Apple eyes Christmas cheer as Samsung falters
APPLE predicts that strong sales of its new iPhones will soon pull the company out of a yearlong slump.
And the misfortunes of its archrival, Samsung, probably deserve a bit of the credit.
On Tuesday, Apple said it expects sales to start growing in the upcoming holiday quarter, driven largely by consumer purchases of the new iPhone 7 and iPhone 7 Plus, which went on sale in September.
The new iPhones hit the market with remarkably good timing. This month, Samsung was forced to recall its Galaxy Note 7, the South Korean company’s answer to the iPhone, because the devices were catching fire. That vaporised Apple’s toughest competition for the most profitable part of the smartphone market.
“There’s more demand we can supply right now,” Apple’s CFO, Luca Maestri, said.
Interest in the iPhone 7 Plus, Apple’s largest model and the most direct rival to Samsung’s Gala x y Note 7, is so intense t hat Apple sa id product ion could still lag demand even by December.
If the company’s forecast is accurate, it will mark a turnaround from what has been a disappointing year for the Silicon Valley giant. In April, Apple announced that sales in the first three calendar months of 2016 shrank for the first time in 13 years.
The poor performance cont inued t hrough t he quar ter that ended September 24. For the most recent three-month period, Apple sa id, revenue fell 9 percent to $46.9 billion. Net income fell 19 percent to $ 9 billion.
One bright spot for Apple was the accelerating growth of its services businesses – essentially its cut of iPhone app sales as well as subscriptions to Apple Music and other services. Revenue from services was up 24 percent as the company squeezed more value from the 1 billion or so Apple devices that it estimates are in active use.
“The next big product is the App Store,” said Ben Schachter, an analyst with Macquarie Research, who sees services as an underappreciated part of Apple’s business.
Maestri said revenue from Apple Music, the company’s streaming service, grew 22 per- cent in the quarter and more than offset the decline in downloads from the iTunes store.
Based primarily on the robust demand for the iPhone 7, Apple raised its financial projections for the quarter that will end in December, when crucial holiday sales occur. The company said it expects revenue of $76 billion to $78 billion, compared to $75.9 billion in the same quarter last year.
China, a key market for Apple where sales have fallen sharply, appears to be stabilising. In the September quarter, sales in there were about flat compared to the June quarter. Sales were still down 30 percent compared to the previous year, but Apple’s chief executive, Tim Cook, said he was optimistic.
“We are very bullish on China,” he said. “There might be a new normal there, but the new normal is a good growth rate.”
Apple sha res were dow n about 2.6 percent i n a f terhours trading.
While phones account for the majorit y of Apple’s business, its Mac laptop and desktop computers rema in signif ica nt contributors to t he company’s bottom line. Today, Apple is expected to announce severa l major updates to its Mac lineup, including the first major overhaul of its MacBook Pro laptop in four years.
Cook got a bit prickly when asked about artificia l intelligence technolog y found i n devices made by competitors like Amazon’s Echo and Google’s Home. T hose gadget s rely on a massi ng a la r ge amount of information about users to deliver personalised information.
He said Apple could deliver similar personalised services through its Siri technology without compromising privacy.