Apple gets on top of iPhone X glitches
Apple 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 US$84 billion ($121.4b) to US$87b in the quarter ending in late December, Apple said. Analysts had predicted US$84b, according to data compiled by Bloomberg.
The shares rose 3.1 per cent to US$173.38 in extended trading yesterday. If the stock nears that level today, Apple will be within reach of a US$900b market capitalisation, solidifying its status as the world’s most valuable public company.
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 preordering the handset on October 27, shipping times lengthened to as many as six weeks.
Chief executive Tim Cook said Apple was addressing the delays. Production is “going well, we’re doing more each week and I’m pleased with how things are going”, Cook said. “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 yesterday in several major markets, including China. Long lines had formed outside Apple retail stores ahead of the launch.
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 this week.
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,” said Hank Smith, chief investment officer at Haverford Trust, which owns Apple shares.
Apple also forecast a gross profit margin of 38 per cent to 38.5 per cent for the holiday quarter. Analysts were looking for 38.5 per cent. 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 and Google’s Home devices.
For the company’s fiscal fourth quarter, which ended September 30, Apple reported earnings of US$2.07 a share on revenue of US$52.6b. Analysts projected US$1.87 a share and sales of US$50.7b.
When Apple unveiled the US$999 iPhone X in September, it also introduced the iPhone 8, which is US$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 US$618 average falling short of the US$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.
“With solid iPhone 8 and 8 Plus sales and strong iPhone X preorders, it is likely that iPhone X will expand the range of users interested in smartphones rather than cannibalise sales of less expensive iPhones,” said Michael Obuchowski, chief investment officer at Merlin Asset Management.