Apple Inc. (AAPL)’s Relief Rally

The most worrisome and surprising news in the report was the drop in iPad unit sales by 25% sequentially and 14% year over year.  I definitely didn’t see that one coming and had expected 18 million unit sales.  At least I wasn’t alone, as the institutional consensus was for 17.6 million units.

The year over year percent drop is mostly attributable to the fact that the 3^rd gen iPad introduced in 2012 boosted sales in Q2.  Also I think there was a disappointment factor this year that there wasn’t a new iPad at what had become the accustomed time.  When a 5^th gen iPad didn’t appear, many customers simply decided to wait.

Other not so good trends included the sequential drop of 43% in sales revenue in Greater China (China, Hong Kong and Taiwan).  Tim Cook indicated that most of this was in Hong Kong, whereas there had been a sequential increase in China.  This points to a crying need for a low cost iPhone in order to bring the goodness of iOS to emerging markets, but it’s not clear at all if this will happen.

Clearly the worst development by far was the lack of year over year revenue growth.  I can accept lower profit if Apple Inc. (NASDAQ:AAPL) is growing its markets.  It’s lack of growth that most concerns me.  Lack of revenue growth can be attributed to a number of things: lack of new products, lack of variety of new model iPhones, lack of lower cost iPhones and iPads. But if Apple doesn’t have the new products yet, then it should be cutting prices to spur demand.  It can afford to.

Apple Inc. (NASDAQ:AAPL) has indeed promised new products for the Fall, and there is even some indication that some may emerge in the third quarter.  As the Fall approaches, I’ll be sifting through the rumors to see which pass the giggle test and offer my projections for Apple’s new products.

Mark Hibben owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.

The article Apple’s Relief Rally originally appeared on Fool.com.

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