Apple for the day

Brian Chen has an article in The New York Times about Apple's earnings:

Apple is famous for setting trends. In China, though, Apple has found success by following one.
For years, Apple rivals like Samsung offered large-screen smartphones. Although the bigger phones sold well in China, Apple held off on releasing a similar model, and the country remained a weak spot. But Apple introduced its own versions in September of 2014, and now the sales spigot is wide open.
The company recently reported just over sixteen billion dollars in revenue from “greater China” (which includes mainland China, Hong Kong, and Taiwan) in its first fiscal quarter, up seventy percent from the same period a year ago. Canalys, a research firm, estimates that Apple is now the number one smartphone maker in China.
The success in China helped push Apple to a blockbuster first quarter, increasing overall profit to eighteen billion dollars and revenue to nearly eighty billion. In the same quarter a year ago, the company had profit of thirteen billion dollars and revenue of just under sixty billion.
Overall sales of iPhones shattered analysts’ predictions. Apple said it sold seventy-five million iPhones in the quarter, as many as twelve million more than expected.
Timothy D. Cook, Apple’s chief executive, said on the company’s earnings call that excitement in China over the new phones, the iPhone 6 and iPhone 6 Plus, was “phenomenal”. He also noted that the new iPhones had attracted the highest number of customers who switched from an Android device.
“It’s an incredible market,” Cook said. “People love Apple products. And we are going to do our best to serve the market.”
Not too long ago, sales of Apple products in China were slipping. In October of 2014, Apple was the number six smartphone maker in China, trailing its Asian rivals Huawei, Lenovo, Samsung, Xiaomi, and Yulong, according to Canalys.
For Apple, gaining a foothold in overseas markets like China has become increasingly vital. Its growth has slowed over the last few years as the smartphone market has become saturated in the United States and parts of Europe.
Over the last couple of years, Apple has made a series of moves to compete more aggressively in China. In late 2013, it reached an important deal to sell iPhones with China Mobile, the largest wireless network in the world, with more than eight hundred million subscribers. The company also continues to build its operations in greater China, and has plans to open two dozen new stores over the next two years, adding to the fifteen stores it currently operates in the region.
In 2013, Apple released the iPhone 5C, a lower-cost version of the smartphone that analysts thought would help increase its growth in China. But the latest numbers suggest that consumers in China wanted bigger iPhones, not cheaper ones.
In an interview, Luca Maestri, Apple’s chief financial officer, declined to say how many iPhones were sold specifically in China. But he said that iPhone sales in greater China were up over eighty percent compared with the same quarter a year ago. Maestri also noted that iPhone sales were still higher in the United States than in China. Some earlier news reports had predicted that Apple’s sales in China would surpass sales in the United States.
The company’s overall revenue, almost $75 billion, easily beat analysts’ average estimates of $67.7 billion, according to a poll by Thomson Reuters. The company’s shares, which have gained more than fifty percent in the last year, rose more than five percent in after-hours trading.
Ben Bajarin, a technology analyst for Creative Strategies, said Apple’s earnings showed that it did not hurt for the company to be late releasing larger smartphones. “Everybody was saying they’re losing share and maybe they’ll never get it back,” he said. “Sure enough, there was tremendous demand. The fact that they weren’t first didn’t really hurt their customer base.”
Strong sales of Macs also contributed to the company’s growth. The company said it sold over five million of the computers in the quarter, up from just under five million in the same quarter of last year. But iPad sales continued to shrink. The company sold twenty-one million iPads in the quarter, down eighteen percent from the quarter a year ago.
Maestri said it had become clear that customers were upgrading to newer models of iPads more slowly than they upgraded iPhones. But he said the company was pleased with overall customer satisfaction with iPads. “We feel confident about the future of the iPad,” he said.
On the earnings call, Cook said he continued to be optimistic about the iPad, partly because there were still many customers buying iPads for the first time. Over seventy percent of people buying iPads in China are first-time buyers, he said.
Increasingly, though, the company’s fortunes rely on the iPhone. Sales of iPhones accounted for seventy percent of the company’s revenue in the quarter, up from fifty-six percent in the same quarter a year ago.
“A bet on Apple is increasingly a bet on the iPhone,” said Toni Sacconaghi, a financial analyst for Sanford C. Bernstein & Company. “The good news is, iPhones are great. The bad news is, right now that’s driving over a hundred percent of the revenue growth of the company.”
Many investors would like to see Apple’s revenue be more diversified, which is raising some of the expectations for Apple’s coming entry into the smartwatch market.
The company said its smartwatch, the Apple Watch, was set to be released in April.
Cook said he had been wearing his Apple Watch every day. “I can’t live without it,” he said.

Rico says he'll probably live without an Apple Watch, but you'll get his iPhone, as Chuck Heston said, from his cold, dead hands...