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Apple's Q1 revenue grows, but Mac sales fall

IPhone and iPad sales grew

Apple's revenue grew but profit was flat in its first fiscal quarter of 2013, during which sales of iPhones and iPads rose, but Mac and iPod shipments dropped.

Apple reported a net profit of US$13.1 billion for the quarter ended Dec. 29, matching the profit reported in 2012's first fiscal quarter. Earnings per share were $13.81, which was higher than the consensus estimate of $13.47 from analysts polled by Thomson Reuters.

The company reported revenue of $54.5 billion, up from $46.3 billion year on year.

Sales of Mac computers and iPods fell during the quarter. Mac sales totaled 4.1 million, dropping from 5.2 million. The fall in Mac shipments comes amid struggles in the personal computer market. Worldwide PC shipments fell by 6.4 percent during the fourth calendar quarter of 2012 compared to the same quarter in 2011, according to research firm IDC.

IPod shipments fell to 12.7 million units compared to 15.4 million units in the year-ago quarter.

Apple blamed a shorter, 13-week quarter and a shortage of new iMacs for the lower Mac shipments. Apple announced iMacs with 21.5-inch and 27-inch screens in October, but shipments started only later in the quarter as supplies of the all-in-one desktop systems were constrained.

IMac shipments were down by 700,000 units year over year, and sales would have been stronger had the computers become available sooner, said Tim Cook, Apple's CEO, during a conference call.

Cook also acknowledged that a weakness in the PC market may have had an effect on Mac shipments, and that growth in iPads also hurt Mac shipments to a limited extent.

Apple sold 47.8 million iPhones during the first quarter, growing from 37 million. Apple sold 22.9 million iPads, growing from 15.4 million.

Apple now offers two iPads -- the fourth-generation iPad with a 9.7-inch screen and the iPad Mini with a 7.9-inch screen. Apple did not provide a breakdown of specific sales related to each iPad model, but there have been concerns among analysts that the iPad Mini sales are affecting the fourth-generation iPad sales. Apple shipped the new iPad models in early November and announced it had sold 3 million units in the first three days.

Apple executives did not break down iPad and iPad Mini shipments. However, Cook said demand for both products was strong.

"For last quarter we had strong sales of iPad and iPad Mini," Cook said, avoiding any breakdown between the products that might have shown the less expensive Mini stealing sales from the iPad.

The supplies of iPad Mini tablets will remain constrained, and the company ended the quarter with a backlog of orders, said Peter Oppenheimer, Apple's chief financial officer, during the call.

Cook also acknowledged iPads cannibalizing Mac sales. The company knows the iPad will affect Mac sales, just as iPhones have cannibalized iPods.

"Cannibalization is a huge opportunity for us. Our base philosophy is never to fear cannibalization," Cook said.

Nevertheless, the Mac remains strong, and there is tremendous demand for the iMac, Cook said. Macs have an opportunity to grow as the Windows PC market falters, Cook said.

In the same vein, Apple's tablets have an opportunity to grow as the PC market weakens, Cook said.

With larger-screen Android smartphones becoming available, Cook also defended the iPhone 5's 4-inch screen size, calling it the "most advanced display in the industry."

A lot of thinking went into screen sizes, Cook said, adding that the iPhone 5 provides a larger screen size without sacrificing ease of use.

"We've picked the right one," Cook said.

Next week, LTE support on the iPhone 5 will become available to customers in 36 more countries, Cook said. Today, 24 carriers around the world offer LTE support.

Cook also touched upon the importance of the China market, which was Apple's second-largest market in terms of revenue during the first quarter. Apple took in $7.3 billion in revenue from the Greater China market, which grew by 60 percent year over year.

Apple is projecting revenue for the second quarter to be between $41 billion and $43 billion.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is [email protected]


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