Apple sells 9 million new iPhones

Revenue projections rise after record-breaking weekend

An employee arranges Apple Inc. iPhone 5c and 5s devices during the launch at the company's new store in Palo Alto, California, U.S., on Friday, Sept. 20, 2013. Apple Inc. attracted long lines of shoppers at its retail stores today for the global debut of its latest iPhones, in the company's biggest move this year to stoke new growth. Photographer: David Paul Morris/Bloomberg
An employee arranges Apple Inc. iPhone 5c and 5s devices during the launch at the company's new store in Palo Alto, California, U.S., on Friday, Sept. 20, 2013. Apple Inc. attracted long lines of shoppers at its retail stores today for the global debut of its latest iPhones, in the company's biggest move this year to stoke new growth. Photographer: David Paul Morris/Bloomberg

Apple Inc. sold a record 9 million iPhones in the weekend debut of two new models, as consumers flocked to stores to buy handsets with more colorful options and fingerprint-reading technology.

Sales almost doubled the previous record even amid supply constraints for the iPhone 5s, the higher-end version of the two smartphones, Apple said Monday in a statement. The results, the first to include opening sales in China, also led Apple to say that quarterly revenue and gross margin will be at the top end of a prior forecast.

“While we’ve sold out of our initial supply of iPhone 5s, stores continue to receive new iPhone shipments regularly,” Chief Executive Officer Tim Cook said in the statement.“We appreciate everyone’s patience and are working hard to build enough new iPhones for everyone.”

Apple’s shares rose as much as 6.3 percent, the biggest intraday jump since November, as the sales exceeded even the loftiest analysts’ projections of fewer than 8 million. The iPhone is Apple’s most important product, accounting for half of revenue. The company has seen sales and profit growth slow and has ceded a share of the $280 billion smartphone market to Samsung Electronics Co. and other rivals.

“The rumors of Apple’s demise are severely exaggerated,” said Laurence Balter, an analyst at Oracle Investment Research in Fox Island, Wash., whose clients are Apple investors. “Those numbers blew away anything I could have imagined and just show that they are still producing the best-quality phones in the industry.”

The new iPhones went on sale Friday in the U.S., Australia, Canada, China, France, Germany, Japan, Puerto Rico, Singapore and the U.K. It’s the first time Apple rolled out its flagship product in China on the same day as elsewhere, abandoning the usual three month delay, as the company seeks to lure new customers in the world’s largest mobile phone market. The phones were also available for the first time on NTT DoCoMo Inc., Japan’s largest wireless network.

The iPhone 5s proved most popular with the initial rush of customers. In a Piper Jaffray Cos. survey of 416 people waiting in line, 95 percent were going to buy that model, which has an improved camera, fingerprint reader and faster processor. It comes in three color variations - black/gray, white/ silver and white/gold - and costs $199 to $399 in the U.S. with a two-year wireless contract.

The less-expensive 5c model is a reconfigured version of last year’s iPhone with a plastic casing that comes in five colors. It starts at $99 with a contract. Sales of that version will pick up more slowly as it attracts owners of devices based on Google Inc.’s Android software, according to Benedict Evans, an analyst at Enders Analysis in London.

“The 5c customer is under contract with an Android phone and will steadily feed into sales over the next year,” Evans wrote in an email.

In a separate filing, Apple said it expects total revenue for the current quarter to be near the high end of its forecast of $34 billion to $37 billion. Gross margin, the portion of sales remaining after deducting product costs, will be near the high end of a range of 36 percent to 37 percent.

Apple’s share price closed Monday up $23.23, or 5 percent, to $490.64 after climbing as high as $496.91. The shares had declined 12 percent this year before Monday, compared with a 20 percent gain for the Standard & Poor’s 500 Index.

Many analysts, including Brian Marshall of ISI Group and Ben Reitzes of Barclays Plc, said Apple may now surpass estimates for quarterly profit of $7 billion, or $7.67 a share, on sales of $36.2 billion.

Apple also said its new iOS 7 mobile software for the iPhone and iPad had been downloaded on more than 200 million devices since Wednesday, double the number from last year’s upgrade. As part of the new system, 11 million people used Apple’s new iTunes Radio, an Internet-radio service included with iOS 7. Pandora Media Inc.’s shares declined more than 10 percent on the news.

Shoppers lined up at Apple Stores in New York, Munich, Tokyo and other cities, with some waiting for days to get their hands on the new models. The gold version emerged as the hottest seller. AT&T Inc., Sprint Corp., T-Mobile US Inc. and Verizon Wireless won’t be able to ship gold iPhones until October, while they’re available in Apple stores this month, Apple said on its website.

Sales and profit growth have decelerated at Apple in the absence of major new product categories, and the company is counting on the new iPhone designs to lure customers.

Analysts’ estimates varied on iPhone sales during the debut weekend because of projected limited supplies of the iPhone 5s. Gene Munster of Piper Jaffray said Apple would probably sell 5 million to 6 million, while Citigroup Inc.’s Glen Yeung predicted as many as 7.75 million.

Apple has been criticized by many analysts who said the company priced the iPhone 5c too high for some emerging markets where customers don’t get the discount associated with signing up for a wireless contract. In China, where Apple is seeking to generate further growth, the iPhone 5c costs more than the equivalent of $700, or two months’ pay for the typical urban worker.

Also on Monday, a German hacking group said it has figured out a way to bypass the fingerprint-based security system on the Apple 5s.

A spokesman for the Chaos Computer Club said the group managed to fool the phone’s biometric sensor into accepting a fingerprint created with a household printer and wood glue.

Dirk Engling said Monday that the exploit has been documented with several videos so independent experts can verify it.

He said the hardest part had been obtaining an iPhone 5s. Apple didn’t respond to requests for comment.

Information for this article was contributed by Laura Kaster of Bloomberg News and by staff members of The Associated Press.

Business, Pages 21 on 09/24/2013

Upcoming Events