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Apple's record iPhone sales top estimates for holiday quarter

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Sales of iPhones during the quarter ended December 27 rose 46 per cent to 74.5 million units, topping analysts' average estimate of 64.9 million

[SAN FRANCISCO] It was a merry holiday season for Apple Inc.

Sales of iPhones during the quarter ended December 27 rose 46 per cent to 74.5 million units, topping analysts' average estimate of 64.9 million, according to a company statement on Tuesday.

That helped push Apple's fiscal first-quarter profit to a record US$18 billion, or US$3.06 a share, on sales of US$74.6 billion. Analysts had predicted profit of US$2.60 a share, and revenue of US$67.5 billion.

Demand for Apple products soared "to an all-time high," Chief executive officer Tim Cook said in the statement.

The quarter that ends in December is typically the most lucrative period for the Cupertino, California-based company because of the holiday shopping season. This year, the scrutiny is even higher since the results provide the first official indicator of how a slew of new products - from larger-screened iPhones to slimmer iPads - have performed.

Apple forecast the momentum would continue, with revenue projected to rise to US$52 billion to US$55 billion from US$45.6 billion during the same period a year ago. Gross margins could widen to 38.5 per cent to 39.5 per cent compared with 39.3 per cent a year earlier. Analysts had predicted revenue would rise in the current quarter to US$53.7 billion, with margins at 38.6 per cent.

"Ultimately it shows that the cycle is going to be more broad and deep than what investors had expected - it will be more successful," Gene Munster, an analyst at Piper Jaffray, said in advance of the earnings announcement.

Apple shares fell 3.5 per cent to US$109.13 at the close in New York. Investor enthusiasm for Apple's new products helped push shares to a new high last year, briefly boosting the company's market capitalization to more than US$700 billion, a first for a U.S. company.

For the just-ended fiscal first quarter, net income rose 38 per cent from US$13.072 billion a year earlier, while revenue increased 30 per cent from US$57.6 billion a year ago. The previous profit record of US$13.078 billion was set in the fiscal first quarter of 2013.

The larger-screened iPhone 6 and 6 Plus, which debuted in September in the US and arrived in other major markets like China in October, helped boost margins to 39.9 per cent. That topped Apple's forecast in October of 37.5 per cent to 38.5 per cent and exceeded the average prediction of analysts for 38.5 per cent.

Sales were particularly robust in the quarter in China, where revenue rose 70 per cent as the company works to expand in the country. Cook has said Apple will open 25 new stores in the country within two years. In the Americas, sales rose 23 per cent, while revenue from Europe increased 20 per cent, Apple said.

The strength of the U.S. dollar posed a challenge for Apple in places such as Russia, where the company briefly halted online sales during the quarter.

For the fourth consecutive quarter, iPad unit sales fell, dropping 18 per cent to 21.4 million units. Mac sales rose 14 per cent to 5.5 million units.

New, thinner iPads that were unveiled in October couldn't stop sales of the tablets from declining, as the market has become saturated and some consumers gravitate to bigger-screen smartphones. Apple is looking to fuel iPad sales by teaming up with International Business Machines Corp to create programs for iPads and iPhones. Apple is also preparing for a larger- screened iPad this year, Bloomberg News has reported.

BLOOMBERG