Apple touts smartwatch to sceptical Wall Street, says device not a flop

Sales of the Apple Watch exceed company’s the nine weeks since its launch in late April, the device has sold better than either iPhones or iPads over a similar period after their launch - Apple CFO Luca Maestri

PUBLISHED : Wednesday, 22 July, 2015, 8:13am
UPDATED : Wednesday, 20 June, 2018, 5:37pm

Apple tried to reassure investors on Tuesday that its new smartwatch was not a flop, a message that was met with a mixed reception on Wall Street.

Reporting results for its third financial quarter, Apple executives delivered several positive data points about the progress of the Apple Watch, the performance of which has been obsessively tracked since its debut in April.

Without disclosing specific figures, Apple Chief Financial Officer Luca Maestri said in an interview with Reuters that sales of the Apple Watch exceeded the company’s expectations. He noted that in the nine weeks since its launch in late April, the device has sold better than either iPhones or iPads over a similar period after their launch.

During a call with investors, Apple Chief Executive Officer Tim Cook suggested the watch’s performance was particularly impressive because it initially was for sale only online and supply trailed demand.

He added that sales of the watch were best in June, contradicting reports that sales dropped off sharply after the gadget debuted.

"We believe that the possibilities for Apple Watch are enormous," he said.


Watch: Apple gives weak forecast, shares drop

Analysts have been closely scrutinizing the "other products" category, where Apple has lumped sales of the timepiece in with products such as the iPod, Apple TV and Beats accessories. Revenue in the category jumped 49 per cent year over year to more than US$2.6 billion, and Cook suggested that the watch’s contributions were even greater as sales of other products such as the iPod had declined.

Based on the performance of the category, sales of the watch seem to have come in at the low end of analyst expectations of about 2 million to 3 million units sold, said analyst Gene Munster of Piper Jaffray & Co. But Munster said the slow start did not spell doom for the Apple Watch.

"We feel good because our expectations were always that this was going to take time," he said, noting that Apple will soon give developers a wider set of tools to develop native apps for the gadget.

Colin Gillis, an analyst for BGC Partners, said the "other products" category generated less revenue for the quarter than he had expected, leading him to believe the watch had underperformed. But the watch may still be judged a success in the nascent wearable market, he added.

"It’s going to be the best-selling wearable," he said.

Apple posted strong sales in China, which more than doubled to $13.23 billion from a year earlier. Apple said on Tuesday it sold 47.5 million iPhones in the third quarter, up 35 per cent from a year ago. But some analysts had expected around 49 million.

The company said net income rose to $10.68 billion, or $1.85 per share, from $7.75 billion, or $1.28 per share, a year earlier. Analysts had expected earnings of $1.81 per share.

Apple makes most of its money from the iPhone, but the California tech giant also disclosed results for other product segments Tuesday. Here’s a breakdown: