Apple reports first decline in profits in 13 years as iPhone sales fall

Apple, the world’s second most valued company, on Tuesday reported a decline in quarterly profits for the first time since 2003, pulled down by low sales of its flagship product -- iPhones.

File photo of Apple CEO Tim Cook attributed the decline in profits mostly to the inability of new iPhones to stand up to the 2014 models (REUTERS)

Apple, the world's second most valued company, on Tuesday reported a decline in quarterly profits for the first time since 2003, pulled down by low sales of its flagship product -- iPhones.

Reaction to the news of the 22.5% decline in the iconic company's profits was succinctly captured by Re/Code in the headline,"Apple's incredible growth streak is officially over."

The company's shares, which were down 20% over last year, fell by 7.6% in after-hour trading (after the close of regular exchange hours) in the US to $96.41 each.

The tech giant said its net income in the second quarter came in at $10.52 billion, or $1.90 a share, compared to $13.57 billion, or $2.33 a share, during the same period in 2015.

Even revenue declined 13% from $58 billion to $50.55 billion.

Apple CEO Tim Cook acknowledged the setback, calling the quarter "challenging" in an interview to The Wall Street Journal. He added, "It doesn't change the future. The future is very bright."

He attributed it mostly to the inability of new iPhones — the entire range of smartphones accounted for 65% of Apple's total revenue in March — to stand up to the 2014 models.

Cook told WSJ that a lot of customers upgraded because of the hype around the larger iPhone 6 and 6 Plus in 2014, and there wasn't much interest left for the newer models.

Low demand in China, which has mostly driven Apple's growth in recent years, was also blamed. Cook said, "[it] was not the strong wind at your back of a year ago or even 18 months ago".

Sluggish growth in China, as it rebalances and moves away from investment and manufacturing toward consumption and services, has been a drag on global growth in general.