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Apple's profits fall for the first time since launch of iPod in 2001

The decline in sales dragged the company’s profits down by 14%

Zlata Rodionova
Wednesday 26 October 2016 12:34 BST
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Tim Cook, Apple's chief executive, tried to focus attention on growth in Apple's services arm
Tim Cook, Apple's chief executive, tried to focus attention on growth in Apple's services arm

Apple has posted its first decline in annual revenue and profit since 2001, as the company looks for a way to offset falling sales of its flaghship iPhone.

The tech giant has never posted a decline in annual revenues since the release of the iPod - until this week, when Apple revealed an 8 per cent drop in sales to $215 billion (£176 million) for 2016.

The decline in sales dragged the company’s profits down by 14 per cent to $45.7billion.

The drop in sales was mostly down to declining sales of the iPhone, which accounts for two-thirds of Apple sales.

Apple sold 45.5 million iPhones in the quarter, which while better than expected, compares to 48 million sold this time last year.

Despite the drop, Apple is still optimistic about its business.

Tim Cook, Apple's chief executive, tried to focus attention on growth in Apple's services arm, which includes iTunes and the App Store.

“We're thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our services business, where revenue grew 24 per cent to set another all-time record,” he said.

Apple’s latest number only include a few week of its iPhone 7 and iPhone7 Plus sales, which analysts expect to have received a boost from Apple’s main rival Samsung exploding smartphone scandal.

“The new iPhone 7 devices were only on sale for few weeks during the quarter – so it is unlikely they were able to prevent quarterly iPhone sales to continue to decline. It will be key to get early performance indicators of how well the new devices sell ahead of the holiday season,” said Thomas Husson, an analyst at Forrester Research.

Apple forecast sales would be up 1 per cent at $76 billion during the holiday-shopping Christmas quarter, suggesting it might get a boost from Samsung’s troubles.

Apple shares fell 2.8 per cent to $114.99 in after-hours trading.

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