Apple's Q2 iPhone sales boom, carry declining iPad performance

Posted:
in AAPL Investors edited April 2014
During its quarterly conference call for the second quarter of 2014 on Wednesday, Apple announced huge growth for its iPhone lineup, while iPad sales were

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For iPhone, Apple hit 43.7 million iPhones worldwide, up from 37.4 million unit sales in the same period from 2013. The 6.3 million uptick represents growth of 17 percent year-over-year.

"We're very proud of our quarterly results, especially our strong iPhone sales and record revenue from services," Apple CEO Tim Cook said in a statement. "We're eagerly looking forward to introducing more new products and services that only Apple could bring to market."

Apple CFO Luca Maestri went over the specifics, noting that sales performance from the iPhone 5s, 5c and 4S were at all-time highs compared to their predecessors. Driving a large portion of iPhone growth were developing markets. In particular, more than 85 percent of iPhone 4S and 69 percent of iPhone 5c buyers were new to the platform.

Maestri noted that China Mobile, the world's largest cellular carrier by subscribership, was especially helpful in the low end. Greater China sales of the iPhone 4S hit an all time high in quarter two as the halo iPhone 5s helped attract new customers. In Japan, Cook pointed out that iPhone now has a 55 percent marketshare.

Both India and Vietnam, two burgeoning markets, doubled overall iPhone sales, while Brazil, Poland, Turkey and others saw double-digit growth year-over-year. Cook said BRIC countries (Brazil, Russia, India and China) clocked in with best-ever sales, illustrating the iPhone's growth potential in key developing regions.

As for iPads, Cook still believes tablets will quickly replace PCs, noting unit sales were at the "high end" of its own guidance but lower than analyst expectations.

Looking at the numbers, Apple sold 16.35 million iPads over the quarter, down substantially from 19.48 million in the year ago quarter. Maestri saw the decrease as a nominal change, which equates to a 3 percent decline due to channel inventory fluctuations.

"iPad has been the fastest growing product in Apple's history," Cook said, noting over 200 million units have been sold in only three years. The growth is substantially greater than iPod and even the iPhone over the same time period. "It's important to put that into perspective, we've come a long way very quickly."

Later in the call, Cook reiterated channel inventory guidance may be to blame for inflated Street expectations. Pointing out a 95 percent share of America's education tablet market, high user engagement and other growth factors, Cook said iPad is performing very well.

"I'm very bullish on iPad," he said.
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Comments

  • Reply 1 of 64
    iPads are going to be just fine.
  • Reply 2 of 64
    sestewartsestewart Posts: 102member
    Apple can continue thinking tablets will replace PCs, but my iPad can't restore it'self without my PC to download the IPSW for restoration.

    As to declining iPad sales, this is the same trend we should expect as consumers begin holding onto iPhones longer with this last iPhone 5/5S generation, as carriers move customers to the off contract model plans.
  • Reply 3 of 64
    tribalogicaltribalogical Posts: 1,171member
    Tim Cook mentioned it, and looking at numbers, I'd agree... Probably the biggest reason iPad sales appeared to "decrease" year on year was the late timing of the new Mini release last year. Had it not been late, the "typical" seasonal slump of last year's quarter would have meant the sales were flat or slightly better this year. The late release 'artificially' increased 2nd quarter sales last year. Without such a late release, this year's numbers wouldn't have had a big fall off.

    There may still be a slump in overall tablet sales, but nothing as significant as it appears with the raw numbers...
  • Reply 4 of 64
    512ke512ke Posts: 781member

    "Apple hit 43.7 million iPhones worldwide, up from 37.4 million unit sales in the same period from 2013."

     

    In other news, Samsung saw sales decline by 6 Million units as Verizon was forced to offer fire sales on the S5 only a week after it was announced.

     

    Samsung/Google were unavailable for comment. 

  • Reply 5 of 64
    512ke wrote: »
    In other news, Samsung saw sales decline by 6 Million units as Verizon was forced to offer fire sales on the S5 only a week after it was announced.

    Samsung/Google were unavailable for comment. 

    I got quite the chuckle out if the "PRE-ORDER the Galaxy S5 now for $199.99, and Buy One, Get One Free!" ads that Verizon had going on every commercial break.
  • Reply 6 of 64
    solipsismxsolipsismx Posts: 19,566member
    sestewart wrote: »
    Apple can continue thinking tablets will replace PCs, but my iPad can't restore it'self without my PC to download the IPSW for restoration.

    As to declining iPad sales, this is the same trend we should expect as consumers begin holding onto iPhones longer with this last iPhone 5/5S generation, as carriers move customers to the off contract model plans.

    1) PCs can't restore themselves without access to a restore disk or disk image either. It's true iOS devices currently needs iTunes for grabbing the IPSW for a restore but there is no reason why that has to be always be the case. Apple could, if they wanted to, use the same techniques for booting the Mac into a recovery mode to download the installation files without needing to plug it into iTunes first. I don't think that will happen for a variety of reasons but they could do it.

