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NewsPoster Jul 24, 2013 01:33 AM
Cook: China market still a 'huge opportunity' for Apple, iOS
On paper, Apple's <a href="http://macnn.com/rd/290322==http://www.macnn.com/articles/13/07/23/global.retail.sales.stay.flat/" rel='nofollow'>sales report from China</a> didn't look that great this quarter. The revenue from <a href="http://macnn.com/rd/290323==http://www.electronista.com/articles/13/07/23/revenue.inches.ahead/" rel='nofollow'>most of the APAC region</a>, in fact, was down. For the "greater China" market, revenues was down 14 percent year-over-year and a whopping 43 percent from last quarter. However, just as Apple's iPad sales looked a lot better after CEO Tim Cook explained that <a href="http://macnn.com/rd/290324==http://www.macnn.com/articles/13/07/23/executive.comments.analyst.questions/" rel='nofollow'>inventory levels</a> were responsible for 80 percent of the 1.9 million-unit drop, so China's figures look a lot less bad when accounting for both inventory factors and regional economic woes.<br />
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During the conference call with analysts on Tuesday, Cook noted that while the Asia-Pacific region was down generally in terms of revenue, Japan had been <a href="http://macnn.com/rd/290325==http://www.macnn.com/articles/13/07/23/global.retail.sales.stay.flat/" rel='nofollow'>a bright spot</a> -- with the iPhone up 61 percent year-over-year in sales. However, for reasons seemingly not known, Hong Kong -- a shopping mecca in the region -- had substantially lower sales than normal, worsening what would otherwise be nearly flat revenues overall for the region. While lower sales are normal for the fiscal third quarter, the sharp drop seen on the revenue sheet was in fact only a four percent drop after accounting for channel inventory changes, and in some important areas sales were actually up.<br />
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In short, Cook argued, more promotion and some better discounts had nearly forestalled the expected drop in sales for China, but hurt revenues. He said that "mainland China was [actually] up five percent year-over-year," but admitted that this was "a lower growth rate than we've been seeing," which he attributed to several factors. He also implied that the company had not been aggressive enough in expanding the number of stores and licensed resellers in the country, promising to double the number of Apple Stores to a total of 16 by 2015.<br />
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The lack of an agreement between Apple and <a href="http://macnn.com/rd/290326==http://www.electronista.com/articles/13/03/14/carrier.aims.squarely.at.iphone.support/" rel='nofollow'>China Mobile</a>, the country's largest carrier, is undoubtedly complicating matters and hindering Apple's expansion plans in the country. Nonetheless, iPad sell-through was up eight percent throughout the greater China region, and up 37 percent in mainland China. Cook also noted that the number of developers working on Chinese-market apps for the iOS platform had increased 70 percent from a year ago, and now numbered more than 500,000.<br />
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Though he continued to refer to China as a "huge opportunity" for Apple, the slow growth rate in the recent quarter (expected to be the same or worse in the next quarter) will surely worry investors. Cook stayed upbeat and said that revenue "doesn't tell the complete story" but also noted that he wasn't sure what was causing the deeper drop in Hong Kong and Taiwan. He said that the iPad was the market-leading tablet in the region, with over 50 percent marketshare against hundreds of competing -- and mostly cheaper -- Android tablets.<br />
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"I don't get discouraged over a 90-day cycle," he told analysts, mentioning that the region had recently been beset with economic issues that would have had an influence on premium-brand buying. "The economy there clearly doesn't help us and others," Cook said.<br />
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China's revenues account for about 14 percent of the company's total for the quarter, and should the company finally work out a deal with China Mobile and get access to the forthcoming new iPhone models later this year, Apple may be able to lift itself out of the region's summer doldrums before the year is out. Even without a China Mobile deal, signs on at least the mainland indicate that iPads and iPhones are, as with Japan, still headed upwards.
 
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