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iPhone's record sales against samsung's galaxy
Highlights
IPhone's Record Sales Against Samsung's Galaxy
SAN FRANCISCO: Apple's iPhone is still defying a long-held rule of the cellphone business: What goes up must come down.
The defiance of that rule was never clearer than on Monday, when Apple reported sales of 51 million iPhones during the last quarter, the most it has sold in any quarter, up from 47.8 million in the same period last year.
Sales of the iPhone shrank slightly in North America, partly because Apple had trouble making enough new phones to keep up with consumer demand. But strong demand in other parts of the world - like China, Latin America and Russia - kept the overall sales trajectory headed up.
"One of the most important things for us in the iPhone business was to do really well in emerging markets," Timothy D. Cook, Apple's chief executive, said on the company's financial earnings call. "We had the best quarter ever from that respect."
Since it was introduced seven years ago, the iPhone has maintained enough sales momentum to knock off former phone giants and bat away some newcomers. BlackBerry, Ericsson, HTC, Motorola and Nokia enjoyed stints near the top of the phone market before plummeting.
Now, even phone sales by Samsung - the latest powerful Apple challenger - are beginning to slow.
Apple saved its biggest moves in 2013 for the end of the year, surely helping sales in the last quarter, which ended Dec. 28. For the first time, the company introduced two new iPhone models instead of one. It also released two new iPads and added NTT DoCoMo, the largest cellphone carrier in Japan, as a partner.
Those efforts translated into sales of 26 million iPads, up from 22.9 million last year. In addition, Apple sold 4.8 million Mac computers, up from 4.1 million last year.
Overall, the company reported a profit of $13.1 billion, which was flat compared with a year ago though still the envy of the technology industry. Revenue increased to $57.6 billion, up about 6 percent.
Despite the strong sales, investors have such high expectations for the company that they were unimpressed by the results, and the company's stock fell 8 percent, to $506.04, in after-hours trading. Shares in the company have gained nearly 25 percent in the last six months.
Wall Street analysts had estimated Apple would sell about 55 million iPhones, and they view the holiday shopping season as an important measurement in determining whether Apple is experiencing healthy growth or if it has plateaued.
"The key area of disappointment was iPhone units," said Toni Sacconaghi, a financial analyst for Sanford C. Bernstein, referring in particular to markets like the U.S. and Western Europe. "The worry is going to be, is the market increasingly mature? Many investors have been worried that essentially all the wealthy people already have high-end smartphones."
Cook said one reason for the dip in sales in North America was that some carriers extended the period of time that customers have to wait until they are eligible to upgrade to a new phone for a discounted price. In the past, the waiting period was 20 months, but carriers including AT&T and Verizon extended that to 24 months last year.
Still, Cook said he thought there was room for more iPhone sales in North America and Western Europe, where Apple has long found success.
"I do believe that category of product can grow in those markets," he said.
The company has put substantial effort into emerging markets, in part to keep up with Samsung's growth in those areas. At one point in 2012, Samsung's older flagship phone, the Galaxy S III, surpassed the iPhone in sales.
The strength of Galaxy phones is fading, however. Despite the marketing blitz that Samsung put behind its flagship smartphones - the Galaxy S4 and the Note 3 - sales were weaker than expected over the holiday season.
For Apple, much of the focus in emerging markets has been on the colorful and less-expensive iPhone 5C. But Apple said that its more-expensive phone, the iPhone 5S, has heavily outsold the iPhone 5C. The company said the mix of demand for the two products was different than it had expected.
Cook said people were particularly intrigued by the fingerprint ID sensor on the 5S, leading to more demand of that phone than expected, but Sacconaghi said Apple's comments told only half the story.
"The issue was more, I think, that their mix was different because they really didn't sell many 5Cs. Not so much that 5S demand was extraordinary," Sacconaghi said.
But overall, iPhone sales appear poised to grow. This month, Apple began selling iPhones through China Mobile, the biggest carrier in China. Analysts estimate that the partnership could add 15 million to 30 million more iPhone sales this year.
Cook said that last week was Apple's best week for iPhone activations in China overall. Apple has been selling through other carriers there for some time.
He noted that China Mobile was selling iPhones in 16 cities, but that number should grow to 300 by the end of the year.
"China Mobile has more subscribers than anyone in the world," Cook said. "I do see it as a watershed moment for Apple."
Jan Dawson, an analyst for Jackdaw Research, said Apple's earnings highlighted that its growth was diversifying beyond the iPhone.
"It grew iPhone revenues by a decent amount year on year - but not astonishingly - but growth from the iPad, Mac and iTunes lines together was greater," Dawson said.
"This is good, because Apple has been very dependent on the iPhone for overall growth, and that growth will inevitably slow down over the coming years."
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