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Apple soars on iPhone demand

Thu, 04/21/2011 - 8:10am
Monica Alleven, Wireless Week

Anyone who was wondering how Apple would fare in the first quarter – and who wasn't? –  got their answer yesterday when the iPhone supplier reported a whopping 95 percent growth in profit for its second fiscal quarter. Second-quarter revenue was $24.67 billion and net profit was $5.99 billion.

Apple sold 18.65 million iPhones in the quarter, representing 113 percent growth over the year-ago quarter, and it sold 4.69 million iPads, although it would have sold more iPad 2s if enough supplies were in the pipeline to meet demand. 

Apple in the last quarter was having trouble meeting demand for iPhones, but that's pretty much caught up in major markets; now it's a matter of getting the iPad 2s up to demand snuff.

COO Tim Cook said the demand for iPad 2 has been "staggering." By way of explaining the supply/demand problem, he said product transitions are never simple – supply chain managers have to make their calls many weeks in advance. Apple sent out invitations to the iPad 2 launch toward the end of February, held a launch event in early March and it went on sale in the United States on March 11, so there were only about two weeks in the quarter where it was being sold.

To illustrate their confidence in getting the iPad 2 supply situation ironed out, Cook said Apple added 25 more countries to its distribution at the end of last month and 13 more countries will be added next week.

Of course, Apple didn't break out geographically how many iPhones sold where; it said adding three major CDMA operators worldwide in the quarter helped, including Verizon Wireless, but gave no clues on the number of new iPhones sold versus how many were upgrades. Today, Verizon Wireless reported that it had activated 2.2 million iPhone 4s in the quarter; it began selling it Feb. 10.

Cook said the U.S. market grew 155 percent year-over-year, boosted by the addition of Verizon – but as AT&T reported earlier on Wednesday, it sold iPhones extremely well in the quarter as well. Cook said the $49 3GS price point, which is what AT&T offers, did "very well" but didn't go into detail.

Another area of great growth geography-wise is Greater China, where iPhone sales were up almost 250 percent.

As for the events in Japan, Cook said Apple as a company has strong ties to people there and the economic impact as a result of the earthquake and tsunami pales in comparison to the personal tragedy. But in terms of a material impact to the business, Apple didn't have any supply or cost impact in its fiscal second quarter and doesn't expect a material impact in the third quarter based on current events. Many components for Apple products are sourced in Japan, but working with its partners there on contingency plans resulted in no major disruption despite the power outages and other issues.

Asked about rival OS Android's progress, Cook pointed to comScore data released earlier this week that shows iOS (iPhone, iPad and iPod Touch) outreaches Android by 59 percent in the United States, and he stands by previous statements that Apple's integrated approach is better than the fragmented one that he says turns customers into systems integrators.

Regarding Steve Jobs' medical leave, Cook said the company sees him on a regular basis and he continues to be involved in major strategic decisions. He didn't give any clues as to when Jobs might be back full-time. "I know he wants to be back full-time as soon as he can," he said.

Apple's terrific success with the iOS is paying off for its Mac line as well; it sold 3.76 million Macs during the quarter, a 28 percent unit increase over the year-ago quarter.

Shares in Apple were trading up about 3 percent at one point this morning, at $352.69.

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