Apple admits demand for iPhone 5c less than hoped

Apple has admitted that demand for the iPhone 5c has not been as strong as it had hoped, as its otherwise solid results still managed to disappoint analysts.

Apple admits demand for iPhone 5c less than hoped

Apple said it had sold a record 51 million iPhones in the last quarter, but didn’t break down what proportion were iPhone 5s models and how many were iPhone 5c. It’s known that the iPhone 5s was hit by shortages, outstripping demand for its cheaper sibling.

“I think last quarter we did a tremendous job, particularly given the mix was something very different than we thought,” CEO Tim Cook said in a conference call discussing the results. “It was the first time we’d ever run that particular play, and demand percentage turned out to be different than we thought.”

As I’ve said before, our objective has always been to make the best, not the most

Cook was asked whether the price of the iPhone 5c needed to be lower. “We obviously always look at our results, and conclude what to change moving forward,” he answered. “And if we decide it’s in our best interest to make a change, then we’ll make one. Obviously I’m not going to predict price changes on the earnings call.”

While the results, and particularly those for the iPhone 5c, may not have impressed analysts or the stock market, Cook said the mid-range iPhone model helped draw in new Apple customers.

“We saw a significant ‘new to iPhone’ number,” Cook said. “It’s not a number that we throw out, but we particularly saw that on the 5c, which is what we wanted to see. So it’s clearly not just upgraders.”

One analyst asked about market share, as Android continues to nab more sales. “As I’ve said before, our objective has always been to make the best, not the most,” Cook said. “And we feel we’re doing that.”

Other results

The company recorded sales of $57.6 billion in its December or fiscal first quarter. Net profit was flat from a year earlier at $13.1 billion.

Apple sold a record 26 million iPads globally in the quarter, in line with Wall Street estimates.

Apple said it sold 4.8 million Macs, up from 4.1 million a year ago. “The growth was driven by significantly increased sales of iMac and Macbook Air, while sales of Macbook Pro also remained strong,” CFO Peter Oppenheimer said.

He noted that app developers had earned $2 billion in revenue from the App Store in the last quarter, bringing the total to $15 billion since the store opened.

The iPod, which sparked the revival of Apple last decade, is now a waning product, selling just over six million in the quarter, less than half the year-ago tally. “iPod sales declined by 52% year-over-year in the December quarter and we would expect them to continue to decline year-over-year in the March quarter,” said Oppenheimer.

The company forecast sales of $42 billion to $44 billion this quarter, brisker than usual because of Apple’s new deal to sell iPhones through China Mobile.

“After showing modest signs of improvement, we’re back to a no-growth outlook,” said JMP Securities’ Alex Gauna. “It’s something Apple needs to find an answer to… If it can’t prove that it’s going to be a growth story again, the valuation is too high.”

What’s next?

Longer term, investors continue to hope that Apple – whose last revolutionary new device, the iPad, launched in 2010 – has something up its sleeve for 2014. Speculation currently revolves around a smartwatch or even a long-rumored TV product. Others say Apple can use its huge iPhone and iTunes base to get into mobile payments or advertising.

“What we need to see from them is some sort of new product development and it would be likely in the area of software, mobile payments and advertisements that would get us thinking that there is an opportunity for accretion,” Gauna said.

“Hardware can only go in one direction and that’s flat or down. It has to be something in the innovation space and they have a lot of things they can do.”

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