Analysts: iPhone demand better than expected

Maybe those recent rumors of "peak iPhone" were premature after all.

The Wall Street Journal reports that Morgan Stanley analyst Katy Huberty said this week that demand for the iPhone this quarter has exceeded expectations and that the expected new version could "provide an additional boost." Apple (NASDAQ: AAPL) is widely expected to unveil a four-inch iPhone at a Monday event at its Cupertino, Calif., headquarters.

UBS analysts this week also predicted brighter days ahead for the iPhone, the Journal reported, with one claiming Apple's ecosystem "has never been stronger."

Apple posted yet another record quarter for iPhone sales in January, and its quarterly profits and earnings per share easily beat Wall Street estimates. But the company's iPhone sales may have plateaued -- Apple sold 74.8 million iPhones during the quarter, up less than 1 percent over the same period a year earlier -- and most analysts expect Apple's iPhone sales to fall during the current quarter, for the first time ever.

Huberty's estimates "show the decline for the current period shouldn't be as bad as anticipated," though, the Journal reported. Apple is on track to sell 56.5 million iPhones this quarter, according to Morgan Stanley, exceeding Wall Street expectations.

Regardless of how successful a new iPhone might be, however, there's no question that Apple faces challenges in a worldwide smartphone market where sales have slowed dramatically. So the company is increasingly focusing on revenue from businesses such as its App Store, iTunes Store and Apple Pay, noting recently that such services rang up $16.8 billion for the fiscal year ended Sept. 26, up 13 percent over the previous year.

Apple is also introduced an iPhone Upgrade Program in September, encouraging users to pay $32 a month or more to switch to a new model of the phone every year. The strategy not only could help boost hardware sales, it enables Apple to enhance its relationships with customers at a touch point that is typically claimed by mobile network operators.

For more:
- see this Wall Street Journal report

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