Strong iPhone sales buoy Apple's third quarter, shares climb

San Francisco, Reuters | Updated : 24 July 2013, 09:55 AM

Sales of Apple Inc's iPhone trumped Wall Street estimates after U.S. shipments soared 51 percent in the third quarter, lifting its stock 5 percent even as profit fell.

The world's largest technology company said on Wednesday that profit fell 22 percent as gross margins slid below 37 percent from more than 42 percent in the year-ago quarter.

The iPhone's solid showing eased concerns that growing competition is hurting demand for Apple's top-selling product as the global smartphone market matures. Rival Samsung Electronics Co Ltd, which overtook Apple to become the world's largest smartphone maker in 2012, fueled those fears when it issued a disappointing earnings forecast earlier this month.

Apple's stock, which has fallen 20 percent since January, rose 5 percent to $437.94 in after-hours trade. It closed at $418.99 on Nasdaq.

"The iPhone number should provide some comfort to investors who were worried about smartphone demand. That's one of the reasons the stock is up. Expectations were not strong for this quarter," said Shannon Cross of Cross Research.

The company sold 31.2 million iPhones last quarter - far more than the estimated 26 million - and 14.6 million iPads.

Chief Financial Officer Peter Oppenheimer said in an interview that iPhone sales rose 51 percent in the United States from a year earlier, and 66 percent in Japan.

But revenue from greater China - an increasingly crucial market for the Silicon Valley giant as it strives for growth - dived 43 percent from the second quarter and 14 percent from the year-ago period.

Executives blamed China's slowing economy for the revenue decline but did not elaborate.

"China is a huge opportunity for Apple," Chief Executive Tim Cook said on a conference call. "I don't get discouraged over a 90-day kind of cycle."

Apple earned $6.9 billion, or $7.47 a share, on revenue of $35.3 billion. That compared with a profit of $8.8 billion, or $9.32 a share, on revenue of about $35 billion in the year-ago quarter.

Wall Street's average forecast was for revenue of $35.02 billion and earnings per share of $7.32, according to an agency.

The company has $146.6 billion in cash and short term securities.

First Published: Wednesday, July 24, 2013 09:52 AM

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