Apple sees sales and shares slide

China's users represent a potential £4.6bn market for Apple. Picture: Getty

Cook – who last month voluntarily linked his bonus payments to Apple’s stock price – is widely expected to unveil flat or near-zero growth when he presents the firm’s third- quarter results on Tuesday.

Spluttering sales in the high-margin iPhone franchise is the main culprit, and has weighed heavily upon the share price this year.

One revitalising factor could be confirmation of a long-anticipated tie-up between Apple and China Mobile, the world’s largest mobile phone company by users.

With more than 720 million subscribers, China Mobile represents a huge untapped market for Apple. Analysts estimate that perhaps 12 per cent of those customers would be able to afford an iPhone, generating as much as $7 billion (£4.6bn) in additional revenue.

The two companies have been in talks about a deal since 2009. Cook met China Mobile chairman Xi Guohua in Beijing earlier this year, raising hopes that an agreement is moving forward.

At an average selling price of about $600, iPhones have always been targeted at high-end clientele. As Brian White of Topeka Capital Markets points out, that market is now saturated. “The way I look at Apple … the high-end smartphone market has hit a wall,” White told journalists last week.

“They have essentially one phone that they put out a refresh of every year and it caters to the high end of the market and they can’t grow anymore because that market is fully penetrated.”

Apple plans to address the issue by producing a line of cheaper phones. Although the company has not confirmed an exact date, it is due to launch its so-called “budget” iPhone later this year. Analysts have estimated that it will sell somewhere in the range of $300 to $400, with production believed to have been farmed out to a Taiwanese manufacturer.

However, concerns remain as to whether the budget version will eat into sales of Apple’s higher-margin iPhones. In a note to investors last week, RW Baird analyst William Power said it would likely be 2014 before Apple brings out any new gadgets with the potential to spur on the share price.

“While a lower-priced iPhone should expand the addressable market, we remain concerned over potential margin and cannibalisation impacts, and thus aren’t banking on that as a positive catalyst,” he said.

The average analyst estimate is for a meagre 0.2 per cent rise in revenues for the third quarter, with a drop of more than 21 per cent in earnings as consumers have gravitated towards cheaper models.

Overall, Apple is thought to have sold roughly the same number of phones as it did in the third quarter of last year – about 26 million.

Some, however, believe this is a lowball figure. Based on her own checks through the Apple supply chain, Morgan Stanley’s Katy Huberty is predicting third-quarter shipments of between 29 and 32 million units, though much of this is thought to have been driven by demand for legacy iPhones.