    2) The iPad has already replaced the "PC" for a large number of people and has supplemented "PC" use by an even greater number. This happened its first quarter on the market and grew so fast that it exceeded the iPhone's growth rate. Has it plateaued? Absolutely, but that's a testament to how quickly it has been adopted, not a sign of flash-in-the-pan success. Everyone I know with an iPad loves it and uses it daily but they also have no desire to upgrade it annually like a smartphone (which are subsidized here in the US) or plans to stop using it. Even the iPad 2 is still a very capable device. The iPad also has an ARP in range of the average WinPC, is responsible for the significant drop in WinPC sales, and outsells any WinPC vendor which makes it success, not a failure. If you buy an iPad to replace one task your "PC" did then it's replacing that WinPC. This notion of the "PC" needing to be dropped in a bin for the iPad can be seen as replacing tasks previously done on a 'PC" is ridiculous.
  • Reply 7 of 64
    asdasdasdasd Posts: 5,173member
    sestewart wrote: »
    Apple can continue thinking tablets will replace PCs, but my iPad can't restore it'self without my PC to download the IPSW for restoration.

    As to declining iPad sales, this is the same trend we should expect as consumers begin holding onto iPhones longer with this last iPhone 5/5S generation, as carriers move customers to the off contract model plans.

    How would carrier contracts for iPhones affect iPad sales?

    As Cook pointed out in the call some of the contracts are designed to have larger churn, and the US is only 30% of the business.
  • Reply 8 of 64
    jungmarkjungmark Posts: 6,591member
    sestewart wrote: »
    Apple can continue thinking tablets will replace PCs, but my iPad can't restore it'self without my PC to download the IPSW for restoration.

    As to declining iPad sales, this is the same trend we should expect as consumers begin holding onto iPhones longer with this last iPhone 5/5S generation, as carriers move customers to the off contract model plans.

    Many folks use a PC to check email and surf the interwebs. The iPad can replace the PC for them.

    ----

    Where are the posters demanding a cheap iPhone? The 4S is the entry level iPhone.
  • Reply 9 of 64
    asdasdasdasd Posts: 5,173member
    Tim Cook mentioned it, and looking at numbers, I'd agree... Probably the biggest reason iPad sales appeared to "decrease" year on year was the late timing of the new Mini release last year. Had it not been late, the "typical" seasonal slump of last year's quarter would have meant the sales were flat or slightly better this year. The late release 'artificially' increased 2nd quarter sales last year. Without such a late release, this year's numbers wouldn't have had a big fall off.

    There may still be a slump in overall tablet sales, but nothing as significant as it appears with the raw numbers...

    He said sell through was -3%.

    And now can we all put to bed the meme that Apple report sales while everybody else reports shipments? Thanks.
  • Reply 10 of 64
    apple ][apple ][ Posts: 8,360member

    The average person isn't replacing their iPad every year.

     

    It's a well built item that lasts for years and years. My mother still uses an iPad 2, and she will probably still be using it a few years from now. The average person doesn't care about specs or having the newest and latest device, especially if they are 100% satisfied with what they currently have, and it gets the job done.

     

    The iPad is more like an appliance than a computer device, an appliance that's built well and will last for a long time.

     

    New iPad models will eventually be coming out, and I'd like to see Touch ID on all iPads, and I'd also love to see an iPad Pro, that spares no expense, has a larger screen and will be the premium iPad model from Apple, with a price tag to match.

  • Reply 11 of 64
    snovasnova Posts: 1,281member
    Quote:

    Originally Posted by sestewart View Post



    Apple can continue thinking tablets will replace PCs, but my iPad can't restore it'self without my PC to download the IPSW for restoration.



    As to declining iPad sales, this is the same trend we should expect as consumers begin holding onto iPhones longer with this last iPhone 5/5S generation, as carriers move customers to the off contract model plans.

    interesting prediction. So you see a shift from getting a new iPhone every 1 to 2 years to people buying insurance to make their phones last?

  • Reply 12 of 64
    melgrossmelgross Posts: 31,263member
    asdasd wrote: »
    He said sell through was -3%.

    And now can we all put to bed the meme that Apple report sales while everybody else reports shipments? Thanks.

    No, we can't because it's true. Apple does report sell through. They've stated that many times. The problem is that they also report units in the channel. As they pull those down, we can get a discrepancy between actual sell through and total sales to the channel. The analysts didn't seem to understand the distinction, and so Apple just cleared that up. It's likely that in the future, they will be clearer on this point.
  • Reply 13 of 64
    plovellplovell Posts: 786member
    Quote:

    Originally Posted by asdasd View Post



    And now can we all put to bed the meme that Apple report sales while everybody else reports shipments? Thanks.

    Partly. Apple reports sales that it can track, and not inventory in the channel as many others do.

     

    Sales at Apple stores or Apple's online store are actual sales. Shipments to reseller stores are, I believe, counted as sales. Shipments to distributors (Ingram, etc) are NOT sales. 

