Today: Apple reports another record-breaking holiday-shopping quarter, but profits declined in 2013 and the company's trajectory and forecast causes concerns that revenue growth could follow the same path.
The Lead: More records fall, but so does Apple stock amid concerns about growth
Apple shattered records for the third consecutive holiday season in 2013, selling more iPhones and iPads than ever before for its highest quarterly revenue total in the Cupertino company's history. Apple's profits, however, were stagnant and decreased for the full year, and revenue growth has slowed to the point that higher revenues may not be expected in 2014.
Apple reported Thursday that it recorded profits of $13.1 billion, or $14.50 a share, on revenues of $57.6 billion, thanks to the sale of 51 million iPhones, 26 million iPads and 4.8 million Macs. All of those numbers represented gains from the same quarter a year ago except net profits, which stayed the same.
Net profits are also an issue when looking at Apple's full-year performance: For 2013, Apple quarterly reports suggest that it brought in $37 billion of net profits in 2013 after recording $40.2 billion in 2012, a decline of 8 percent. Revenues gained 5.6 percent in 2013, but Apple's forecast for the current quarter suggests that such gains may not continue: The projection calls for $42 billion to $44 billion in revenues for the first quarter of 2014, similar to the $43.6 billion Apple hauled in during the first quarter of 2013.
Those results bring up the same concern that led to Apple's stagnant performance on Wall Street in 2013: growth, or the lack thereof. Investors showed their disappointment, driving Apple stock down to nearly $500 after shares closed with a 0.8 percent gain at $550.50.
"The report for the December quarter was fine, but the real problem is the forecast for the March quarter," Morningstar analyst Brian Colello told Reuters, and JMP Securities analyst Alex Gauna agreed.
"The midpoint of the guidance has them back to a no-growth story," Gauna told Marketwatch. "People were hoping for more, and they essentially guided flat year-over-year growth."
Apple's iPhone and iPad sales continue to trump previous performance, with iPhone sales increasing 13 percent to 153.4 million in 2013 and iPad sales gaining 12.9 percent to 74.2 million. Even the company's personal-computer business managed to gain as the rest of that industry suffered declines, with Mac sales increasing slightly to about 17.2 million units.
Investors hoped that Apple's recent deal with China Mobile would mean a boost for iPhone sales and keep Apple's revenue growth from falling to declines, but CEO Tim Cook said in Monday's conference call that North American iPhone sales had decreased in the holiday quarter as carriers changed their policies on customers' smartphone upgrades, meaning Chinese sales could just be filling a hole that will instead just keep numbers consistent.
Meanwhile, the device that sparked Apple's ride to the top as the world's most valuable company, the iPod, has fallen on tough times, with sales falling more than 50 percent year-over-year in the holiday quarter, and Cook noting in the company's conference call that growth would have been in double-digits without the decline of Apple's music player. Developed in 2007, the iPod has been overtaken by development of gadgets that can accomplish the same tasks as the iPod and so much more.
Now, Apple faces a future where its two major money makers could begin to take a similar track to the iPod, bringing back calls for Apple to introduce new products as an avenue to the growth investors crave. Cook stood by earlier comments that 2014 would include new innovations -- "Yes, absolutely," the CEO said when asked if new product categories were still on track for this year -- and hinted that Apple could be ready to launch a payments option to challenge PayPal.
"Mobile payments is one we're intrigued with, one of the thoughts behind Touch ID," Apple's fingerprint-sensor technology built into the iPhone 5S, Cook said.
Analysts and investors join the millions of gadget fans around the world in waiting to see if Apple will introduce a new product this year.
"There's a perception problem that they aren't innovating," Wedge Partners analyst Brian Blair told Bloomberg News. "That's why new product announcements will be so critical this year."
SV150 market report: Wall Street falls again, Google drops after deals
Wall Street continued to decline after last week's big drop, and Silicon Valley could not avoid the declines, with Google taking a hit while signing on for two big deals.
The Mountain View search giant fell 2 percent to $1,101.23 after agreeing to yet another big-money acquisition and signing off on a patent deal with Apple-rival Samsung. Google followed its recent acquisitions of robotics company Boston Dynamics and Silicon Valley device company Nest Labs with the purchase of British artificial intelligence company DeepMind Technologies. The deal was originally reported by Re/Code with a price tag of $400 million, though later reports said Google's bid topped $500 million in a battle with Facebook. Google also locked down a deal to avoid the type of legal unpleasantness Apple and Samsung have been experiencing, signing a cross-licensing patent deal with the Korean electronics giant that makes popular gadgets that run Google's Android mobile operating system.
Facebook fell 1.7 percent to $53.55 Monday, as Re/Code reporter Mike Isaac reported that the company was hiring editors for an upcoming Flipboard-like project and an Adobe study showed other social networks catching up to the Menlo Park company. Rival Twitter declined 6.2 percent to $57.91 while cofounder and chairman Jack Dorsey's uncharacteristic silence sparked interest, and LinkedIn fell 5.6 percent to $205.22. Yahoo declined 3.3 percent to $36.65 a day ahead of its earnings report, with CEO Marissa Mayer still facing questions about the dismissal of her chief operating officer while continuing to purchase small companies at a rapid clip. Intel declined 0.4 percent to $24.72 as the Santa Clara chipmaker plots its play in the personal assistant space, and Cisco declined 0.9 percent to $22 after JP Morgan analyst Rod Hall doubted the San Jose company's plan to fight off software-defined networking.
Up: Electronic Arts, Apple, Juniper, Hewlett-Packard, SanDisk
Down: Twitter, LinkedIn, Yelp, Splunk, Yahoo, Tesla, eBay, Applied Materials, Zynga, Salesforce, Gilead, Workday, Google, VMware, Symantec, AMD, Oracle, Facebook, Pandora Netflix, Adobe
The SV150 index of Silicon Valley's largest tech companies: Down 15.2, or 1.01 percent, to 1,486.89
The tech-heavy Nasdaq composite index: Down 44.56, or 1.08 percent, to 4,083.61
The blue chip Dow Jones industrial average: Down 41.23, or 0.26 percent, to 15,837.88
And the widely watched Standard & Poor's 500 index: Down 8.73, or 0.49 percent, to 1,781.56
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.