While iPhone sales continued to increase during Apple's recent fiscal second quarter, the growth rate has slowed compared to 2012 as industry watchers wonder whether the company has forfeited its role as a fount of innovation.

Apple's net profit dropped during its fiscal second quarter ended March 30, with profits totaling $9.5 billion ? or $10.09 per diluted share - down from $11.6 billion ? or $12.30 per diluted share - during the same period a year ago. The company?s revenues were up, totaling $43.6 billion compared with $39.2 billion a year ago, with the growth driven primarily by growth in iPad and iTunes sales.

?Despite the results that meet or beat our guidance, which we have done consistently, we know that we didn?t meet everybody?s expectations,? said Tim Cook, CEO of Apple, during a conference call with analysts to discuss the results. ?And though we?ve achieved incredible scale and financial success, we acknowledge that our growth rates have slowed and our margins have decreased from the exceptionally high levels we achieved in 2012.

?Our average weekly growth slowed to 19 percent and our gross margins are closer to the levels of a few years ago,? he said.

A tough comparison
Mr. Cook was addressing the fact that some of the enthusiasm that investors and analysts previously felt for Apple has waned in recent months.

Apple?s stock reached an 18-month low last week, but was trading slightly up after its earnings were released yesterday. The drop suggests there are concerns about Apple?s future growth potential.

Mr. Cook said that Apple?s fiscal 2013 financial results are suffering in comparison with 2012?s very strong results. He noted that comparisons will continue to be challenging until the anniversary of the launch of the iPad mini in the fall and is predicting revenues to be flat during the current fiscal third quarter.

?I think what he was saying is that 2012 was an aberration,? said Carl Howe, vice president of research and data sciences at Yankee Group, Boston. ?Some days your wind is at your back other days it is not.

?As he said, he doesn?t control the currency market, he doesn?t control most of the markets which they operate in,? he said.

?Q4 of 2012 was the fourth highest earning of any company ever in the world. Not every quarter is going to be like that.?

New product cycle
Traditionally, there is a slowdown in smartphone shipments in the first quarter of any given year as sales slow following the busy holiday period during the fourth quarter.

In the first part of the year, Apple?s sales should be slowing since loyal customers have already purchased their new iPhone 5, which was introduced in the fall, and anyone still in the market for a new phone is likely to wait until a new iPhone is introduced, which Apple is expected to do later this year.

The company has experienced a slow start to the year before and bounced back with significant sales later in the year once new products have been introduced. The question is if there is a more overarching trend toward slower growth rates as the company moves into more of a general market positioning.

Industry analysts will be watching any new Apple product introductions later this year to see how consumers respond.

?This is an expected slowdown in growth - they have a single product and annual cycle so this is what should be happening,? said Michael Morgan, analyst at ABI Research, New York. ?They are now starting to taper into what we consider general market growth - this means that they are not going under.

?However, if the next devices don?t change the game in some manner for Apple then they are going to be facing that OEM handset cliff.?

The innovative touch
A key element in Apple?s future growth potential is how well it does in China, which has become a very important region for handset makers given the significant size of the potential smartphone market there.

?It is not news that Apple has always had a problem with these emerging low-income regions,? Mr. Morgan said. ?But if they can show that they can still change the game in China and continue to do well there, then that bodes well for them.?

Another issue of concern is whether or not Apple has lost its touch when it comes to introducing innovative products that generate the kind of buzz that can translate to sales, such as Samsung has been able to do with its Galaxy range of smartphones.

?We haven?t been seeing much of that from Apple lately,? Mr. Morgan said.

?I don?t know if it because they have fallen into a rhythm of this works, I?m going to keep doing it and that?s all we have to do or if it?s that they don?t believe in that, that they believe now they are a mass market device and we don?t need to be especially new,? he said.

Apple has also failed to innovate recently on the advertising front, per Mr. Morgan.

iPad sales very strong
Overall, Apple?s mobile sales were good.

Apple sold 37.4 million iPhones in the quarter, compared to 35.1 million in the year-ago quarter, an increase of 7 percent.

IPad sales continue to be very strong with Apple selling 19.5 million iPads during the quarter, compared to 11.8 million year-over-year, up 65 percent.

Apple also said it sold significantly more iPad minis in the March quarter than in the December quarter and expanded availability to China. According to the company?s research, the majority of iPad mini purchasers are first-time iPad purchasers.

In terms of the iPod, Apple sold 5.6 million units in the quarter compared to 7.7 million in the year ago quarter.

Some have looked to Apple?s CEO Tim Cook as the reason why the company has lost some of its stature in the smartphone market. There is even talk that the company may be looking to replace Mr. Cook, who took over the reins of Apple following the death of much-loved Steve Jobs more than a year ago.

?It seems like the fire has gone out of them in a weird way,? Mr. Morgan said.

?We can blame that on leadership in the sense that Steve Jobs was a visionary and Tim Cook is really an operations guy,? he said. ?He?ll make it run smooth but you are going to be wowed anymore, I guess is what it comes down to.

?The sort of general theme is translating to a lot of different facets of their business.?

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York