Apple profits and sales beat estimates

Apple, the maker of the iPhone and iPad, reported third-quarter profit and sales that beat analyst estimates, spurring optimism that the company is weathering an attack from low-end smartphone competition.

Earnings were $7.47 €5.65) a share in the period, which ended Jun 29, the California-based company said last night.

Analysts had predicted $7.30 on average, according to data compiled by Bloomberg. Sales rose to $35.3bn, topping the estimate of $35bn.

The results bolstered the view that Apple can withstand increased competition and saturation in the smartphone market, which have threatened to drag the company into a prolonged slump.

Apple earns margins of 50% or more on the iPhone 5, almost twice the level of rival models. Investor concern that the company was losing that edge contributed to a 31% stock decline over the past year.

“We are more encouraged about Apple’s ability to sustain healthy profits over the near and medium term,” Keith Bachman, an analyst at BMO Capital Markets in New York, said in a report before the earnings were released. He has a neutral rating on Apple’s stock.

Apple shares rose as much as 4.7% to $438.88 in extended trading after the results were released. They closed at $418.99 earlier in New York. Even after the decline this year, the company has a higher market valuation than any other technology business.

The company sold 31.2m units of the iPhone, its best-selling and most profitable product. Analysts had estimated 26.1m. Apple’s gross margin, the percentage of sales left after subtracting production costs, was 36.9%, compared with the company’s target of 36%-37%.

Sales of the iPad fell 14% from the prior year to 14.6m. Consumers are holding off on purchasing the tablet as they wait for new models later this year, said Ben Evans, an analyst at Enders Analysis in London. Apple forecast sales of $34bn to $37bn for the current quarter.

The company has seen Google’s Android platform gobble up much of the smartphone market. Android captured 70% of global mobile operating-system sales at the end of the first quarter, compared with 17% for Apple’s iOS, according to IDC.

Samsung, Asia’s biggest technology company, was the No 1 Android vendor with 41% of that market.

Apple chief executive Tim Cook said the company is considering television products that go beyond its Apple TV set-top box.

- Bloomberg


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