Apple forecasts slowing iPhones sales, but remains upbeat on carrier subsidies

Apple (NASDAQ:AAPL) released its fiscal second quarter results showing sales of 35.1 million iPhones in the quarter, which the company said was up 88 percent over the year-ago quarter. The company sold 11.8 million iPads during the quarter, a 151 percent unit increase over the year-ago quarter.

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

The shipments were down slightly though from Apple's blow-out quarter that ended last year, which was the company's fiscal first quarter. During that quarter, Apple sold 37.04 million iPhones and 15.43 million iPads.

Moreover, the company said it expects a quarter-on-quarter decline in iPhone shipments in its coming quarter. One analyst estimated Apple expects to sell fully 10 million fewer iPhones during its upcoming quarter than it did in its most recent quarter.

Apple CEO Tim Cook explained that the company's iPhone 4S enjoyed a "huge January" during the company's second quarter, largely due to the gadget going on sale in locations including China. The company was able to meet much of that demand, Cook said, which means the company now expects slowing iPhones sales in the coming months.

Nonetheless, Apple executives remained optimistic on the company's long-term prospects.

Interestingly, Cook also addressed recent analyst concerns that wireless carriers will at some point draw down the subsidies they pay Apple for the iPhone.

Carriers "want to provide what their customers want to buy," Cook said. "The subsidy is not large relative to the sum of the monthly payments [users pay] over 24 months [of their service contract]."

Cook also said the iPhone provides a number of benefits to wireless carriers, including lower churn. ("That has a significant, direct financial benefit to the carrier," he said.) Cook said the iPhone is more efficient with data than other, unnamed smartphone operating systems. Indeed, Sprint Nextel (NYSE:S) CEO Dan Hesse has said iPhone users consume less data than Android users. Finally, Cook said the iPhone encourages people to upgrade from feature phones, which gives carriers another reason to subsidize the cost of the iPhone.

"I think some of these factors are missed in the general discussion of subsidies," Cook said.

Apple executives also offered some insights into the company's iPad business. Cook said Apple is "thrilled" with its iPad sales, though he declined to provide details on sales of Apple's new iPad vs. sales of its less-expensive iPad 2. Cook also said the company continues to see iPad demand outstrip supply, and said Apple expects to sell more iPads in its coming quarter than it did in its most recent quarter.

During one particularly memorable exchange between Cook and a financial analyst during Apple's earnings call, Cook explained why Apple has no intention of combining its iPad and laptop businesses: "You wouldn't want to put these things together because you'll end up compromising both," he said. "You can converge a refrigerator and a toaster but that probably won't be good for the end user."

Apple rival Microsoft (NASDAQ:MSFT) plans to combine tablet and laptop computing functions in its forthcoming Windows 8 operating system. "We're not going to that party. Others might," concluded Cook.

Finally, Apple offered a few statistics around its content business. The company said it counts 365 million iOS devices and 600,000 apps in its App Store, of which 200,000 are designed for the iPad. The company said it counts 125 million iCloud users.

As for the company's financials, Apple recorded revenue of $39.2 billion, up from $24.7 billion in the year ago quarter. The company's quarterly net profit reached $11.6 billion, almost double the $6 billion it notched in the year-ago quarter. The results beat Wall Street estimates, according to media reports.

Apple's stock was up almost 7 percent, to almost $600 per share, in after-hours trading immediately following the news.

For more:
- see this Reuters article
- see this WSJ article (sub. req.)
- see this release

Special Report: Wireless in the first quarter of 2012

Related Articles:
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More regional carriers grab pieces of the Apple iPhone pie
Analyst: Apple's iPhone outpaces competition at AT&T, Verizon and Sprint
AT&T, Verizon land new LTE-based Apple iPad, reveal data price plans
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Article updated April 24 to include information from Apple's earnings call.

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