Apple CEO Won't Predict When iPad Sales Will Turn North, But He Believes in Category
Those waiting for an update on Apple’s HomeKit efforts were disappointed as Apple’s smart home plans were one of the few topics CEO Tim Cook didn’t touch on in the fiscal Q2 earnings call Monday. Noting the expansion of the Apple ecosystem, Cook cited “great momentum” with Apple Pay and with health-related technology. More than 50 hospitals in the U.S. will include Apple Pay this year for co-pays and bill payments at registration and check-in, he said.
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Since September's release of HealthKit with iOS 8, more than 1,000 apps have been developed to help users “track, manage and interact with their health” and are available in the App store, Cook said. Cedars-Sinai Medical Center in Los Angeles turned on the largest HealthKit integration last weekend through its MyCS app that syncs patients with their electronic medical records, he said.
Cook noted a higher rate of “switchers” from other smartphones as a growth driver for iPhone revenue in Q2. Chief Financial Officer Luca Maestri reported 61.2 million iPhone sales in Q2, a 40 percent jump over the 2014 quarter, as sales more than doubled in Korea, Singapore, Taiwan and Vietnam and were up 80 percent or more in Canada, Germany, Mexico and Turkey.
Overall average selling prices for the iPhone increased by $62 year on year, despite foreign exchange “headwinds,” on a “strong mix” of iPhone 6 and 6 Plus sales and higher capacity smartphone offerings, said Maestri.
Apple sold 12.6 million iPads in Q2, down from 16.4 million in the year-ago quarter, said Cook. Sell-through totaled 13.7 million units in the quarter including a channel inventory reduction of 1.1 million units, he said. Despite “record” iPad sales in Japan and China, performance in other markets was “more muted,” he said. Cook cited NPD tablet market share figures indicating Apple’s “strong leadership share in all the price bands where we compete.” He also reported high interest in the iPad in enterprise markets. On when the iPad will return to growth, Cook believes it's still a good business long term, but “when precisely it begins to grow again I wouldn't want to predict.”
Apple was able to deliver customers more Apple Watches over the first weekend of availability than it anticipated, Cook said. By late June, the company anticipates rolling out the watch to other countries, he said. Demand is hard to gauge “when you don’t have a product in stores,” he said, saying the watches are currently available only online. The App store has 3,500 Watch apps now, he said, compared with 500 for the iPhone and 1,000 for the iPad at their launches.
In Q&A, Cook said Apple saw 71 percent growth in greater China revenue, led by the iPhone that was up 70 percent year on year including Chinese New Year sales. Estimates from Kantar Worldpanel give Apple a 9-point share gain in smartphones over the year-ago quarter, he said. Mac units were up 31 percent in China, despite a 5 percent contraction in PC sales there for the quarter, said Cook. Most important, he said, “we are in many more cities than we were before” in China.
For the quarter, Apple had revenue of $58 billion, compared with $45.6 billion in the 2014 quarter. Income was $13.6 billion versus $10.2 billion a year ago.