Apple: we're years ahead of smartphone rivals

 

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By Barry Collins and Reuters

Posted on 22 Jul 2009 at 08:18

Apple's chief operating officer, Tim Cook, claims the company is "years ahead" of its smartphone rivals as the company announced another set of bumper profits.

The company continued to defy the global recession with a solid 13% jump in fiscal third-quarter net profit. Apple reported a net profit of $1.23 billion for the quarter, up from $1.07 billion in Q3 2008.

It sold more than seven times as many iPhones - 5.2 million units - as it did in the same period last year.

The iPhone is often thought of as a consumer device, but Apple claims almost a fifth of Fortune 100 companies have bought at least 10,000 units and it is unable to make enough iPhone 3GS handsets to meet demand - a shortfall the company said it is working to address.

Sales of Macs also beat analysts' expectations, helped by product refreshes and lower prices, while iPod shipments were toward the low end of forecasts.

Apple sold 2.6 million Macs in the quarter, an increase of 4% on last year.

"Years ahead" on smartphones

Although the smartphone segment continues to grow more crowded , chief operating officer Tim Cook said on a conference call the company is "years ahead of other people" in its competitive position.

The install base for the iPhone and the iPod Touch is now 45 million, Apple claims.

"The iPhone is the biggest driver right now, because the profitability is really high," says Frost & Sullivan analyst Ronald Gruia. "It's been an absolute success."

Yet there had been some concern about margin pressure heading into the results, given the product price cuts and the trend of higher component costs.

Although Mac units rose, revenue in the segment fell 8% from a year ago as average selling prices came down, a trend seen throughout the PC industry.

But Apple posted a gross margin of 36.3%, above the 34% some analysts predicted. Apple claims component costs rose, but not as much as expected and it spent less than it planned in several areas.

iPod drops

iPods were the one chink in Apple's armour. Apple shipped 10.2 million iPods in the quarter, down 7% on the year. As iPod sales slow down, analysts see alternative catalysts on the horizon, with the expected launch of an iPhone in China and a rumored tablet PC or internet device in the works.

Cook said the company hoped to have an iPhone in China within a year.

Chief Executive Steve Jobs did not make an appearance on the company's conference call, despite rumours that he might. Jobs recently returned from a six-month medical leave, where he underwent a liver transplant.