China: Apple’s mother of all markets

April 28, 2015 4:09 PM (UTC+8)

 

Just in time, China fell in love with the iPhone, which just goes to show that bigger is better.

Apple on Monday reported it sold more iPhones in China than the U.S. for the first time. The consumer-electronics giant said in the fiscal second quarter ended March 28 it sold 61.2 million iPhones, a 40% increase from the year-ago quarter. However, iPhone sales in China soared 72% over last year.

Apple shareholders should be sending a big “thank you” note as they exhale a huge sigh of relief. Because if it weren’t for these legions of Chinese buyers, the share price of the company from Cupertino, Calif. probably would be in far worse shape. Late Tuesday, Apple shares were down 1.2% to $131 after climbing modestly on Monday’s earnings.

For the quarter, Apple posted net income of $13.6 billion, or $2.33 a diluted share, compared with $10.2 billion, or $1.66 a diluted share in the year-ago quarter. Revenues jumped 27% to $58 billion. Both revenues and profits beat Wall Street’s forecasts.

The greater China region, which Apple defines as China, Hong Kong and Taiwan, saw sales soar 71% to $16.8 billion. Or to put it another way, 29% of Apple’s total revenues.

The iPhone makes up most of the Chinese sales, which is being fueled by the expanding middle class, said Chief Executive Tim Cook. A big part of the surge came from Chinese New Year, a traditional time of year to give gifts. Last year among the status conscious, Samsung’s big screen smartphones ruled. But with the launch six months ago of the big-screened iPhone 6 and 6 Plus, Apple products suddenly became the hot new thing. Some say China’s on track to become Apple’s biggest market. Period.

And Carl Icahn thinks this could be the beginning of even bigger things at Apple. In February, the activist investor said the shares are undervalued and should be trading at $216. Icahn reiterated his pronouncement Monday, tweeting that Apple remains undervalued and misunderstood, even as the company posted stellar quarterly results.

 

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