India stays top of Apple’s shop talk

Focus on emerging markets as sales drop

APPLE CEO Tim Cook has said the tech giant is “looking forward” to setting up retail stores in India to tap into the booming smartphone market here.

“India is now one of our fastest growing markets. In the first three quarters of this fiscal year, our iPhone sales in India were up 51% cent year-on-year,” Cook said on an investor call.

He added the company has announced the setting up of a design and development accelerator to support Indian developers creating innovative applications for iOS and opened a new office in Hyderabad to accelerate maps development.

“We’re looking forward to opening retail stores in India down the road, and we see huge potential for that vibrant country,” he said, without disclosing further details.

Cook, who visited India in May, had discussed issues including manufacturing and setting up retail stores in the country with Prime Minister Narendra Modi.

“On a personal note, during the past quarter I visited China and India, and I am very encouraged about our growth prospects in those countries,” he said.

Recently the government issued new norms allowing single-brand retail trading and exemption from local sourcing for “state-of-theart” and “cutting edge” technology with a waiver for three years, and the option to extend it to five years.

The Cupertino-based tech giant sold more iPhones than Wall Street expected in the third quarter and estimated its revenue in the current period would top many analysts’ targets, soothing fears that demand for the company’s most important product had hit a wall. Its shares rose 7% in after-hours trading.

The world’s most valuable publicly traded company said it sold 40.4 million iPhones in the third quarter, down 15% from the year-ago quarter but slightly more than the average analyst forecast of 40.02 million, according to research firm FactSet StreetAccount.

Sales of the iPhone dropped for the second straight quarter, pushing down Apple’s total revenue 14.6% in the fiscal third quarter, ended June 25.

Demand for Apple’s phones has waned in China, partly because of economic uncertainty there, and has also slowed in more mature markets as people tend to hold on to their phones for longer. The sales slump has stoked concerns about whether the tech leader can continue to deliver profits at the level Wall Street has come to expect.

The country was one of the rare bright spots, with 51% growth in iPhone sales

“China was a major letdown,” said Patrick Moorhead, an analyst at Moor Insights & Strategy. “Samsung and Huawei are much more competitive now than a year ago and the Chinese economy is not doing well at all.”

Moorhead said, however, that increased services revenue — which includes the App Store and iCloud — was a “very big bright spot for Apple.”

Chief financial officer Luca Maestri told Reuters in an interview that Apple’s performance had topped his expectations in a quarter weighed down by tough foreign exchange rates and difficult comparisonswith block bus teri Phone 6 sales from the previous year.

Apple reduced channel inventory by $3.6 billion, exceeding the $2 billion expected reduction, meaning sales were better than they appeared, Maestri said.

Customer demand “was better than what is implied in our results and better than we had anticipated,” he said.

Sales of the iPhone fell last quarter for the first time since the gadget’s release in 2007, dropping 16.3%. Maestri projected the gadget’s average selling price to rise in the September quarter.

The iPhone drives about twothirds of Apple’s total sales. Apple chief executive Tim Cook said during a call with analysts that the iPhone SE, a cheaper, four-inch (10 cm) phone released this year, was extending the range of people able to buy Apple phones.

“It’s opening the door to customers we weren’t reaching before,” he said.

Apple’s quarterly net profit fell 27% to $7.8 billion, while revenue of $42.36 billion beat analysts’ average estimate of $42.09 billion, according to Thomson Reuters I/B/E/S.

Apple’s services business, which includes the App Store, Apple Pay, iCloud and other services, generated nearly $6 billion in revenue, up 18.9% from the previous year.

A si Phone sales level off, Apple is attempting to use such services to wring more revenue out of its existing base of users. The business emerged as Apple’s second largest after the iPhone for the first time in the second quarter, eclipsing gadgets such as the iPad and the Mac.

That shift bodes well for Apple because gross margins on services are better than the average for the rest of the company, Maestri said.

“It’s a great business because it is recurring in nature and more linked to our installed base,” he said.

Apple forecast fourth-quarter revenue of $45.5 billion to $47.5 billion, largely above Wall Street’s average estimate of $45.71 billion, according to Thomson Reuters I/B/E/S.

The forecast, covering the quarter ending in September, will likely include at least the first weekend of sales of the iPhone 7 range, which Apple is expected to launch in September.

Up to Tuesday’s close, Apple’s shares had fallen about 8.2% since the start of the year.