Apple ships 35.2M iPhones, slightly below expectations

Apple (NASDAQ: AAPL) sold 35.2 million iPhones in its fiscal third quarter, just below analysts' expectations but not too far off. Analysts had forecast around 35.9 million iPhone sales, according to the Wall Street Journal. Attention is now turning to the next iterations of the iPhone and whether Apple will introduce a wearable device dubbed the iWatch, as many industry watchers expect it will.

Click here for quarterly iPhone and iPad sales since 2007.

In the year-ago quarter, Apple sold 31.2 million iPhones, up 12.8 percent from the same period last year (which was up 20 percent from the 26 million in the period before that).

"We generated healthy growth in our entry priced, mid-tier and lead iPhone categories," Apple CEO Tim Cook said during the company's earnings conference call, according to a Seeking Alpha transcript. "I'm especially happy about our progress in the BRIC countries, where iPhone sales were up a very strong 55 percent year-over-year."

Interestingly, Cook also said that U.S. carriers' move toward handset upgrade plans that allow customers to finance their devices in exchange for being able to upgrade earlier "plays to our customer base in a large way. And so that makes us incredibly bullish that customers on those plans would be very likely to upgrade when we announce a new product."

As for iPads, Apple sold 13.27 million of the gadgets during its most recent quarter, below analysts' expectations of 14.5 million, according to Reuters. In the same quarter last year, Apple sold 14.6 million iPads.

Cook said that iPad sales met Apple's expectations but the company realized they didn't meet many analysts' expectations. He said iPad sales were hurt in part by a reduction in channel inventory and partly by "market softness" in certain markets. "For example, IDC's latest estimate indicates a 5 percent overall decline in the U.S. tablet market, as well as a decline in the Western European tablet market in the June quarter," he said.

However, Cook said that Apple's recently announced agreement with IBM to collaborate on selling iPhones and iPads, and related applications and services, into the enterprise will be a "catalyst for future iPad growth." Cook added: "I just think we have to do some more things to get the business side of it moving in a faster trajectory and I think we're now on to something that can really do that."

In terms of its financials, Apple reported revenue of $37.4 billion, up from $35.3 billion in the year-ago period. According to Reuters, Wall Street was expecting revenue of $38 billion. Apple posted net profit of $7.7 billion, up from $6.9 billion in the year-ago quarter. Apple said its gross margin was 39.4 percent, compared to 36.9 percent in the year-ago quarter.

Additionally, the company said international sales accounted for 59 percent of the quarter's revenue. Apple generated $5.93 billion in Greater China, which includes China, Hong Kong and Taiwan, making it its third largest region after the Americas and Europe. In the year-ago quarter Apple had $4.64 billion in Greater China revenue. Apple's bump in China is likely attributable to the company's deal to sell iPhones through China Mobile, inked in December. China Mobile currently counts around 790 million customers. Indeed, Apple CFO Luca Maestri told Reuters that the company's iPhone unit sales in Greater China grew 48 percent year-over-year in its latest quarter.

As for its forecast for its fiscal fourth quarter, Apple said it expects revenue of between $37 billion and $40 billion. Analysts were hoping Apple would forecast revenue of around $40.4 billion for the next quarter, Reuters reported. That could point to the next iPhone launches coming a bit later than in recent years.

Apple's June quarter is typically a slower quarter for iPhone sales as customers often hold back on buying in anticipation of new iPhone launches in the fall, something Maestri acknowledged during the call.

Meanwhile, Apple has reportedly told its suppliers to produce between 70 million and 80 million units of the next iPhone by Dec. 30, with 4.7-inch and 5.5-inch displays, according to a Journal report. That volume would represent the largest ever for an iPhone launch, and much more than the order last year of between 50 million and 60 million versions of the iPhone 5s and 5c.

For more:
- see this release
- see this WSJ live blog (sub. req.)
- see this CNET article

Special Report: Wireless in the second quarter of 2014

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Apple's iPhone 6: Bigger screen may prompt more data consumption
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Article updated July 23 with additional commentary from Apple executives.

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