Is Apple's lineup beginning to rot?

Apple Lineup Reaching Ceiling Puts Pressure on CEO Tim Cook

‘Not Feasible’

Even so, sales of the iPhone, which is Apple’s biggest source of revenue, are now trailing global growth. IPhone shipments increased 13% in 2013, while the broader market rose 41%, according to researcher Strategy Analytics. The company’s share fell to 15% from 19% last year, while Samsung captured 32%, the firm said.

“To expect the kind of growth we saw years ago is not feasible,” said Channing Smith, who helps oversee about $1.1 billion at Capital Advisors Inc. in Tulsa, Oklahoma. “These are more expensive products, especially what Apple is selling, and that condenses the market opportunities.”

Apple’s forecast for the current quarter also raised questions as the numbers offer a glimpse of how sales are faring after the release earlier this month of the iPhone on China Mobile.

In a conference call, Cook said iPhone sales with China Mobile had had “an incredible start.” The smartphone is available in 16 cities in China and will be in more than 300 by the end of this year, he said.

Gross Margins

While sales in Greater China rose 29% to $8.84 billion, Apple said revenue in the Americas region fell 1% to $20.1 billion. Cook attributed the drop in part to new upgrade policies by carriers that led customers to wait longer to upgrade their devices. Apple also didn’t have the right mix of iPhones for sale between the 5s and 5c models, and the high-end 5s was more popular than expected, he said.

Apple also reported that gross margins, a measure of profitability that’s closely watched by investors, will be 37% to 38% for the current quarter, compared with analysts’ estimates of 37.3%.

Apple, which has been pressured to return more money to shareholders, also declared a cash dividend of $3.05 a share and said it had returned more than $43 billion in payments to date. Billionaire activist investor Carl Icahn last week increased his stake in the company to about $3.6 billion and has been pressing Cook to increase the buyback program to boost Apple’s stock price. Icahn’s proposal is slated to be considered at the company’s annual shareholder meeting next month.

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