A dark cloud is hovering over Apple's collective head: Analysts expect today's earnings report, to be released after the closing bell, to show the company's first drop in profits since 2003. Their estimates, as reported by Bloomberg and the Los Angeles Times, peg the fiscal Q1 net income sinking about 2% to between $13.41 and $13.48 a share. And consider this: With the exception of a single quarter since 2003, Apple's profit has jumped more than 10%. What you need to know before the report, which Tim Cook and Apple's CFO will follow with a conference call that one Barclays analyst has dubbed "the most important ... in years":
- As Chris O'Brien explains for the Times, Apple is expected to report record iPhone sales and record revenue (somewhere around $54.7 billion—about an 18% bump, which happens to be the slowest growth rate since 2009). But "no matter how mind-blowing its performance," investors are spooked, and fear Apple may soon be dethroned as the smartphone king.
- Among their worries: narrowing profit margins in the face of an expanded product line, a rising Samsung, and a saturated US market in which many of the smartphone-less are looking for a device cheaper than the $199-and-up iPhone 5.
- The big opportunity could come in places like China—except there's generally no mobile-phone-carrier subsidy in emerging markets, which means the cheapest iPhone typically has a $450 price tag. And that's led to Apple being outsold in China by four Chinese smartphone makers who hawk cheaper devices. One, China Wireless Technologies, is just 1% of Apple's size, reports Bloomberg.
- But Apple could still surprise today: A Bloomberg review of past reports found that the company has bested analysts' estimates in every quarter but three since 2006.