Can Apple live up to the hype for the iPhone X?

Services remain the main profit drivers for the tech giant

The iPhone X’s lush screen, facial-recognition skills and $1,000 price tag are breaking new ground in Apple’s marquee product line.

Now, the much-anticipated device is testing the patience of consumers and investors as demand outstrips suppliers’ capacity.

Apple said Thursday that iPhone sales rose 3 per cent in the July-September quarter, a period that saw the iPhone 8 and 8 Plus come out in the final weeks. Sales could have been higher if many customers hadn’t been waiting for the iPhone X, which comes out Friday.

Apple shipped 46.7 million iPhones during the period, according to its fiscal fourth-quarter report released Thursday. That’s up from 45.5 million at the same time last year after the iPhone 7 came out, but represents a step back from the same time in 2015, when Apple shipped 48 million iPhones during the quarter.

As with recent quarters, one of the main sources of Apple’s growth is coming from its services, which are anchored by an app store that feeds the iPhone and other devices.

Revenue in that division surged 34 per cent to $8.5 billion during the July-September period. All told, Apple earned $10.7 billion on revenue of $52.6 billion, compared with a $9 billion profit on revenue of $46.9 billion a year earlier.

Apple shares were up 2.7 per cent in after-hours trading.

Nonetheless, the just-ended quarter largely became an afterthought once Apple decided to release the iPhone X six weeks after the iPhone 8.

“The Super Bowl for Apple is the iPhone X,” GBH analyst Daniel Ives said. “That is the potential game changer.”

But it also brings a potential stumbling block. While conspiracy theorists might suspect that Apple is artificially reducing supply to generate buzz, analysts say the real reason is that Apple’s suppliers so far haven’t been able to manufacture the iPhone X quickly enough.

Making the iPhone X is proving to be a challenge because it boasts a colour-popping OLED screen, which isn’t as readily available as standard LCD displays in other iPhone models. The new iPhone also requires more sophisticated components to power the facial-recognition technology for unlocking the device.

Even with the iPhone X’s delayed release, Apple is still struggling to catch up. Apple is now giving delivery times of five to six weeks for those ordering in advance online (limited supplies will be available in Apple stores for the formal release Friday). Most analysts are predicting Apple won’t be able to catch up with demand until early next year.

The company was optimistic.

“As we approach the holiday season, we expect it to be our biggest quarter ever,” CEO Tim Cook said on an earnings call with analysts Thursday. He added that the company is increasing its iPhone X production capacity every week.

On Thursday, Apple predicted revenue for this quarter from $84 billion to $87 billion. Analysts, who have already factored in the supply challenges, expect $85.2 billion, according to FactSet.

Analysts are expecting Apple to ship 80 million iPhones during the current quarter, which includes the crucial holiday shopping season, according to FactSet. That would be slightly better than the same time last year.

Apple is counting on the iPhone X to drive even higher-than-usual sales during the first nine months of next year — a scenario that might not play out if production problems persist and impatient consumers turn instead to phones from Google or Samsung.

“What Apple needs to do is manage consumer expectations so they don’t get frustrated having to wait for so long for a new phone,” Ives said.

Analysts believe Apple can pull off the juggling act. They are expecting the company to sell 242 million iPhones in the fiscal year ending in September 2018 — the most in the product’s history. The previous record was set in 2015 when Apple shipped 231 million iPhones, thanks to larger models introduced just before the fiscal year began. By comparison, Apple shipped nearly 217 million iPhones in its just-completed fiscal 2017.

If Apple falters, investors are likely to dump its stock after driving the shares up by 45 per cent so far this year on the expectation that the iPhone X will be the company’s biggest hit yet.

Michael Liedtke And Tali Arbel, The Associated Press

Like us on Facebook and follow us on Twitter.

Just Posted

Lakedell Womens Conference a hit Apr. 24

Food, fashion and fun the order of the day at Lakedell Ag Society

Grandview Cemetery taken over by County of Wetaskiwin

Cemetery board dissolved, could no longer care for property

Wetaskiwin Warlords selected as Team Alberta

Slo-pitch team inducted into Sports Hall of Fame

Bill Mojelski a famed local sports researcher

Mojelski inducted into Sports Hall of Fame

Jack Manson’s stellar hockey career

Manson was inducted into Sports Hall of Fame Apr. 27

VIDEO: Police dog in Oregon struck by 200 porcupine quills during pursuit

The German shepherd had to be sedated and was in treatment for more than two hours

Calgary woman killed in B.C. highway crash

Crash closed highway for hours

Assessment says Alberta woman facing animal abuse charges fit to stand trial

April Dawn Irving, 59, is charged with 13 counts of cruelty to animals

Canadian privacy watchdogs find major shortcomings in Facebook probe

The probe followed reports that Facebook had let an outside organization use an app to access users’ personal info

Provinces, Ottawa talk 50/50 split on abandoned bus-route service

B.C. has paid $2 million on a bus service for the northern part of the province

Wilson-Raybould: Feds want to just ‘manage the problem’ of Indigenous Peoples

Former federal justice minister speaks at First Nations Justice Council meeting in B.C.

Oil and gas company confirms death of one of its employees in Yoho avalanche

Dana Coffield died when he was skiing in the Rocky Mountains

Cenovus CEO estimates production curtailments will deliver billions to taxpayers

The curtailment program started Jan. 1 was designed to keep 325,000 barrels per day off the market

Singh says childhood abuse steeled him for scrutiny and stress of politics

He recounts the assaults for the first time in his book Love & Courage

Most Read