Even Apple Is Getting Hammered By The Europe Mess (Or Is This A Deeper, Darker Problem?)

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As analysts crawl through Apple’s disappointing quarterly results to try to pinpoint the exact causes of the miss, several points leap out.

One of them is Europe.

Until recently, people in Europe seemed willing to go without food, water, and air for a while if it meant having enough money to buy the next Apple gadget.

No longer.

Here’s part of what Apple CEO Tim Cook had to say when explaining why overall iPhone sales were so disappointing:

In terms of what we see happening in the different geographies, the U.S. was very strong, running at 47% [year over year growth], Japan was strong at 45%. I’ve already mentioned Greater China was up 66%, but Mainland China was over double as I said before, it’s over 100% up. The geography that did not perform well was Europe. Europe was essentially flat, slightly positive year-on-year and that really hampered our total results. (Full transcript at Seeking Alpha)

iPhone sales in Europe were flat year over year. Yikes!

Then, speaking about Apple’s overall revenue, not just iPhones, Cook drilled down to the country level. And the results here should come as no surprise:

We see a margin difference between the countries. The U.K. was relatively solid at 30% growth, but France and Greece and Italy were particularly poor, and Germany was ultimately a single-digit positive growth for the quarter. Eastern Europe was strong, materially stronger than Western Europe, but obviously, the Western European countries drive the preponderance of the revenue in that segment. And so, we’re certainly seeing a slow down in business in that area.

The main culprit here is presumably the lousy economy in these countries.

That said, Apple also may be getting hit by two factors that are more worrisome:

  • Competition from the latest Samsung phone, the Galaxy SIII, which sold 10+ million units worldwide in two months (vs. Apple’s 26 million iPhones sold for the quarter). 
  • Reductions in carrier subsidies by some European carriers, which may be slowing the rate at which consumers upgrade to the latest and greatest phone. As we warned a couple of months ago, this carrier issue is potentially a serious concern, especially if it is adopted by carriers in the U.S. and other countries.

Overall, though, if you’re looking for a geography to blame for Apple’s crappy quarter, look to Europe.

SEE ALSO: Apple Whiffs Earnings Thanks To Disappointing iPhone Sales

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