nytimes.com/IPhone Demand Provides Apple With Record-Breaking Quarter

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SHAFAQNA –  Apple’s biggest cash cow, the iPhone, is gaining weight. Sales of iPhones, including the new, big-screen iPhone 6 models released last month, helped carry Apple to a record-breaking quarter and offset slowing sales of one of Apple’s other major products, the iPad, the company announced Monday. Apple sold 39 million iPhones in the quarter that ended Sept. 27, a significant bump from the 33.8 million it sold in the same period last year.

Apple appears to be gorging on consumer demand for its smartphone. The company’s $8.5 billion in net profit for its fiscal fourth quarter was 13.3 percent higher than the same quarter a year ago. Revenue over the quarter was $42.1 billion, up from $37.5 billion in the same period last year.

“Demand for the new iPhones has been staggering,” Timothy D. Cook, Apple’s chief executive, said in a financial earnings call with investors. He added: “I’ve never felt so great after a launch before.”

But impolite as it may be to point out in the middle of such exuberant returns, those numbers — while enviable for most companies — do pose some risk for Apple, which gets about 70 percent of its profits from the iPhone, said Toni Sacconaghi, a financial analyst for Sanford C. Bernstein research.

As with any company increasingly reliant on a single product, should development of that product falter or if competition from companies like Samsung grows even tougher, Apple would be vulnerable.

“Increasingly Apple is the iPhone story,” Mr. Sacconaghi said.

Shares of Apple rose about 1.5 percent to $101.25 in after-hours trading Monday.

Phone sales have steadily grown even though overall sales of smartphones are slowing in developed markets like the United States and parts of Europe. But Apple has aggressively fought that trend. Last year, it for the first time released two new iPhone models instead of just one. Last month, Apple again released two new iPhones, this time with bigger screens.

The larger iPhone 6 and iPhone 6 Plus smartphones drew a strong reaction early. In the first weekend that the new iPhones went on sale in September, Apple sold 10 million of the devices, up from the nine million new iPhones sold last year on their opening weekend.

In addition, Apple has teamed up with phone carriers in important markets, particularly China.

Apple’s quarterly revenue beat Wall Street expectations for $39.9 billion, according to a survey of analysts by Thomson Reuters. Apple’s $1.42 a share profit also exceeded analysts’ expectations for $1.31 a share. For Apple’s full fiscal year of 2014, profit was $39.5 billion on revenue of $182.8 billion.

Now for the bad news: The company on Monday said it sold 12.3 million iPads over the quarter, down from 14 million in the same quarter last year. The company’s iPad sales were down in the previous quarter, too.

Photo

An iPhone 6 display in an Apple store in Shanghai. IPhone 6 sales offset slowing iPad purchases. CreditJohannes Eisele/Agence France-Presse — Getty Images

J.P. Gownder, a technology analyst for Forrester Research, said that it appeared tablet makers had not established a steady pattern for how often people upgrade to new tablets. He added that the faster and thinner iPad Air 2, which was announced last week, could give incentive for professional customers to buy a tablet, but an iPad with an even bigger screen would have driven more new demand.

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Apple also said it sold 5.5 million Macs over the quarter, a major improvement from the 4.6 million it sold in the same period last year. But the Mac is still small fry compared with the iPhone.

In the earnings call, Mr. Cook said that Apple continued to be very bullish about the iPad’s prospects. He noted that over four years, Apple had sold about 230 million iPads, which was double the number of iPhones it sold over the first four years.

He added that sales of some of Apple’s other products might be eating into iPad sales, and that was not a concern.

“I’m sure some people looked at a Mac and an iPad and decided on the Mac,” Mr. Cook said, “and I’m fine with that, by the way.”

Apple executives are optimistic about the coming holiday quarter. Apple told investors that it expected to make $63.5 billion to $66.5 billion of revenue for its fiscal first quarter next year. That compares with $57.6 billion in revenue in the same quarter one year ago.

The question remains if a brand-new product — the Apple Watch due for release early next year — could one day become a star that rivals the iPhone in terms of sales and profit.

Notably, Apple said in the call that in its future financial reports, the company would include sales numbers for the watch in the “Other” category, along with the Apple TV and iPods — products that have been less successful. That made analysts wonder if Apple had low expectations for the watch.

Mr. Cook said Apple did not form the category based on expectations and acknowledged that he was lumping the watch in with other products for competitive purposes. “I’m not very anxious in reporting a lot of numbers on Apple Watch and giving a lot of detail on it, because our competitors are looking for it,” Mr. Cook said.

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