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Apple guides first-ever iPhone sales decline in Q2

During Apple's quarterly conference call for the first fiscal period of 2016, CEO Tim Cook said he expects year-over-year iPhone unit sales to decline in the current March quarter, the first downturn for iPhone since its launch in 2007.




Cook's statement came in response to a question posed by Sanford Bernstein analyst Toni Sacconaghi, who asked whether Apple's iPhone guidance for the current quarter suggests a broader negative trend resulting in a year-over-year decline for all of fiscal 2016.

"We do think that iPhone units will decline in the quarter," Cook said. "We don't think that they'll decline to the level that you're talking about. We aren't projecting beyond the quarter as [Apple CFO Luca Maestri] mentioned earlier, but at this point in time, we see that Q2 is the toughest compare."

Last year, Apple sold a record 61 million iPhones in the quarter ending in March, a high number for a period that usually suffers a massive sequential decline from the holidays. Cook attributed the unseasonably positive result to catch-up from the first quarter of 2015, which saw supply constraints due to overwhelming demand for then-new larger format 4.7- and 5.5-inch handsets.

"Plus, we're in an environment now that is dramatically different from a macroeconomic point of view than last Q2," Cook said. "From a currency point of view, from the level at which we've had to adjust pricing in several of these markets and sort of the overall malaise in virtually every country in the world. It's really all of those factors that play in there, and it's difficult to sort out how much is due to which one."

The future may not be as bleak as some analyst predict, however, as Apple saw more Android switchers than ever in the first quarter. Further, some 60 percent of existing iPhone owners have yet to upgrade to the iPhone 6/6s series, a market Apple began to address in earnest in September with its iPhone Upgrade Program.

Looking beyond the current March quarter, Cook foresees an upside in important markets like China. He pointed to low penetration in areas just now moving from previous generation 3G phones to faster LTE smartphones. Cook is also banking on China's booming middle class, a demographic responsible for iPhone's regional success, saying that market is expected to ballon to half a billion people by 2020.