iPhone sales contribute to a record quarter for Apple (AAPL)

Apple announced record profits in the last fiscal quarter of 2014 thanks to a surge in iPhone sales. But falling iPad sales have investors questioning how Apple can turn the device around.

Peter Kneffel/dpa/AP/File
People queue in front of an apple store in Munich, Germany on Sept.19.

What a past few months it has been for Apple. The company unveiled a batch of new products, and now the company has announced it had one of its best quarters ever.

Apple announced Monday that huge sales of the iPhone 6 and 6 Plus pushed it to have a record-breaking fourth quarter, which ended on Sept. 27. Apple made $42.1 billion in revenue during that time, up from $37.5 billion during the same period last year. Of that revenue, Apple made $8.5 billion in net profit, which was 13.3 percent higher than the same quarter a year ago. 

One of the major drivers of Apple's quarter was the iPhone. On Sept. 9, Apple released the iPhone 6 and 6 Plus. Though the phones were much larger than previous versions, they've caught on. Apple sold 10 million phones during the first weekend the phones were on sale. During the quarter, Apple sold a total of 39 million iPhones, up from the 33.8 million it sold during the same time last year. And the record numbers don't include the sale of the iPhone 6 and 6 Plus in China because Apple didn't begin selling in one of the world's biggest smartphone markets until Oct. 10. 

“Demand for the new iPhones has been staggering,” Timothy D. Cook, Apple’s chief executive, said in a financial earnings call with investors. “I’ve never felt so great after a launch before.”

But some critics see a problem in the prosperity. As iPhone sales have grown, Apple has become more dependent on the device to drive the company's profits. iPhone sales amount to 70 percent of Apple's total profit, and that makes the company vulnerable if the sales of the phone decline or competition, like Samsung, begins to take a bigger percentage of the mobile market, Toni Sacconaghi, a financial analyst for Sanford C. Bernstein research, told The New York Times.

“Increasingly Apple is the iPhone story,” Mr. Sacconaghi said.

While iPhone sales have done well, sales of the iPad slid for the third straight quarter. In the latest quarter, Apple sold 12.3 million, down from 14 million during the same quarter last year. 

At an event to announce a new generation of iPads last week, Mr. Cook said the company had already sold 225 million iPads worldwide in the four years since the device was released. But with the number of iPads already sold, market researchers believe consumers who would be interested in buying a tablet already have one, and they haven't seen a reason to upgrade. 

“The year to year improvements aren’t enough to get yearly upgrades,” e-commerce consultant Bryan Eisenberg told MarketWatch. A recent study found that iPad owners only upgrade their devices every two to four years, compared to every two years for iPhone owners. 

Even with declining iPad sales, Apple remains optimistic about the upcoming quarter. In a call with investors, Apple announced it expects to make $63.5 billion to $66.5 billion in the first quarter next year. That's up 13.7 percent from the $57.6 billion in revenue Apple made in the first quarter a year ago. 

“With amazing innovations in our new iPhones, iPads and Macs, as well as iOS 8 and OS X Yosemite, we are heading into the holidays with Apple’s strongest product lineup ever. We are also incredibly excited about Apple Watch and other great products and services in the pipeline for 2015,” Cook said in a press release.

After taking a dip in mid-October, Apple's stock is up 2.19 percent by Tuesday afternoon to $101.93 a share. Apple has approved a 47 cents cash dividend per share for common stock.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.