Apple Inc. is fixing supply problems with the iPhone X, its most important device in years, setting the company up for a better-than-expected holiday period.
Supported by resurgent iPad and Mac sales, the 10-year anniversary iPhone will help push revenue to a record high of $84 billion to $87 billion in the quarter ending in late December, Apple said in a statement. Analysts had predicted $84 billion, according to data compiled by Bloomberg.
The iPhone X has two headline innovations: an edge-to-edge display and a facial recognition system that uses 3-D sensors. Both components have endured production problems, and soon after people started pre-ordering the handset on October 27, shipping times lengthened to as many as
Chief Executive Officer Tim Cook said Apple is addressing the delays. Production is “going well, we’re doing more each week and I’m pleased with how things are going,” he said in an interview. “The initial demand for iPhone X has been very, very strong.”
Six-week waiting times for online iPhone X orders will be reduced in the next two days as Apple adds more production capacity, he added. Indeed, wait times were already falling in several major markets, including China. Long lines had formed outside Apple retail stores on Friday.
IPhones usually account for about two-thirds of Apple revenue and the devices are a hub for a growing suite of other products and services from the company. If the iPhone X is a big hit, that could fuel growth of offerings like Apple Music and iCloud storage in coming years. Apple shares have hit records, with investors predicting demand for the handset will continue in future quarters.
Cook provided few specifics on how well the iPhone X is doing compared with other versions of the phone, but his vaguely positive comments, combined with estimate-beating fiscal fourth-quarter results, kept investors happy.
“I’ve got goosebumps—it’s another great quarter, tremendous momentum and we’ve got the iPhone X to look forward to,” Hank Smith, chief investment officer at Haverford Trust, which owns Apple shares, said.
Apple also forecast a gross profit margin of 38 percent to 38.5 percent for the holiday quarter. Analysts were looking for 38.5 percent. Results over this crucial period will also benefit from the HomePod, a smart speaker that will be available in December. It competes with a range of revamped Echo speakers from Amazon.com Inc. and Google’s Home devices.
For the company’s fiscal fourth quarter, Apple reported earnings of $2.07 a share on revenue of $52.6 billion. Analysts projected $1.87 a share and sales of $50.7 billion. Sales in Greater China rose 12 percent to $9.8 billion. The company had $269 billion in cash and long-term marketable securities at the end of September.
Cook highlighted market share gains in China for the iPhone, iPad and Mac products. “We sold more iPhones than we expected,” he said. “We had double-digit iPhone growth in many of the emerging markets.” Apple said Mac sales jumped 25 percent in the period, iPad revenue grew 14 percent and other products, such as the Watch and AirPods, surged 36 percent. Total sales rose 12 percent, the biggest increase in two years.
When Apple unveiled the $999 iPhone X in September, it also introduced the iPhone 8, which is $300 cheaper and a more modest upgrade to the prior handset. The iPhone 8 went on sale a week before the end of the September quarter, and contributed to fiscal fourth-quarter results. The handset failed to boost the average price consumers paid for iPhones, though, with the $618 average falling short of the $633 estimated by analysts.
It’s the first time that Apple
has staggered the release of new handsets that were unveiled at the same time. The delay may have prompted some buyers to wait to check out the iPhone X before deciding on its more affordable sibling. That may have pushed more sales into the holiday quarter.
The results follow strong third quarters from technology companies including Alphabet Inc.,
Microsoft Corp. and Amazon.
Apple’s reinvigorated effort to expand services, like the App Store and Apple Music, has also locked customers into its products more tightly. That’s creating more stable demand for the iPhone X even amid manufacturing problems. The company said its services business generated record revenue of $8.5 billion in the fiscal fourth-quarter, up 34 percent from a year earlier.
One of Apple’s latest customer lock-in tools is an updated mobile operating system supporting augmented reality features and apps that can super-impose images and information onto a user’s view of the real world.
Apple watch in surprisingly strong demand at UK Carrier EE
The UK’s largest mobile carrier, BT Group Plc’s EE, said it’s been surprised by an increase of customers taking out contracts to use Apple Inc.’s latest smartwatch on its network.
EE Chief Executive Officer Marc Allera said the company expected the Apple Watch Series 3 to be popular, but it has exceeded the network’s expectations.
“We haven’t released any numbers but it has been really strong, both for existing customers and those joining EE,” Allera told Bloomberg on the sidelines of the Wired Live conference.
The 4G-equipped Apple Watch, announced by Apple in September, lets customers make phone calls without an iPhone connected to it. Apple Chief Executive Officer Tim Cook said that the Apple Watch saw unit growth of more than 50 percent for the third straight quarter. EE is the only British carrier to offer the 4G service for Apple’s new watch. Allera said smartwatches that embed cellular technology are “the beginning of a trend” that the company is preparing for. He said he believes Apple’s model will prompt other companies to release similar products.
“This is the start really,” he said. “This is why we built this new network to support one phone number shared across multiple devices.”
Separately, Allera said the consumer appetite for mobile data is escalating wildly. He cited the popular Glastonbury music festival as an example, saying that
the demands of data-intensive smartphones on EE’s network by attendees have increased 54-fold over the past four years. The event attracts about 135,000 people annually. “We now carry as much data in a month as we carried over an entire year five years ago,” he said.