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Friday 21 October 2016

iPhone still driving force in Apple success as company posts stronger-than-expected results

Published 27/04/2015 | 22:13

A person wearing the new Apple Watch
A person wearing the new Apple Watch

The iPhone is still the engine behind Apple's phenomenal success, even though its new smartwatch has attracted much of the attention in recent weeks.

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Sceptics have questioned whether the company's future is tied too much to one product, but the iPhone's popularity was the reason Apple turned in another excellent financial report today.

The results far surpassed most analysts' expectations for the first three months of the year, when sales traditionally fall from their Christmas-season peak.

Apple sold more than 61m iPhones in the quarter.

As expected, the numbers were down from the previous quarter, when shoppers snapped up a record 74 million of the new iPhone 6, 6 Plus and older models, but it was a 40% increase on the number of iPhones sold in the first three months of last year.

Apple chief financial officer Luca Maestri said: "We're seeing great results all over the world."

He said iPhone sales grew 72% in China, where the company has big hopes for expansion.

Since it began offering models with bigger screens in the autumn, Apple has vied with South Korea's Samsung for the No 1 position in the global smartphone market.

By some estimates, Apple outsold Samsung in the quarter that ended in December, and analysts will be watching closely when Samsung reports its latest results this week.

As iPhone sales have surged, so has Apple's stock. Apple shares have gained more than 50% over the last year, making it the world's most valuable company.

The stock closed today at 132.65 dollars, up 1.8% for the day, and was rising in late trading.

The iPhone is not just Apple's "dominant product", said Frank Gillett, a tech industry analyst at Forrester Research. "It's more than anything else what's driving the success of their company."

Market researchers expect growth in the world smartphone market will slow this year, particularly at the higher price range where Apple competes, as most consumers in developed countries have already bought one. That could make it difficult for Apple to maintain its recent pace.

Investment analyst Colin Gillis at BGC Partners said: "They're extremely dependent on the iPhone. At some point, the market dynamics change."

He added that "the question is what could replace the iPhone" if sales begin to slow.

Apple chief executive Tim Cook has said he is optimistic about new markets such as China, where the company has made a strong showing against Samsung and China's Xiaomi.

And even if Apple is increasingly selling new iPhones to people who are simply upgrading older models, "that's still a pretty healthy market", said Gartner analyst Van Baker, noting that more than 700 million iPhones have been sold since the first model was introduced in 2007.

Mr Maestri also stressed the potential for new products such as Apple Watch and Apple Pay, the company's mobile payment service.

While these currently provide minimal revenue, analysts say they have big potential. And they are designed to work closely with the iPhone, which means each might bolster the other's popularity in the future, Mr Gillett said.

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