The Secret Behind Apple’s “Incredible Quarter”

by CXOtoday News Desk    Apr 28, 2015

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Apple posts yet another blockbuster quarter, driven in large part by iPhone sales and a surge of Apple devices in the China market. The tech giant sold some 61.2 million iPhones in the first three months of 2015 and reported revenues of $58 billion. 

iPhone and China Factor

On a call with analysts, Cook said the company had an “incredible quarter” that resulted from strong sales of the new iPhone 6 and the larger iPhone 6 Plus in China during the Chinese New Year in February. Analysts polled by Bloomberg had expected Apple to sell 58.1m iPhones and for the company to report revenues of $56bn. The number far exceeded the 43.7m iPhones that Apple sold in the same period a year ago.

In February this year, Apple announced that it reached its $700-billion mark revenue. It sold 74.5 million iPhones in the last three months of 2014. Cook riding on the success of the company noted that Apple’s sales are rising incredibly fast globally and especially in China, a vast market in which the firm boasted revenues of $38 billion in 2014, up from $1 billion a few years ago.

This quarter, revenue from China surged by 71 percent to $16.82 billion. Sales of Macs rose 31 percent in the country. Cook said the company had benefitted from an expansion its physical retail and online presence in the country.

 “We are thrilled by the continued strength of iPhone, Mac and the App Store, which drove our best March quarter results ever,” said Cook, adding that “We’re seeing a higher rate of users switching to iPhone than we’ve experienced in previous cycles, and we’re off to an exciting start to the June quarter with the launch of Apple Watch.”

Analysts upbeat

Brian White, Senior Researcher at Cantor Fitzgerald told Fortune, Another Big Quarter and Plenty to Look Forward To… “Given the strength of this iPhone cycle, expanded cash distribution, and entry into the first new product category in five years with Apple Watch, we believe Apple remains early in this transformational cycle.”

The Susquehanna Financial Group senior analyst estimates that Apple sold “more 6 Plus and more of the higher memory” devices than many had predicted. With the introduction of iPhone 6, Apple dropped the 32GB offering. “So basically for another $100 you can go right from 16 gig to 64 gig,” Caso told CNBC’s “Squawk Box” in an interview. “That’s been very profitable for them.” Apple still offers the iPhone 5s in 32GB.

“Apple’s success has been widely attributed to its focus on product design like making tech cool, fashionable and desirable to users. Moreover, Apple has created a new market and a bunch of raving fans, not customers unlike other brands,” says Pranav Sahu, an independent tech analyst. Apple has managed to continue enjoying massive consumer loyalty, even as competition from Google, Samsung and others have come up over the years. A Morgan Stanley Research demonstrated that Apple is triumphant in the brand retention battle when it comes to smartphones: a staggering 90 percent of iPhone users admitted they’re sticking with the brand.

Read more: Apple Will No Longer Ignore Indian Market

Many believe, life at Apple has been phenomenal ever since Tim Cook took over as CEO, taking forward the legacy of icon and Apple Founder Steve Jobs. There are several other things also in the offing this year. Apple has two major iPhone launches around Q2 2015 and Tim Cook will have the chance to reinforce the success of the current iPhone line-up to the world. The Cupertino major is also bullish on Apple Pay that waslaunched by the end of 2014 and is banking on its success in the forthcoming quarters. Just like Apple Watch, Cook believes that this can also change the way we work and live.

The other area is enterprise mobility. The Apple-IBM partnership is a game changer in the world of mobile, believe experts. “The truth is, enterprise hasn’t moved to mobility like consumers have,” Cook says in an interview with Goldman COO Gary Cohn and ensures that customers can now look at the next level in enterprise mobility.

With a net operating profit of $13.6bn, a 33 percent increase, the only challenge is the continued decline of iPad sales, off year-over-year for the second quarter running as smartphones with larger screens – including the 6 Plus – become more widely adopted.

The Year Of Mac

Finally, 2015 can be a year for Mac once again. While Apple Watch, iPhones and iPads had stolen the spotlight from the Mac for years, Apple still sees much potential in the PC market and doesn’t plan to dump Mac anytime soon. A 10 percent increase year-over-year in Mac sales been consistently bucking the trend of a PC market in decline. Perhaps that’s exactly why the new 12-inch MacBook exists. Cook explained. In his own words, “Mac in the coming month will continue to give people an experience that’s a jaw-dropper.”

Some, however, expect smartphone growth to slow down worldwide this year, particularly at the higher price range where Apple competes, as most consumers in industrialized countries have already bought one. That could make it difficult for Apple to maintain this momentum.