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Apple polishes forecast after selling 9 million new iPhones

Alejandro de Rosa (R) and Melisa Racineti of Buenos Aires, Argentina pose with their new Apple iPhone 5s phones with Apple employee Jay at t
Alejandro de Rosa (R) and Melisa Racineti of Buenos Aires, Argentina pose with their new Apple iPhone 5s phones with Apple employee Jay at t

By Poornima Gupta and Jennifer Saba

(Reuters) - Apple Inc sold 9 million new iPhones during their first three days in stores after China joined the list of launch countries for the first time, prompting the company to issue a rosier financial forecast.

Shares in the company closed up 5 percent at $490.64 on Monday after the company said revenue in the fiscal fourth quarter would gravitate towards the high end of its previous forecast for $34 billion to $37 billion.

Apple, which began selling the top-tier iPhone 5s and cheaper, multi-hued iPhone 5c on Friday, rarely adjusts its outlook in the middle of a quarter. Since CEO Tim Cook took the reins, however, the world's largest tech company has begun to court Wall Street more visibly.

The record sales and beefed-up forecast reinforced expectations of strong demand for Apple's latest gadgets. Phones based on Google Inc's Android software and made by the likes of Samsung Electronics have steadily eroded its market share, as customers flocked to lower prices and larger phone sizes proved popular.

Critics had also said the iPhone 5c was priced too high to take advantage of pent-up demand in emerging markets.

"The critics have told you Apple lost its magic," said Daniel Ernst, an analyst with Hudson Square Research. "Customers are telling you something very different. Clearly, people like the product. That sentiment is almost more important than the number."

Sales of the new models were nearly double those of the iPhone 5's 5 million in the first weekend after its launch a year ago, and far surpassed the roughly 6 million that analysts had projected.

But forecasts for Apple's latest iPhone had proven trickier than in the past, because the company introduced two models simultaneously in 11 countries -- including the crucial Chinese market. Apple launched the iPhone 5 in just nine countries.

Another factor was that this time around, Apple signed on NTT DoCoMo, Japan's largest mobile carrier.

China joined a rollout that included Hong Kong, Singapore, the United States, Australia, Japan, Britain, Canada, Germany, France and Puerto Rico. Previously, Apple began selling phones in China only months after the global launch.

"We underscore one important caveat for investors: Apple's iPhone seasonality is likely to be exaggerated this cycle because of the addition of NTT DoCoMo, and particularly because of the early launch in China," said Bernstein Research's Toni Sacconaghi, who has an "outperform" rating on Apple.

"Although upside exists for the September and December quarters, the risk exists that the fall-off in iPhone sales beginning in the March quarter could be more acute than history, potentially resulting in some downside to estimates."

SUPPLY LIMITED

Demand for the iPhone 5S has exceeded initial supply and many online orders are scheduled to be shipped in the coming weeks, Apple said. On Friday, long lines formed outside stores in Tokyo, New York, San Francisco and other cities for the new top-of-the-line 5s and the less-expensive 5c. It was the first time Apple launched two iPhone models simultaneously.

The gold-colored version of the 5S, which also comes in silver and gray, was sold out as of Friday and will now ship only in October, according to Apple's website. As of Monday, the two other colors were also set to be shipped only in October.

"Thanks to all our amazing customers for the fantastic weekend!" said Cook in his second tweet, after he joined Twitter following a visit to Palo Alto Apple store last Friday.

Apple also said gross profit margin would come in near the top of a range of between 36 percent to 37 percent, in line with average forecasts for 36.7 percent. The more optimistic margin forecast should allay investor concerns that, at just $100 less than the 5s, the 5c will draw buyers away from the premium gadget.

Analysts' average revenue forecast for the quarter stands at $36.1 billion, according to Thomson Reuters I/B/E/S.

Apple, which had grown notorious for providing conservative estimates that it routinely overshot, had resolved to improve its guidance for investors. Analysts have said the change will help rein in some over-the-top financial expectations.

The company said more than 200 million iOS devices are now running iOS 7 mobile software, rolled out just before the iPhone launch.

Apple did not break out separate sales figures for the 5S and 5C. The 5C, which starts at $199 with a contract, offers a touch ID that scans a user's fingerprint to unlock the phone. The 5C starts at $99 and comes in five colors.

"If Apple could ship so well without even having a larger screen iPhone, which we think it could deliver next year, then Apple is getting over a key hump," Shebly Seyrafi, an analyst with FBN Securities, said in a note to clients. "We believe that the immediate availability of the phone in China is also a key driver of the strength."

(Reporting by Poornima Gupta in San Francisci, Jennifer Saba in New York and Sruthi Ramakrishnan in Bangalore; Editing by Kirti Pandey, John Wallace, David Gregorio and Cynthia Osterman)

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