Apple crushes expectations with 43.7M iPhone sales

Apple (NASDAQ: AAPL) easily beat analysts' expectations for iPhone sales in its most recent quarter, delivering 43.7 million iPhone unit sales. However, the company's iPad sales fell below analysts' expectations, and were lower than Apple's iPad sales in the year-ago period.

Click here for Apple's quarterly iPhone and iPad shipments since 2007.

Although Apple's iPhone sales were down from the record 51 million iPhone sales Apple had in the holiday quarter, the company's iPhone sales for its fiscal second quarter demolished analysts' expectations. According to Bloomberg, analysts on average had predicted Apple would sell 37.7 million iPhones in its fiscal second quarter.

However, the company reported that it sold just 16.35 million iPads in its most recent quarter. Analysts had expected Apple to sell 19.7 million iPads in the period. In the year-ago quarter, Apple sold 37.4 million iPhones and 19.5 million iPads.

On the company's earnings conference call, Apple CEO Tim Cook said Apple's iPad shipments actually came in at the high end of Apple's own internal expectations. Cook explained that, in the March quarter last year, Apple had significantly increased iPad channel inventory, but this past March quarter Apple reduced it. Additionally, Cook said Apple ended the December quarter last year with a substantial backlog of iPad mini units that were then sold in the March quarter of 2013. That didn't happen this year, Cook said.

Cook said Apple saw strong demand across its iPhone portfolio, from the iPhone 5s to the 5c to the 4S. He said Apple gained market share in the U.S., U.K., Japan, Canada, Germany, Vietnam and Greater China. He also said Apple set a new record for iPhone sales in the so-called BRIC countries of Brazil, Russia, India and China.

Over the first six months of Apple's fiscal 2014 year, Cook said iPhone sales in Brazil were up 61 percent, Turkey was up 57 percent, India was up 55 percent and Vietnam was up 262 percent. Those markets are ones Apple has historically not done well in, he said.

"Hopefully this quarter demonstrates .. we can do well in a number of geographies, from emerging markets to developed markets," he said.

Apple's iPhone average selling price fell $41 from the holiday quarter. Apple executives explained that the decline was due to successful sales of the less expensive iPhone 4S in Latin America, Asia Pacific and Eastern Europe.

In its financials, Apple posted quarterly revenue of $45.6 billion and quarterly net profit of $10.2 billion, up 5 percent from 43.6 billion in revenue and up from net profit of $9.5 billion in the year-ago quarter. Apple's gross margin was 39.3 percent compared to 37.5 percent in the year-ago period. The results were above Apple's January guidance.

Both Apple's revenue and profit topped expectations. Analysts had been looking for net income of $9.1 billion on sales of $43.5 billion, according to Bloomberg.

Apple's iPhone-related revenue in the quarter was $26.06 billion, or 57.1 percent of total revenue, compared to $22.95 billion, or 52.6 percent of total revenue, in the year-ago period.

For the current fiscal third quarter, which ends in June, Apple said it expects revenue to fall to between $36 billion and $38 billion.

Apple also announced a 7-for-1 stock split and it increased its share repurchase authorization to $90 billion from the $60 billion level announced last year.

Investors are hoping the company will be able to expand sales in the second half of this year with redesigned iPhones and possibly a new product, perhaps a wearable device related to health and fitness, which would likely be dubbed an iWatch. According to a wide range of rumors and reports, Apple will release two different iPhones later this year, one with a 4.5-inch screen and another with a 5.5-inch screen. Apple's most recent iPhones, the 5s and 5c, have 4-inch screens.

"We currently feel comfortable in expanding the things that we're working on," Cook said, adding that the company is "not ready yet to pull the string on the curtain." Cook declined to give any more details but said Apple has "great things we're working on that I'm very proud of and very, very excited about."

According to Apple documents from April 2013, released as part of Apple's legal battle with Samsung, Apple believes that "customers want what we don't have." The documents also conclude that growth in the smartphone market is primarily coming from phones that cost less than $300 on an unsubsidized basis or phones that have screens larger than four inches. Apple's iPhones currently sport 4-inch screens and sell for $600 and more.

Interestingly, during the company's conference call, Apple's Cook obliquely addressed a rumor that Apple will charge carriers $100 more for its forthcoming iPhone 6: "We price things in such a way that we think is a fair price for the value that we are delivering," Cook said. "We make those decisions on each thing as it gets closer in time to come to market."

For more:
- see this release
- see this The Verge article

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