room to grow there.”

John Sepulvado

John Sepulvado is from Southern California. He enjoys writing, reading and wants to take up fishing. He wrote for Government Technology for a short time in 2014.