Cantillon: iPhone sales at core of Apple’s earnings

Yet again Apple has beaten analyst expectations, reporting third-quarter earnings ahead of most analyst predictions. This is becoming something of a standard play for the tech giant.

This is the most exciting Apple earnings report of the year, because it’s happening right at the conclusion of a flurry of activity from the company. Apple has rolled out new iPhones and new iPads in the past couple of weeks.

The sales of iPhones will be particularly pleasing to the firm, at 33.8 million. That’s ahead of analyst expectations, signalling that its new phones are not as unpopular as some had feared. The company reported fiscal fourth-quarter revenue of $37.5 billion (€27.2 billion), ahead of Wall Street’s average forecast of $36.8 billion.

When the latest tranche of iPhones was unveiled last month Apple pursued a new tactic for the brand: cheap. Well, cheaper than before at least. The fear was the tactic has not worked.

However, the apprehension is not entirely unfounded as it's based on stories in the likes of the Wall Street Journal, well connected to the machinations within Apple. Earlier this month it reported that suppliers had been asked to cut
production of the 5C.

Localytics, a marketing platform for mobile apps, calculates that the 5S has comfortably outsold the 5C in every single market since launch.

Sales of iPhones are massively important for Apple. Barclays Research estimates that the iPhone accounted for 53 per cent of Apple's revenue for the fiscal year that ended September 30th.

Apple's 5C, with its colourful plastic back, arrived after investors had pressured the company to offer a cheaper phone that might attract less wealthy buyers, particularly in China. The 5C is basically an iPhone 5 with a cheaper case – but it is still not cheap.

There is some hope, however, that sales of 5C may well pick up. As one analyst put it: “The 5C buyer isn’t the sort of buyer who stands in line. Once the 5S frenzy has died down, the 5C will be more popular.”

Given the firm’s track record for turning doom-laden predictions on their heads – and last night’s latest earning report that exceeded analysts expectations – it’s best to take the early 5C market reaction with a pinch of salt.