With 78.3M iPhone shipments in holiday quarter, Apple shoots past Samsung to become world’s largest smartphone vendor

Apple's iPhone sales reached a high point in the company's most recent quarter. Image: Jan Dawson of Jackdaw Research.

Apple posted record iPhone shipments and quarterly financial results during the holiday quarter, results that Strategy Analytics noted make Apple the world’s largest smartphone vendor by volume.

“Apple shipped 78.3 million smartphones worldwide and captured 18 percent market share in Q4 2016, rising a steady 5 percent annually from 74.8 million units in Q4 2015,” said Neil Mawston, executive director at Strategy Analytics, in a release from the research firm. “This was the iPhone’s best performance for over a year, as Apple capitalized on Samsung’s recent missteps. Samsung shipped 77.5 million smartphones worldwide in Q4 2016, dipping 5 percent annually from 81.3 million units in Q4 2015. Samsung lost momentum in the quarter as a result of its Note 7 battery fiasco. Samsung captured 18 percent share for the quarter and 21 percent share for the full year, its lowest level since 2011.”

Apple said it sold 78.3 million iPhones during its December quarter, the company’s fiscal first quarter, a reversal of three quarters of slowing iPhone sales and above some analyst expectations. Samsung initially passed Apple in 2012 to become the world’s largest smartphone vendor, though the two companies have traded that crown a handful of times since.

“iPhone had a tremendous quarter thanks to exceptional demand that beat our own internal expectations,” Apple CEO Tim Cook said during Apple’s earnings conference call. “While iPhone 7 is our most popular model, we saw exceptionally strong demand for iPhone 7 Plus, which was a higher portion of the new product mix than we’ve ever seen with Plus models in the past.”

Indeed, Apple executives noted that the company’s iPhone average selling prices rose from $619 in the company’s September quarter to fully $695 in the company’s December on the strength of the iPhone 7 Plus.

Overall, Strategy Analytics said that global smartphone shipments grew 3 percent annually to hit a record 1.5 billion units in 2016. “Global smartphone shipments grew an improved 9 percent annually from 403.0 million units in Q4 2015 to 438.7 million in Q4 2016,” said Linda Sui, director at Strategy Analytics. “This quarter was the smartphone industry’s fastest growth rate for over a year. Smartphone growth is recovering slightly due to stronger demand in major developing markets like China and Africa. Global smartphone shipments grew 3 percent annually from 1.44 billion in full-year 2015 to a record 1.49 billion in 2016.”

In addressing the overall smartphone market, Apple’s Cook said he believes the space will continue to grow. “I think the smartphone is still in the early innings of the game,” he said. “We’ve got some exciting things in the pipeline.”

Cook also touted Apple’s services business, which covers offerings like AppleCare, Apple Music and the App Store. The company said revenues in the business jumped 18 percent from the same quarter a year ago, to $7.2 billion in revenue. He said the results will make the company’s services business the same size as a Fortune 100 company this year, and he said Apple’s goal is to double the size of its services business over the next four years.

“Apple services revenue of $7.2bn exceeded Facebook's TOTAL revenue of $6.8bn in most recently reported quarter. Wow!” tweeted Ben Wood CCS Insight.

Overall, Apple generated $78.4 billion in revenue during its fiscal first quarter, up from $75.9 billion a year ago. The company’s net income for the quarter reached $17.9 billion, down slightly from the $18.4 billion Apple reported during the same quarter a year ago. However, Apple’s per-share earnings grew during the period, and came in above some analyst expectations. Apple had fewer shares in the market, Cnet noted, which boosted the company’s per-share earnings.

For the coming quarter, Apple expects revenue between $51.5 billion and $53.5 billion.

“Our outstanding business performance resulted in a new all-time record for earnings per share, and over $27 billion in operating cash flow,” said Luca Maestri, Apple’s CFO, in a release from the company. “We returned nearly $15 billion to investors through share repurchases and dividends during the quarter, bringing cumulative payments through our capital return program to over $200 billion.”

Finally, Apple’s Cook addressed the company’s ongoing legal battle with Qualcomm. “I don’t like litigation and view it as a last resort,” he explained, but added: “We didn’t see another way forward. … They were insisting on charging for technologies that they had nothing to do with.”

Cook said of the company’s legal action against Qualcomm and its patent-licensing efforts: “We felt like we had no choice.”

For its part, Qualcomm executives have said they will defend the company’s patent-licensing business.

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