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Apple's Q1 Beats Wall Street, but Breaks a Profit Streak

Apple's Q1 Beats Wall Street, but Breaks a Profit Streak

Apples' much-anticipated earnings are out, and the company had better than expected sales of its iconic mobile devices. Whether that will quell recent speculation about Tim Cook's future remains to be seen. At least the company is still going strong in the legal arena, where it beat back a patent challenge this week from Motorola at the International Trade Commission. None of this, however, answers a key question from investors: When is the next iPhone coming out?

By Rachelle Dragani MacNewsWorld ECT News Network
04/24/13 5:00 AM PT

Apple dominated the earnings roundup this week. Investors braced for a quarterly report that could determine whether the company's stock heads back towards last September's highs -- or continues its 40 percent-plus decline.

Expectations weren't stellar for Apple before the Q1 report, but the company did barely beat analyst estimates thanks to high sales for iPhones and iPads. It sold 37.4 million iPhones during the past quarter, slightly up from the 35.1 million during the same period last year. iPad sales had a bigger jump with 19.5 million sold compared to 11.8 million from the same time a year ago.

It was the first time in nearly a decade, however, that the company announced a year-over-year decline in profits. Apple reported US$43.6 billion in revenue with $9.5 billion in net profit -- down 18 percent from the $11.6 billion in profit from the same time last year.

Apple did not respond to our request to comment for this story.

Perfect Storm Brings Cook Backlash

A lot of attention surrounding its earnings report is nothing out of the ordinary for the high-profile tech giant. However, leading up to the announcement, CEO Tim Cook became a big part of the media scrutiny.

Cook has been the subject of several critical editorials and tweets that point to the company's stock price, which has taken a nose dive since its $700 high point in September. He has also been slammed for the lack of new products, sparking speculation that his time may be ending at Apple.

That launched nearly as many social media posts and editorials defending Cook, pointing out that even if the company's stock price is down, product sales are at record highs and the company is sitting on a huge pile of cash.

Despite all the rumors, the campaign against Cook isn't likely to result in him looking for new work. It is an indication, thought, that some Apple investors, analysts and fans are irritated, said Joseph Pastore, professor Emeritus at Lubin School of Business at Pace University.

"This is not about the merits of Tim Cook," he told MacNewsWorld. "This is about a classic moment in which a fundamentally talented leader finds himself, and his firm, in the midst of the proverbial perfect storm."

The storm, in this case, is a tech industry that is relatively strong, but Apple hasn't recently proved it's the undisputed leader. Investors want to see a strong next-generation iPhone and a more stable stock price, said Pastore.

"Given the disruptive nature of the industry and the temporary advantage firms are likely to have, this is a moment where faith in Apple has waned," he noted. "Yes, sales are strong, but sales are the result of yesterday's decisions, and confidence in this industry is built not on what a firm has done, but what it is likely to do."

It also doesn't help that Cook had big shoes to fill, Pastore added.

"Tim Cook is still in the shadows of Steve Jobs, adding more weight to the adage, 'Never follow Lombardi, always follow Lombardi's successor.' It's not fair, but it is so."

Apple Still Holds Serve in Courts

Despite business grumbling, Apple is still enjoying success in the courtroom.

The International Trade Commission sided with Apple this week in a case against Motorola Mobility, ruling that Cook's company did not infringe on a Motorola patent regarding sensors.

The patent protects technology that prevents users from accidentally launching apps or hanging up when their device is held against their face to talk on the phone.

Motorola asked that the ITC halt sales of the iPhone. The commission, however, said the technology for the sensor controlled interface was obvious enough that it did not necessarily need patent protection.

The win didn't just fuel Apple's patent litigation fire. It also is an indication that the iPhone's legacy could be helping it in court, said Roman Tsibulevskiy, patent attorney at Goldstein Patent Law.

"The key here is that we are dealing with the iPhone, which is the most important Apple product," he told MacNewsWorld. "Given that Apple plays such an important role on the stock market, I think anytime anyone asks for halting iPhone imports, the commission has to be really confident that the iPhone actually does infringe a valid patent. Not maybe, but very clear infringement. The potential for PR disaster and negative economic impact are huge with such valuable products."

In addition to likely frustrating Google, it could also explain some of the scrutiny of Cook, said Tsibulevskiy.

"I am really astounded by the fact that the Android side, like Google, Motorola, HTC, Samsung, etc., is unable to obtain one major successful victory against Apple," he pointed out. "There are so many lawsuits against Apple and nobody can get a major blow against them. I think that speaks to their leadership, business savvy, legal savvy and Steve Jobs' legacy. No wonder Tim Cook is under so much pressure."


Rachelle Dragani is a freelance reporter based in Brooklyn, NY. She enjoys staying on top of e-commerce deals, reporting on what new gadget is coming your way, and keeping tabs on anyone trying to hack into your info. Feel free to e-mail her at rachelle.dragani@newsroom.ectnews.com.


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