Apple Sales Rise, Pushed by Purchases of iPads and Macs -- Update

By Tripp Mickle Features Dow Jones Newswires

Apple Inc. delivered strong revenue in the June quarter, typically its weakest period, by re-energizing iPad and Mac sales and keeping purchases of iPhones steady as consumers anticipate a new phone this fall.

Continue Reading Below

The company's revenue jumped 7.2% from a year earlier, its best growth in seven quarters, as shipments of Apple's flagship product rose 1.6% to 41.03 million iPhones.

The biggest surprise was a revival of the iPad business, and the continued momentum of the Mac, which both had waned in recent years as consumers shifted more money into smartphones. Mac sales rose 6.7%, the third consecutive quarter of gains, while iPads avoided a fourth consecutive quarterly slide with 1.9% growth. For the first time in 14 quarters iPad shipments increased, rising 15% to 11.42 million units amid strong sales to schools and businesses.

Profit for the period rose 12% to $8.72 billion -- the company's second consecutive quarterly increase in earnings after a year-long downturn.

"We've got some momentum," Chief Executive Tim Cook said. "A lot of things we've been working on a long time are beginning to show in the results."

The results came during what is historically Apple's softest quarter -- a time when consumers often hold off buying iPhones in excitement for an autumn release of a new device.

Continue Reading Below

Mr. Cook said discussions of future iPhones was greater than normal and affected sales, particularly of its highest priced devices, the iPhone 7 and iPhone 7 Plus. "We believe there is a pause, but that probably bodes well for the future," he said.

Apple projected a wide revenue range of $49 billion to $52 billion for the current quarter, mostly eclipsing the analysts' consensus estimate of $49.2 billion in sales, according to Thomson Reuters. Had the company's estimates fallen short of analysts' expectations it would have indicated the company may be running into production problems with the next iPhone, said Brian White, an analyst with Drexel Hamilton. But the estimates suggest at least some of the product will be delivered on time in late September, rather than slipping entirely into the holiday quarter.

Apple last gave a $3 billion range for its September quarter in 2014 when it released the iPhone 6 and iPhone 6 Plus, the first time it brought two phones to market. Sales of those devices were initially limited by supply constraints.

The company is widely expected to release three phones instead of the usual two -- updated versions of the current iPhone 7 and 7 Plus as well as a special 10th-anniversary iPhone with a different display and new features like wireless charging and facial recognition technology.

The complexities of the new hardware led several analysts to predict for months that the iPhone would run into production challenges and supply constraints. Analysts have largely shrugged off that possibility, believing the iPhone will be delivered in time for Christmas and loyalists will wait for it to arrive in stores.

"In a way, that could be a marketing tool for them -- a way to flame more excitement around the iPhone 8 because anything you can't get you want more," Mr. White said.

Apple showed some improvement in Greater China. Sales there fell 9.5% to $8 billion in the quarter, marking the first time in five quarters the company hasn't reported a double-digit sales decline in the region, which includes Hong Kong and Taiwan.

The company has run into a host of challenges in China as many Chinese consumers hold on to their iPhones longer and others switch to lower-priced devices from rivals like Huawei Technologies Co. and BBK Electronics Corp. The market, which accounts for about 20% of total sales, is seen as critical to the success of the next iPhone.

Mr. Cook said sales were flat in mainland China and rose 20% in Taiwan but fell in Hong Kong, where a strong currency has cut into tourism and shopping.

Underscoring the market's importance, Apple recently named its first executive with oversight of its China business, Isabel Ge Mahe. She will manage government relations and help develop new operating system features with local appeal, such as a function that allows iPhone owners to filter text-message scams common in China.

"One of the things we like about Apple is once you become an Apple customer you stay for the long haul, but that seems more difficult in China because there's more competition," said Jeff Dillon, chief executive of Dillon & Associates, a Jackson, Mich.-based investment firm and Apple investor with $300 million in assets. He said he was encouraged to see Apple "stabilizing that business and starting to right the ship."

Write to Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

August 01, 2017 17:15 ET (21:15 GMT)