iPhone, Mac boost Apple sales but iPad numbers disappoint
In the third quarter, Apple made a net profit of $7.75 billion and revenue of $37.4 billion, fuelled by healthy sales of Mac and iPhone
Consumer electronics giant Apple expects revenues to be flat in the fiscal fourth quarter ending September and predicts revenue to be between $37 billion and $40 billion.
The company, known for giving conservative estimates to investors, said on Tuesday after announcing its third-quarter results that its gross margin is expected to be between 37 per cent and 38 per cent.
In the third quarter, Apple made a net profit of $7.75 billion and revenue of $37.4 billion, fuelled by healthy sales of Mac and iPhone, and helped by 55 per cent growth in markets like Brazil, Russia, India, and China for smartphones.
Compared to the same period last year, Apple made a profit of $6.9 billion and revenue of $35.3 billion.
“Our record June quarter revenue was fuelled by strong sales of iPhone and Mac and the continued growth of revenue from the Apple ecosystem, driving our highest EPS growth rate in seven quarters,” Tim Cook, Apple’s CEO, said on the conference call.
He said Apple is incredibly excited about the upcoming releases of iOS 8 and OS X Yosemite, as well as other new products and services that we can’t wait to introduce.
“We generated $10.3 billion in cash flow from operations and returned over $8 billion in cash to shareholders through dividends and share repurchases during the June quarter,” said Luca Maestri, Apple’s chief financial officer.
Apple revealed that the company made 29 acquisitions since the fiscal year began nine months before, though many of purchases remain undisclosed.
“We have now taken action on over $74 billion of our $130 billion capital return programme with six quarters remaining to its completion,” he said.
America contributed 38.94 per cent to the total revenue, followed by Europe with 21.61 per cent and Greater China with 15.85 per cent.
China reported the biggest year-on-year growth 28 per cent while America reported one per cent growth and Europe with six per cent.
“China continues to be a major focus for us. Our iPad sales have jumped 51 per cent while iPhone sales have surged 48 per cent and Mac sales by 39 per cent,” Cook said.
China a key market
Ben Bajarin, a consumer technology analyst for Creative Strategies, said that China is becoming a key market for Apple as high-end smartphone sales in the US and Europe is becoming saturated.
The company sold 35.2 million iPhones, 13.3 million iPads and 4.4 million Macs during the quarter globally.
Bajarin said that it is a good move from Apple to go for bigger screens, a trend started by Samsung which other manufacturers followed suit, to target the Asian region especially, as demand for phablet (smartphone-tablet combo) is very strong.
Apple expects the current quarter to be a very busy and very excited about what we have in the pipeline,” Maestri said.
Apple is expected to unveil its 4.7-inch and 5.5-inches smartphone on September 19.
According to Forrester Research, around 40 per cent of Android smartphones sold in China have display sizes of more than five inches.
But research firm International Data Corporation (IDC) said that at least 20 per cent of all smartphone sales in China have display sizes of more than five inches last year and is accepted to surge to 50 per cent by 2017.
Phablet demand slowly increasing
“Even though currently it is still just catering to a niche market, demand and the trend for phablets in the region are slowly increasing. With growing demand for smart phones, larger screen sizes and success of popular models like Samsung Notes 3, it will be interesting to see the growing competition in this domain. Apple too with the iPhone 6 is said to be heading in a larger âphablet’ style direction. However, it is too early to say whether phablets will eventually replace a good chunk of both the tablet and smartphone categories,” Nabila Popal, research manager at IDC Middle East, Africa and Turkey.
IDC cut its 2014 forecasts for the global tablet market to 246 million units — an increase of 12 per cent over last year but a slowdown from 52 per cent growth in 2013 — citing the challenge from phablets. Phablets now make up more than 10 per cent of smartphone shipments.
For the full year, the MEA market is expected to witness a rise of 38.7 per cent to 16.4 million tablets, compared to 11.8 million in 2013.
According to Annette Zimmermann, research director at Gartner Deutschland GmbH, the Middle East and North Africa market is likely to grow by less than one per cent to 106 million mobile phones this year compared to 105 million last year. Smartphone sales are expected to grow by 82 per cent to 60 million compared to 33 million units last year.
To spur iPad demand among the corporate segment, Apple announced a tie-up with IBM to create 100 business apps exclusively for iPhones and iPads.
Coook said Apple sees “substantial upside” in the business technology market, as he touts the new partnership with IBM. “I honestly believe the opportunity is huge.”
Apple’s board of directors has declared a cash dividend of $0.47 per share of the company’s common stock. The dividend is payable on August 14, 2014, to shareholders of record as of the close of business on August 11, 2014.
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