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Cook: China growth a major factor in second-quarter numbers

updated 09:50 pm EDT, Tue April 24, 2012

$7.9B of Asia-Pacific's overall $10.15B haul

The Asia-Pacific region and China specifically were called out several times in today's earnings call with analysts. CEO Tim Cook was unusually candid in breaking out some China-specific numbers, noting that of the $10.15 billion in Asia-Pacific sales in the company's second fiscal quarter, China alone accounted for $7.9 billion, a tripling of sales on a year-over-year basis. Cook also said Apple was seeing a "halo effect" that was increasing Mac sales in the region.

Cook again took a moment to praise China and the company's Chinese retail partners as a "tremendous opportunity" for companies that understand the culture. As with last quarter's call, he noted that increasing wages from the manufacturing sector of the country -- including such plants as Foxconn, which pay significantly above the average wage in China -- was creating a gigantic new "middle class" that was generating enormous growth and economic activity, which included desire for Apple products as well as for other companies' products.

China alone has contributed $12.4 billion so far to Apple revenues in fiscal 2012, compared to $13 billion for the entire year in 2011, which was itself a huge increase over 2010 China revenues. Cook noted that Mac sales in China were up 60 percent year-over-year (29 percent overall in the Asia-Pacific region), and credited it to the "halo effect" of increasing iPhone and iPad sales there. In the US and elsewhere, Mac sales are healthy but flat in growth sequentially as some consumers wait for expected spring and summer updates.

In response to a question from Piper Jaffray's Gene Munster, Cook mentioned that the company had increased "distribution points" of Apple gear 70 percent year-over-year, but it was still a much smaller network than in the US, which only has one-fourth the population of China. There are a total of 11,000 sales outlets in China and Hong Kong, but only 2,500 of these are carrying the iPad (Apple has not yet debuted the latest iPad in China). Cook said there is a "lot of headroom" for Apple expansion and mention that over the next few years the company planned to make China a bigger point of opportunity.

Part of the success in the Asia-Pacific region was credited to the launch of the iPhone 4S and lower-priced iPhone models with China Telecom in March, one of the country's largest carriers. The region overall more than doubled sales year-over-year, and Cook said that "momentum" in China had climbed five times higher than a year ago, thanks largely to the new iPhone and price reduction on the iPad 2.

by MacNN Staff



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