Apple profits go bananas as China proves fruitful market

Apple had another blowout quarter thanks in large part to its new plus-sized iPhones, which helped the company smash sales records for the holiday season.

The tech giant said Tuesday that it sold 74.5 million iPhones during the three months that ended Dec. 31, beating analysts' expectations for the latest models of the popular gadget, introduced in September.

China proved to be a fruitful market for Apple, selling more smartphones in the Asian superpower than any other maker. Growth rate of 70 percent was recorded in China for the company.

The surge in iPhone sales drove the company's total revenue to $74.6 billion, up 30 percent from a year earlier. CEO Tim Cook said on a call with analysts that demand for the phones was "staggering," and noted that results would have been even higher if not for the impact of the strong dollar on overseas sales. Net income rose 38 percent to $18 billion.

Apple’s revenue for Greater China — which includes mainland China, Hong Kong and Taiwan — grew by 70 percent in the most recent quarter from a year earlier, more than triple the growth rate in the Americas and Europe.

Apple has set records with each new version of its iPhone. By comparison, the company sold 51 million smartphones during the holiday quarter in 2013, when its iPhone 5s and 5c models were new on the scene. Bigger screens are one reason for the popularity of the iPhone 6 and 6 Plus. Apple had resisted when other companies such as Samsung began introducing smartphones with bigger screens. But its iPhone 6 has a 4.7-inch screen, measured diagonally, while the 6 Plus screen measures 5.5 inches. That compares to a 4-inch screen on iPhone 5 models.

The big screens are especially popular in countries like China where streaming video during one's mass transit commute is much more common.

"It took Apple a long time to come to grips with the fact that the market did want the bigger screen," said Gartner tech analyst Van Baker. "They finally closed the gap on a feature they were missing."

The surge in sales of Apple's signature smartphones helped make up for an expected decline in sales of iPad tablets. The California-based company sold 21.4 million iPads in the lartest quarter, down 22 percent from a year earlier. Sales of Mac computers rose 9 percent, and Apple saw overall revenue gains in all geographic regions.

Growth in China coincides with Apple beginning to keep the personal data of some users on servers in mainland, marking the first time the tech giant has done so on Chinese soil.

The storage of user data in China represents a departure from the policies of some other technology companies, notably Google, which publicly abandoned mainland China in 2010 and moved its services, including its search engine, to Hong Kong-based servers after refusing to comply with Beijing. Microsoft Corp also does not have servers for its email service in China.

Still, some experts worry that Apple's strength could become a weakness. Apple makes more money from iPhones than any other product, including its iPods, iPads and Mac computers. That could leave it vulnerable as the overall smartphone market shows signs of slowing growth, warned Colin Gillis, a tech stocks analyst with BGC Partners. He notes that Apple depends on iPhones for nearly two-thirds of its revenue.

"Selling north of 70 million of anything is fantastic. But what's going to happen a year from now?" he asked. "The strength today has potential to become a weakness down the road."

Wire services