China helps drive iPhone sales as Apple smartwatch fails to impress
Print Edition
SALES of Apple iPhones are still surging, driven partly by growth in China, but the company’s latest financial report suggests its much-vaunted smartwatch might be not be selling as fast as Wall Street expected.
The California tech giant sold more than 47.5 million iPhones in the three months through June, up 35 percent year on year, while its profit for the period soared almost 38 percent to US$10.7 billion.
While the iPhone is the engine of Apple’s current success, many analysts and investors see the sleek new smartwatch as an important indicator of the company’s ability to produce new products. Chief Executive Tim Cook said on Tuesday that watch sales outpaced initial sales of the iPhone and iPad during the first nine weeks after their launch.
Apple said earlier it sold 1 million iPhones in the first 74 days after sales began in 2007, and 3 million iPads in the first 80 days after its launch in 2010. Analysts surveyed by FactSet said Apple was set to sell 4 million watches in the quarter.
Cook, however, declined to be more specific, saying he didn’t want to give Apple’s competitors any insights into the new product.
“Sales of the watch did exceed our own forecasts,” he told analysts on a conference call, adding that demand outpaced supply in the early weeks.
Sales in June were greater than in May or April, when the watch first became available, he said.
Some analysts noted that Apple reported US$2.6 billion in revenue from the company’s “Other Products” segment, which includes the watch. That’s about US$952 million more than the previous quarter, when the watch had not yet gone on sale, or significantly less than the US$1.8 billion in watch sales that analysts surveyed by FactSet were expecting.
Chief Financial Officer Luca Maestri said, however, that revenue from the watch amounted to “well over” that US$952 million increase.
Watch sales were offset by declining revenue from iPods and accessories, which are also in that segment, he said.
Apple’s revenue from all sources in the April-June quarter grew 33 percent year on year to US$49.6 billion, with the iPhone contributing US$31.4 billion. Net income surged 38 percent to US$10.7 billion, while earnings amounted to US$1.85 per share.
That beat the estimates of Wall Street analysts surveyed by FactSet, who were expecting the company to report earnings of US$1.81 per share on sales of US$49.25 billion.
Apple got a boost from new markets like China, which contributed US$13.2 billion. In China alone, sales more than doubled from a year ago.
The company also benefited from its decision to offer bigger screens with the iPhone 6 and 6 Plus, which helped lure consumers away from competing phone makers that started selling bigger-screen devices a few years earlier.
Apple sold more iPhones than the 47 million expected, on average, by analysts surveyed by FactSet. But in a sign of Wall Street’s high expectations, some analysts said they were looking for sales of up to 49 million.
Some analysts are also worried about whether Apple can sustain its recent growth. In the coming months, it will face more difficult comparisons against the surge in sales that followed the iPhone 6 launch last September.
The company said on Tuesday that it is expecting between US$49 billion and US$51 billion in revenue for the quarter ending in September. The mid-point of that range is below the average analyst estimate of US$50.8 billion.
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