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Apple is making more money than ever, but uncertainty over Watch sales has Wall St worried

HARRY TUCKER

ANALYSTS have been led to believe that Apple’s smart watch was a sales flop after the company left details out of its financial figures.

While not releasing specific figures for the Apple Watch, Apple reported total results for several products, including the watch, that suggest sales were lower than many Wall St analysts expected. The company also issued a revenue forecast for the current quarter that suggested sales could fall below analysts’ prior estimates.

Apple’s latest financial report shows the iPhone is still the key engine of the company’s success. The California tech giant said it sold more than 47.5 million iPhones during the three months ending in June, or 35 per cent more than a year ago.

But top executives stood by their decision not to disclose results for the Apple Watch, saying the information could be used by competitors. Many analysts and investors see the watch as an important indicator of the company’s ability to produce successful new products.

In one tantalising clue, Apple reported $2.6 billion in revenue from the segment that includes the watch and several other products, or about $952 million more than the previous quarter, when the watch had not yet gone on sale.

If we were to guess that the $952 million was from Watch sales, it would mean that Apple sold — at most — roughly 3 million of its latest device, assuming all sold were the cheapest model. Significantly less than the iPhone.

It’s also half the $1.8 billion in watch sales that analysts surveyed by FactSet were expecting.

Apple’s stock fell nearly 6 per cent, indicating investors weren’t satisfied with the report.

Malcolm Turnbull is one of the 3 million with an Apple Watch.

Malcolm Turnbull is one of the 3 million with an Apple Watch. Source: News Corp Australia

Apple chief financial officer Luca Maestri told the Associated Pressthat revenue from the watch amounted to “well over” that $952 million increase. He said the category also includes revenue from iPods and accessories, whose sales fell in the quarter.

“We beat our internal expectations” for the watch, Maestri said, adding that the number of watches sold in the first nine weeks was greater than the number of iPhones or iPads that the company sold in a comparable period after those products launched.

Apple has previously said it sold 1 million iPhones in the first 74 days, or more than 10 weeks, after sales began in 2007, however that was only in the USA. Apple has said it sold 2 million iPads in the first 60 days, with iPad sales hitting 3 million in 80 days after the iPad was launched in 2010.

Meanwhile, analysts and investors were eager to learn more about the Apple Watch, which went on sale in April. While not expected to be an important revenue source now, the watch has symbolic importance as the first new product category that Apple has launched since the 2011 death of founder and iconic chief executive officer Steve Jobs.

“When you look at the next big wave of innovation, in coming years, it’s not going to come from smartphones,” said analyst Angelo Zino of S&P Capital Markets, who said phones were already becoming “commodity” items, even with Apple dominating the high end of that market. “So a lot of people want to see if Apple can roll out a new product that’s very successful and innovative.”

Apple’s next software update will be easier for app makers to develop for.

Apple’s next software update will be easier for app makers to develop for. Source: AFP

While Apple executives say demand for the watch has been strong, the absence of official numbers has left analysts to offer estimates ranging from rosy to lacklustre. Maestri acknowledged that Apple has released detailed sales figures for other products, but he said the company wanted “to be careful” with information about the watch, to avoid tipping competitors as Apple learns more about consumer demand for a new product.

One of the big problems at the moment facing the Apple Watch is a classic catch-22 case. Big app developers like Facebook are being increasingly cautious in developing apps for the new platform, leaving big Facebook, Messenger and WhatsApp holes in the Watch ecosystem. Similarly, Google has shown a lack of support for its big apps like Gmail and Maps due to a lack of users on the platform.

But the problem here is, people aren’t buying the Watch because it doesn’t have any big features or killer apps that consumers think are worth dropping big dollars for.