What iPhone Fatigue? Strong Phone Sales Boost Apple

Drop in iPad, Mac Sales Curtailed by Continued iPhone Interest

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There's no "i' in smartphone fatigue. At least not this quarter as sales of the iPhone were strong enough to help Apple meet its revenue projections despite year-to-year declines in both iPad and Mac sales.

Apple set an iPhone record for its June quarter selling 31.2 million iPhones. The company sold 26 million iPhones during the same quarter last year. iPad sales dropped to 14.6 million units from 17 million during the same quarter last year and Mac sales were down from 4 million to 3.8 million.

On April 23, Apple projected revenue between $33.5 billion and $35.5 billion for the subsequent quarter. It was at the high end of that range, reporting quarterly revenue of $35.3 billion. Apple shares rose more than 3% in after-hours trading.

"iPhone 5 remains, by far, the most popular iPhone," Apple CFO Peter Oppenheimer said during the earnings call.

Continued interest in the iPhone contrasts with disappointing sales of smartphones from Samsung and BlackBerry -- Galaxy S4 and Z10, respectively -- which has led some to predict that the market for high-end smartphones is saturated and the consumers are feeling smartphone fatigue.

"Apple is suffering from iPhone fatigue, while Samsung is suffering from Galaxy fatigue," Neil Mawston, executive director of Strategy Analytics, told Bloomberg after Samsung warned of slow sales of the Galaxy S4.

On the contrary, sales of iPhone 5 were strong even though an update is widely expected this year. "I don't subscribe to the common view that the higher end of the smartphone market has hit its peak," Apple CEO Tim Cook said during the earnings call.

Apple's projection for the upcoming quarter -- revenue between $34 billion and $37 billion -- is higher than what it projected in April for this most recent quarter, suggesting Apple is optimistic about the unannounced new products it will be releasing. "We are laser-focused and working hard on some amazing new products that we will introduce in the fall and across 2014," Mr. Cook said in a press release.

The new products are speculated to be a lower cost iPhone, different sized iPhones and iPads and possibly a "smartwatch." "I think the wrist is interesting," Mr. Cook said at an AllThingsD conference in May. "But to convince people they have to wear something it has to be incredible."

Also due out this fall is iTunes Radio, Apple's play in the fickle streaming music industry. iTunes Radio will be free to consumers and will include audio and video ads sold through iAd, the company's mobile ad network. The music service will also come preloaded on Apple TV -- Apple set top box -- meaning Apple will be selling video ads specifically for televisions.

That should be a boon for iTunes, which recorded $4 billion in revenue in the most recent quarter.

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