Robust iPhone sales boost Apple’s chip suppliers

28 Oct 2015 | Author: | No comments yet »

Apple has just broken a big world record.

San Francisco: Apple’s iPhone is the company’s biggest success story. Apple painted a rosy picture for its new iPhones as it reported quarterly results on Tuesday, but investors were more focussed on the company’s next test: topping last year’s record holiday sales.APPLE has recorded the biggest annual profit in corporate history, defying the sceptics to make a whopping $74.9 billion (US $53.4 billion) over the past 12 months. Shares of the world’s most profitable company initially rose 3 percent in extended trade after Apple beat Wall Street’s sales and profit forecasts, but the gains largely evaporated later.

Chief executive officer Tim Cook attributed the forecast to customers upgrading to the latest iPhone models, converts switching over from Android handsets and continued growth in China. While the iPhone provided nearly two-thirds of Apple’s $51.5 billion in revenue for the last quarter, the company also reported on sales of its other major products — including Mac computers, iPads and the new Apple Watch, along with services like the iTunes store.

CEO Tim Cook told investors today (Oct. 27) that he anticipates the Greater China region will become “Apple’s top market in the world,” though he didn’t say when. While iPad sales have fallen, and growth is expected to slow over Christmas, Apple said it planned to keep setting records in the global smartphone market. Already Greater China, which includes Taiwan and Hong Kong, accounts for 24% of Apple’s total revenue. “Frankly, if I were to shut off my web and shut off the TV and just look at how many customers are coming in our stores regardless of whether they’re buying, how many people are coming online, and in addition looking at our sales trends,” Cook said, “I wouldn’t know there was any economic issue at all in China.” China’s long-anticipated economic slowdown hit the economy this year, and recently pulled quarterly GDP growth below 7% for the first time since 2009. 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.

Analysts say consumer demand for smartphones is slowing worldwide, with the combined sales of all brands are easing because most people in developed nations already own a smartphone. While the results won’t put to rest concerns that Apple’s business may be nearing its peak, it showed the company is still able to wring more from its most important product. “iPhone dominates the results, but it’s doing good enough to deliver growth for the company,” said Walt Piecyk, an analyst at BTIG Llc. “The concern was growth would be ending.” Apple included its holiday outlook in results for the fiscal fourth quarter, which ended on 26 September. Analyst Ben Bajarin of Creative Strategies said as the Chinese market matures, it is beginning to show spikes around the holidays and slumps before the release of a new phone, as in the U.S. market. “The seasonality in China is really a new wrinkle,” he said.

For that period, net income rose 31% to $11.1 billion, or $1.96 a share, while sales climbed 22% to $51.5 billion, the company said Tuesday in a statement. Those factors should drive iPhone sales beyond the next quarter, Mr Cook said, in response to analysts who suggested demand may still slow after December.

For the current quarter, which will include a full three months of sales of the new iPhone 6s and 6s Plus models, Apple forecast revenue between $75.5 billion and $77.5 billion. The company’s generally conservative forecast was in line with Wall Street’s average estimate of $77.17 billion, according to Thomson Reuters I/B/E/S. Apple said its net income for the quarter ended September 26 was $15.58 billion (US $11.1 billion), up 30 per cent from a year earlier, while revenue rose 22 per cent to $72.3 billion (US $51.5 billion). While the iPad was a smashing success following its 2010 introduction, industry experts say consumers aren’t replacing their older models as often as they would upgrade their smartphones. While smartphone sales are slowing globally, Apple has strengthened the iPhone’s appeal to upscale buyers by offering premium features like better cameras and faster processors, said Gartner analyst Brian Blau.

But Maestri, the chief financial officer, told the Associated Press that watch sales increased in the September quarter from the period that ended in June. Apple’s shares, which fell steeply in mid-August as concerns about the company’s business in China hit fever pitch, were trading at $114.80 after the bell, after closing at $114.55 in regular Nasdaq trade. While the company doesn’t provide a more detailed breakdown, Maestri said the increase was driven by a 25 percent increase in revenue from mobile app sales. 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.

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.” Bloomberg

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