Apple needs to produce more blockbuster products to keep investors happy, particularly as the high-end smartphone market matures in many parts of the world, according to Loizos Heracleous, a professor of strategy at the UK’s Warwick Business School.
Shares in Apple tumbled by more than 7 per cent overnight at around US$511 (A$585), resulting in the iPhone maker losing around US$40 billion of its market value. Investors were expecting even bigger returns from the company.
This is despite Apple reporting revenues of $57.6 billion and a profit of $13.1 billion for the first fiscal quarter of 2014. The company also sold a record 51 million iPhones and 26 million iPad during the quarter.
Professor Heracleous said even though Apple has achieved record revenues and earnings per share, the growth rates of its leading products – the iPhone and iPad – are reducing.
“This means to recapture the rates of growth that Apple has historically delivered, Apple should introduce offerings of the calibre of these leading products,” he said.
“These category-defining, disruptive offerings are in the works according to Apple, and are expected to be released over the next few months."
Still, Professor Heracleous believes the computing giant’s competitive advantage in many areas means it is still a good company to bet on in the long term.
“Apple’s performance did not fully meet analysts’ growth and earnings expectations,” he said. “But Apple’s quarterly revenues were the highest in its history and were also the highest quarterly revenues from any technology company ever.
“Even though analysts’ expectations of growth were not fully met, the company performed reasonably well on this metric, given its already huge revenue and earnings base of $170 billion revenues and $37 billion net income in 2013.
“Apple’s gross margins this quarter are slightly lower year-on-year at 37.9 per cent but still exceptional for the tech sector.”
Apple’s planned expansion in China could boost its performance over the next few years, Professor Heracleous added.