Apple posts record iPhone sales

Just days ahead of planned products announcements that are expected to broaden the breadth of its lineup, Apple Inc. announced strong financial results including record iPhone sales and profits.
During its first fiscal quarter ended Dec. 26, 2009, Apple said it sold more than 8.7 million iPhones, which was a 100% increase compared with the previous year. The sales results were boosted by an increase in availability of the device in new markets as well as Apple breaking out of its single carrier per market strategy that it initially deployed. Apple said it added 17 new carriers during the quarter and that the device is now officially available in 86 countries.
Unofficially, the iPhone has found its way across most countries. Apple only recently made the device available in China, but iPhones have been found across the country over the past several years. Apple said that since the official launch in China the company has sold more than 200,000 units in the world’s largest market across more than 1,500 official points of sale.
While the number was a record for Apple, some analysts were expecting the company to sell in excess of 9 million units during the quarter. A component shortage was noted as a possible reason for the shortfall. Apple relies on a number of proprietary components as well as more widely available flash memory components for the iPhone.
Apple also boosted its inventory channels during the quarter saying the number of devices in inventory jumped from about 230,000 units at the beginning of its first fiscal quarter to 2.7 million units at the end. Cook noted that some of the increase was in anticipation of strong sales in Asia and that that despite the increase Apple was managing the inventory channel very tightly and was comfortable with the number.
The iPhone has also continued its march into the enterprise market with Apple claiming more than 70% of the Fortune 200 deploying or piloting iPhones.
Apple’s COO Timothy Cook said revenues from iPhone sales also surged from $2.94 billion during its first fiscal quarter of 2009 to $5.58 billion this year. Cook added that the sales value of the 8.7 million sold iPhones was more than $5.4 billion resulting in an average selling price of the device of $620. Carriers typically subsidize the device when a customer signs a contract, with AT&T Mobility domestically selling new iPhones for between $100 and $300 depending on model.
AT&T a great partner
Despite rumors that Apple was looking at expanding beyond its partnership with AT&T Mobility for domestic distribution as well as acknowledged network issues in dealing with increased data traffic and coverage, Cook said AT&T Mobility was a great partner.
“We have been working with them since well before we announced the first iPhone to get it out,” Cook said during a conference call with analysts. “I think it is important to remember they have more mobile broadband usage than any other carrier in the world. In the vast majority of locations we think that iPhone customers are having a great experience from the research we have done. As you know AT&T has acknowledged they are having some issues in a few cities and they have very detailed plans to address these. We have personally reviewed these plans and we have very high confidence they will make significant progress towards fixing them.”
AT&T Mobility has relied heavily on the iPhone to fuel its customer growth since the device launched in mid-2007. The carrier is currently the second largest domestic provider behind Verizon Wireless and is scheduled to announce fiscal fourth quarter results on Thursday.
Apps and content
Apple also deflected criticism that its approval process for App Store applicants was becoming more arduous as the company has sailed past the availability of more than 100,000 applications in its store front.
“I think it is important to keep this in some perspective that we have over 100,000 apps on the store and that over 90% of the apps we have had have been approved within 14 days of submission,” explained Peter Oppenheimer, CFO and SVP at Apple. “We created the approval process to really make sure that it protected consumer privacy, safeguards children from inappropriate content and to avoid apps that degrade the core experience of the phone. Some types of content such as pornography are rejected outright. Some things like graphic combat scenes and action games might be approved but with an appropriate age rating. Most of the rejections however are actually bugs in the code itself. This is protecting the customer and the developer to a great extent because they don’t want customers unhappy with the app. So I think what you have here is something that the noise on it occasionally may be much higher than the reality with over 90% approved within 14 days I think is pretty good.
Oppenheimer also touched on Apple’s recent acquisition of Quattro Wireless saying the deal would allow Apple to offer a seamless way for developers to “make more money on their apps, especially those that are providing free apps.” Quattro’s core competency was to provide a platform that would allow advertisers access to mobile users across the mobile Web and through applications.
Many analysts noted the Quattro deal was announced shortly after rival/partner Google Inc. acquired mobile advertising platform provider AdMob for $750 million, which could set Apple and Google against each other in the burgeoning mobile ad space.
“We work with Google in some areas and we compete with them in others,” Oppenheimer explained. “I think mobile advertising is just in its infancy and with the great folks we have acquired and are going to be working with at Quattro we look forward to providing our developers with a great opportunity from mobile advertising.”