Apple outlook, profit pleases Wall Street as iPhone sales surge

28 Oct 2015 | Author: | No comments yet »

Android users are ditching their phones for the iPhone at a record rate.

More Android users than ever are switching to the iPhone, Apple’s chief executive has said, revealing that three in 10 iPhone buyers are converting from Google’s smartphone operating system.Apple Inc. has unveiled a partnership with American Express that will bring the Apple Pay mobile wallet to eligible Amex customers in Canada and Australia later this year.

Apple Pay is expanding to five more countries by the end of 2016, Apple CEO Tim Cook said during the tech giant’s conference call Tuesday discussing its earnings results. Apple Pay launched in the U.S. in the fall of 2014 and the United Kingdom last July but expansion beyond the two countries has been slow, with sources saying negotiations with the Canadian banks stalled over fees and security issues. The announcement is the first multi-country expansion for Apple’s mobile payments service, which allows users to make payments in stores by simply waving newer Apple devices in front of readers.

As iPad tablet sales decline and adoption of Apple Watch remains modest, the company’s expansion has become increasingly dependent on demand for new iPhones. In its fourth quarter earnings report, meanwhile, the world’s largest company by market value announced revenue and profit ahead of expectations but guided to sales in the holiday quarter at the low end of analyst forecasts. It forecast low single digit revenue growth of between $75.5 billion (U.S.) to $77.5 billion in the December quarter, slightly ahead of year ago sales and compared to the $77.1 billion projected by a consensus of analysts. Net income rose to $11.12 billion, or $1.96 per share in the period ended Sept. 26 from $8.47 billion or $1.42 per share a year earlier. “The law of large numbers is working against them as they get bigger,” said JPM Securities analyst Alex Gauna. “It gets harder to show growth.” “We believe iPhone will grow in Q1,” he said citing “the highest rate on record for Android switchers” along with strength in Greater Chian, where iPhone sales more than doubled over year.

Cupertino, Ca.-based Apple derives more than 60 per cent of revenue from the iPhone as smartphone penetration reaches saturation levels in much of the developed world. Cook said Apple is also focused on new growth drivers, pointed to a jump in services revenue in the fourth quarter on record App Store sales, especially in China and gains in its enterprise services business. Luca Maestri, Apple’s chief financial officer, said Apple isn’t concerned about slowing growth and that changes in foreign-exchange rates weighed on the company’s results. “When you look at the type of revenue growth we had throughout 2015, it’s difficult to repeat those types of numbers, but given our size we feel very good about our prospects for the future,” he said in an interview. To skeptics, the company has largely run out of new geographic regions to introduce the iPhone, and without new hit products, it’s reaching the limits. While Apple is the world’s most valuable company, and has a balance sheet that other companies envy, many investors make decisions largely based on the outlook for future growth.

Apple faced a similar challenge in 2013, when sales slowed amid competition from Samsung Electronics Co. “They get graded on a curve,” JMP’s Gauna said. “In technology, there are the quick and the dead, so Apple needs to be on the side of the quick.”

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