Ap­ple hopes rest on iPhoneX sales.

On the eve of the launch in stores of its deluxe iPhone X, the tech pow­er­house pre­dicts big sales com­ing and also posted quar­terly re­sults that blew past fore­casts

The Mercury News Weekend - - FRONT PAGE - By Se­ung Lee slee@ba­yare­anews­group.com

Ap­ple ex­pects a Christ­mas feast this hol­i­day-shop­ping sea­son, thanks to in-store sales kick­ing off Fri­day for its deluxe iPhone X.

The Cu­per­tino-based tech­nol­ogy gi­ant on Thurs­day fore­cast be­tween $84 bil­lion and $87 bil­lion in rev­enue for the Oc­to­ber-through-De­cem­ber quar­ter, show­ing bullish con­fi­dence in the iPhone X’s pop­u­lar­ity.

“I couldn’t be more ex­cited about Ap­ple’s fu­ture,” said Ap­ple CEO Tim Cook dur­ing a call with an­a­lysts to dis­cuss the com­pany’s quar­terly earn­ings. “As we ap­proach our hol­i­day sea­son, we ex­pect it to be our big­gest quar­ter ever.”

The prospects of strong de­mand for the new iPhone X and iPhone 8 seemed to wipe away mem­o­ries of a pre­vi­ous iPhone sales slump. As re­cently as this May, Ap-

ple re­ported a de­cline in year-to-year iPhone sales, trig­ger­ing ques­tions about whether Ap­ple was los­ing its mojo.

As Cook lauded his com­pany’s per­for­mance dur­ing the Thurs­day earn­ings call, the iPhone X of­fi­cially went on sale in Aus­tralia. Cook said sev­eral hun­dred peo­ple were wait­ing out­side Syd­ney’s Ap­ple Store to pur­chase the new phone.

The iPhone X will be­gin sell­ing in U.S. stores on Fri­day.

Fol­low­ing the earn­ings re­sults, Ap­ple shares jumped around 3 per­cent higher in af­ter-hours trad­ing.

Its fis­cal fourth- quar­ter re­sults for July through Septem­ber blew past an­a­lysts’ ex­pec­ta­tions.

Ap­ple re­vealed it sold 46.7 mil­lion iPhones in the fourth quar­ter, up 3 per­cent from the same pe­riod a year ear­lier. That beat ex­pec­ta­tions for the sale of 46.1 mil­lion units.

Ap­ple said iPhone sales rose to $28.85 bil­lion, a 2 per­cent rise from a year ear­lier.

It is un­clear how many of those sales were for the iPhone 8, which was an­nounced on the same day as the iPhoneX, but re­leased in Septem­ber.

But Cook said that since the iPhone 8 and iPhone 8 Plus went on sale, they im­me­di­ately be­came Ap­ple’s best-sell­ing iPhone mod­els.

“That for us was a bit of a sur­prise, a pos­i­tive sur­prise, ob­vi­ously,” said Cook.

Ap­ple’s rev­enue was $52.6 bil­lion in the quar­ter, beat­ing an­a­lyst es­ti­mates of $50.7 bil­lion. Com­pared to a year ear­lier, Ap­ple saw its rev­enue rise 12 per­cent.

The com­pany posted quar­terly earn­ings per share of $2.07, which were 20 cents above the av­er­age Wall Street es­ti­mate of $1.87, and 24 per­cent higher than a year ear­lier.

“The over­all num­bers are very solid,” said Creative Strate­gies Pres­i­dent Tim Ba­jarin. “iPhone sales are a bit dis­ap­point­ing as they are up only 3 per­cent over same quar­ter last year, but I at­tribute much of that to many Ap­ple buy­ers wait­ing to see the re­views of the iPhoneX.”

In past years, the new­est iPhone mod­els gen­er­ally be­gan sell­ing in Septem­ber or Oc­to­ber, and the fourthquar­ter earn­ings al­lowed an­a­lysts to de­duce pos­si­ble hol­i­day sales.

This year, there are some en­cour­ag­ing hints. Last Fri­day, iPhone X pre- or­ders sold out in 15 min­utes, and back­logged de­mand pushed out ship­ping dates as far as six weeks. De­spite re­ports of sup­ply- chain prob­lems, which left Ap­ple with a limited iPhone X sup­ply for the rest of 2017, the high de­mand buoyed Ap­ple shares to an all-time high ear­lier this week of $169.04 and al­lowed an­a­lysts to muse about Ap­ple’s pre­sumed fu­ture as a tril­lion-dol­lar com­pany.

“I think they are re­ally crush­ing it go­ing into an im­por­tant prod­uct cy­cle with the iPhone X,” said Loup Ven­tures founder and long­time Ap­ple watcher Gene Mun­ster.

For Ap­ple to reach the tril­lion-dol­lar mark, its ser­vice seg­ment — which in­cludes Ap­ple Pay, Mu­sic, App Store and iCloud, among oth­ers— will be crit­i­cal. This quar­ter was no ex­cep­tion in the ser­vices seg­ment’s ever-ris­ing growth: Ap­ple re­ported $8.5 bil­lion this quar­ter in rev­enue from ser­vices, a 34 per­cent boost from a year ago.

“Rev­enue from ser­vices con­tin­ues to grow and is a good sign longer term,” said Creative Strate­gies an­a­lyst Carolina Mi­lanesi. “This should be play­ing a big­ger role in over­all rev­enue.”

The fastest-grow­ing seg­ment in rev­enue for the quar­ter went to the “Other Prod­ucts” cat­e­gory at 36 per­cent, pro­pelled by a new Ap­pleWatch, which has cel­lu­lar con­nec­tion, and a new Ap­ple TV with 4K res­o­lu­tion com­pat­i­bil­ity.

Both iPad and Mac sales also showed dou­ble- digit growth in rev­enue from last year, with the for­mer grow­ing 14 per­cent and the lat­ter grow­ing 25 per­cent.

Ap­ple’s growth in terms of ge­o­graphic re­gions also showed prom­ise. China, which has re­cently been Ap­ple’s fo­cus af­ter it saw its iPhones slide in the past few quar­ters, saw12 per­cent growth from a year ear­lier in its rev­enue. How­ever, Ap­ple also noted an 11 per­cent de­cline in rev­enue from Ja­pan.

“China was the star of the quar­ter,” said GBH In­sights an­a­lyst Daniel Ives. “This cru­cial re­gion ap­pears to be find­ing its sea legs again and is the main in­gre­di­ent in Ap­ple’s recipe for suc­cess around iPhone X up­grades dur­ing 2018.”

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