Apple’s stock reaped the benefits of a positive quarterly earnings report and surprisingly good profit announcement as the company sold more of its iPhones than expected – 31.2 million between April and June. Its shares rose five percent in early trading on Wednesday.
But there are signs of slowing sales growth, which means investors are focused on what Apple is going to do about that with new products in the autumn and non-hardware initiatives.
Ross Rubin, an analyst with Reticle Research said: “They talked about moving into schools with the iPad, moving into enterprise with the iPad. Also a lot of cloud activity and new content choices available on Apple TV. So even though some of the device categories, Mac, iPod may be maturing now, slowing down, we are seeing how the company is trying to really build out that ecosystem in the future.”
Software and services growth are crucial, but it is the hardware that gets Apple fans excited and many market analysts are waiting for the expected launch of new iPhones – including a cheaper, more basic model – and updated iPads later this year, before pronouncing on the stock’s future.
China fall, not so fast says the CEO
A sharp drop in Apple’s revenue in China in the second quarter underscored the challenges it faces in what is now its second-largest market as cheaper Chinese rivals close the technology gap.
CEO Tim Cook blamed China’s slowing economic growth, but said he remained bullish on that market. The “economy clearly doesn’t help us, nor others,” he told analysts.
He said, however, that the revenue numbers do not tell the whole story. Apple records revenue when it supplies resellers, who then sell the products to consumers. Sales to consumers – or sell-through – slipped just four percent in Greater China from a year ago. By that same measure, mainland Chinese sell-through sales actually rose five percent year-on-year, though that was a deceleration in growth, Cook said.
The global battle for mobile supremacy is not just between Apple and Samsung. Huawei and ZTE are growing across their Chinese home base, and South Korea’s LG said on Wednesday it sold a record 12.1 million smartphones in April-June, more than double its year-ago sales.
However, even excluding China, Apple’s revenue in Asia Pacific did fall 35 percent quarter-on-quarter.