     

    So I think that iPhones on a boat or in a warehouse are not yet "sold". The ones, say, at your local Verizon store are "sold".

  • Reply 14 of 64
    asdasdasdasd Posts: 5,173member
    melgross wrote: »
    No, we can't because it's true. Apple does report sell through. They've stated that many times. The problem is that they also report units in the channel. As they pull those down, we can get a discrepancy between actual sell through and total sales to the channel. The analysts didn't seem to understand the distinction, and so Apple just cleared that up. It's likely that in the future, they will be clearer on this point.

    The main headline sales stats reported in the headlines are to channel. They mention sell-through in the comments or Q&A when it's useful to them ( for instance the iPad this Q but not the iPhone. ).
  • Reply 15 of 64
    plovellplovell Posts: 786member
    Quote:

    Originally Posted by AppleInsider View Post



    ...Cook still believes tablets will quickly replace PCs...

    Obviously not ALL PCs. I think what he meant here is that a lot of PCs due for replacement are being replaced with iPads, and some with new PCs.

     

    The decline in the PC market bears this out.

  • Reply 16 of 64
    snovasnova Posts: 1,281member
    Quote:
    Originally Posted by Apple ][ View Post

     

    The average person isn't replacing their iPad every year.

     

    It's a well built item that lasts for years and years. My mother still uses an iPad 2, and she will probably still be using it a few years from now. The average person doesn't care about specs or having the newest and latest device, especially if they are 100% satisfied with what they currently have, and it gets the job done.

     

    The iPad is more like an appliance than a computer device, an appliance that's built well and will last for a long time.

     

    New iPad models will eventually be coming out, and I'd like to see Touch ID on all iPads, and I'd also love to see an iPad Pro, that spares no expense, has a larger screen and will be the premium iPad model from Apple, with a price tag to match.


    you are right. I don't see why an iPad would get replaced any more often than a PC.

    Quote:
    Originally Posted by starbird73 View Post

     
    Quote:
    Originally Posted by 512ke View Post



    In other news, Samsung saw sales decline by 6 Million units as Verizon was forced to offer fire sales on the S5 only a week after it was announced.



    Samsung/Google were unavailable for comment. 




    I got quite the chuckle out if the "PRE-ORDER the Galaxy S5 now for $199.99, and Buy One, Get One Free!" ads that Verizon had going on every commercial break.

    seems not too long ago people were criticizing the iPhone for being "stale"... now it's Samsung's turn.   to them I say, "just you wait... Samsung is just pacing themselves, all that will change AFTER Google revamps of the Android UI (again) or Apple brings out something new".  Then Samsung will have "its" next big thing, one year after that happens. 

  • Reply 17 of 64
    asdasdasdasd Posts: 5,173member
    plovell wrote: »
    Partly. Apple reports sales that it can track, and not inventory in the channel as many others do.

    Sales at Apple stores or Apple's online store are actual sales. Shipments to reseller stores are, I believe, counted as sales. Shipments to distributors (Ingram, etc) are NOT sales. 

    So I think that iPhones on a boat or in a warehouse are not yet "sold". The ones, say, at your local Verizon store are "sold".

    Not sure about that. My first job was in Apple cork as an intern back when it was a manufacturing hub and they were definitely trying to ship stuff as much as possible towards the end of the quarter. When shipped it can be invoiced and when invoiced it can be reported in that Q's sales. Reporting mechanisms may have changed though.
  • Reply 18 of 64
    plovellplovell Posts: 786member
    Quote:

    Originally Posted by asdasd View Post





    Not sure about that. My first job was in Apple cork as an intern back when it was a manufacturing hub and they were definitely trying to ship stuff as much as possible towards the end of the quarter. When shipped it can be invoiced and when invoiced it can be reported in that Q's sales. Reporting mechanisms may have changed though.

    That could be so for Ireland. But that reporting of "sales" would from the manufacturing company to the sales company which, in Ireland, is separate. But I will admit to not knowing the answer in the case of Apple International. I know it's not the same as for the U.S. but I am not sure how different.

  • Reply 19 of 64
    dasanman69dasanman69 Posts: 12,969member
    plovell wrote: »
    Obviously not ALL PCs. I think what he meant here is that a lot of PCs due for replacement are being replaced with iPads, and some with new PCs.

    The decline in the PC market bears this out.

    Agreed, or a household can get by with just one PC versus several.
  • Reply 20 of 64
    dasanman69dasanman69 Posts: 12,969member
    snova wrote: »
    seems not too long ago people were criticizing the iPhone for being "stale"... now it's Samsung's turn.   to them I say, "just you wait... Samsung is just pacing themselves, all that will change AFTER Google revamps of the Android UI (again) or Apple brings out something new".  Then Samsung will have "its" next big thing, one year after that happens. 

    What makes you think that Google is going to revamp the UI? And you haven't been paying attention, quite a few websites have called the SGS 5 a 'meh' update.
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