Bumper iPhone Sales Boost Apple Profits

Bumper sales of the iPhone delivered the biggest quarterly net profit in corporate history for Apple in the October-to-December quarter, as the gadget maker continued to extend its influence over the global service provider community.

Net profit soared by 37% year-on-year in, to $18 billion -- beating a previous record of $15.9 billion set by oil giant ExxonMobil -- while revenues grew by 22.8%, to a staggering $74.6 billion.

Results were driven largely by enthusiasm for the iPhone in both developed and emerging markets. Overall unit shipments in the quarter rose by 46%, to 74.5 million, compared with the same period of 2013, with unit sales up 44% in the US and 97% in the BRIC countries (Brazil, Russia, India and China).

The iPhone deal it signed in late 2013 with China Mobile Ltd. (NYSE: CHL), which claimed to serve nearly 807 million customers at the end of December, fueled a doubling in unit sales in China, which now represents Apple Inc. (Nasdaq: AAPL)'s second-biggest iPhone market after the US. "Apple's entry to China has been instrumental to revenue growth, and the upside potential in revenues from this market is very significant," said Loizos Heracleous, a professor of strategy at the UK's Warwick Business School.

Unit sales also doubled in Brazil and Singapore, according to Apple CEO Tim Cook. (See Forget 3G: China Mobile Is a 4G King.)

Metrics suggest the costlier iPhone 6 Plus has been a major success since being launched in September, with average selling prices per device increasing by $50, to $687.

"This led to iPhone revenue growth of 57% year-over-year, with quarterly sales exceeding $50 billion for the first time ever," said Cook during the company's earnings call with analysts. (See this Seeking Alpha transcript.) Apple generated revenues of $32.5 billion from iPhone sales in the same period of 2013.

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While mobile operators have previously complained that Apple has too much power and is able to dictate the terms of distribution contracts, the manufacturer has continued to extend its influence over the industry.

Cook said the company is now working with about 375 operators, representing as much as 72% of the world's mobile phone customer base, and that it has more than 210,000 points of sale for iPhones internationally.

Apple insisted that results would have been even better were it not for the currency volatility it witnessed in a number of markets.

The company appears to be coming under particular pressure in Russia, where a drop in the value of the ruble is driving up the cost of equipment imports.

That could force Apple to take unorthodox measures, according to CFO Luca Maestri.

"We prefer to adjust local pricing at the time of new product launches. That's what we do in normal times," he told analysts during the earnings call. "When currencies move as much as they have been in places like Russia for example, sometimes we need to take mid-cycle action to realign pricing. So we'll see what happens."

Apple has also encountered a rare bastion of resistance in Russia, where Mobile TeleSystems OJSC (MTS) (NYSE: MBT) -- the country's biggest mobile operator -- still refuses to sign a distribution deal with the company.

"We have no contract with Apple and we are the only company in Russia that doesn't," said Vasyl Latsanych, in a recent interview with Light Reading. "We don't believe it would bring us enough benefits to commit to their terms."

Although the iPhone flourished in the October-to-December quarter, unit shipments of the iPad fell by 18% year-on-year, to 21.4 million, while iPad revenues dropped by 22%, to $9 billion.

Mac sales rose by 14%, in unit shipment terms, to 5.5 million, and by 9% in revenue terms, to $6.9 billion, while revenues from other products and services were up 3.5%, to $7.5 billion.

Apple expects to generate revenues of between $52 billion and $55 billion in the January-to-March quarter, up from $45.6 billion in the same period of 2014.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

[email protected] 1/28/2015 | 8:01:27 AM
China Mobile impact I know there isn't another mobile operator the size of China Mobile, but wow... that's quite the impact from a single carrie relationship.
iainmorris 1/28/2015 | 1:00:25 PM
Re: iPhone company Starting to look that way. iPhone sales generated 69% of total revenues in the October-to-November quarter, up from 56% in the same period of 2013.
kq4ym 1/28/2015 | 1:27:22 PM
Re: China Mobile impact It looks like they've made a smart move with China Mobile. Billion and billions can probably be sold doing even better than McD's hamburger sales and with a $50 increase in price per unit, and historic income increase, Apple's on a winning streak at least for now.
MarkC73 1/28/2015 | 4:19:40 PM
Re: China Mobile impact I don't think their streak is done yet either, the 6 and 6+ probably still have momentum, and their other products and services have little expectations.  Apple pay could easily surprise by end of this year and any addition to the profit margin would be seen as an upside.  Also the fact that Mac sales were on the rise with most in mid cycle is another nice plus.
pcharles09 1/28/2015 | 10:39:30 PM
Re: China Mobile impact @kq4ym,

If everyone there wants an iPhone & couldn't get one before, I wonder what mobile devices they were using. I'd imagine that vendor to be pretty upset.
Joe Stanganelli 1/28/2015 | 10:59:54 PM
Re: iPhone company @Mitch: Not so sure about that.  I'd suggest it's an iPhone and iPad company, at least.  ;)

Really goes to show the import of marketing primarily to the consumer as a way of indirectly marketing to the enterprise -- and it's something that few other than Apple have been able to get right.
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