Apple’s Growth will Come from China

According to a report from Gartner, Android-based smartphones and tablets will account for 1.1 billion devices worldwide in 2014, recording a growth of 26% over the year. Total shipments of PCs, tablets, smartphones, and mobile phones will grow 7.6% this year to 2.5 billion units. Gartner also estimates that by 2017, emerging markets will account for more than 75% of Android’s sales volume. Apple’s iOS and MacOS devices will grow 29% to 344 million units while Windows mobile and PC operating systems will grow 10% to 360 million devices this year.

Apple’s Financials

Apple’s (Nasdaq: AAPL) first quarter revenues grew 6% over the year to $57.6 billion, ahead of the Street’s projections of $57.47 billion. EPS of $14.50 for the quarter was also ahead of the market’s projections of $14.09.

While iPhone sales continued to grow, the units sold were lower than market expectations. Apple reported sales of 51 million iPhones during the quarter, compared with the Street’s projections of sales of 54-56 million. During the quarter, they sold 26 million iPads, surpassing market projections of sales of 24 million. They sold 4.8 million Macs compared with 4.1 million a year ago.

By segment, revenues from the iPhones grew 6% to $32.5 billion driven by a 7% increase in unit volume. iPad unit grew 14% over the year and helped drive revenues upwards 7% to $11.5 billion. During the quarter, Mac sales also grew 19% and helped grow revenues by 16% to $6.4 billion. iPod sales fell 52% in volume terms and 55% in revenue terms to $0.97 billion. Digital sales continued to drive growth with revenues growing 19% to $4.4 billion. Revenues from accessories grew 2% to $1.86 billion.

By region, revenues from Americas fell 1% to $21.0 billion. The recovery in the European markets helped grow revenues 5% to $13.1 billion. The biggest growth came in China where revenues grew 29% to $8.8 billion. Revenues from Japan grew 11% to $4.9 billion while revenues from the rest of Asia Pacific fell 9% to $3.6 billion. Retail revenues grew 9% to $7 billion for the quarter.

For the current quarter, Apple projected revenues of $42 billion-$44 billion, falling short of the Street’s projections of $46.1 billion.

Apple’s Asian Expansion

Apple continues to invest heavily in the Greater China region, which is the largest smartphone market. After six years of negotiations, Apple finally tied up with China Mobile, the largest carrier in the market. Through the deal, China Mobile, China’s state run telecom carrier, will be able to sell iPhones. The company already saw strong interest in the region and China Mobile saw pre-orders for the iPhone exceed more than 1 million. China Mobile will help Apple get access to 700 million subscribers and help grow their global smartphone market, which has been falling due to Samsung’s growing reach. Apple’s iPhones will also be available in over 3,000 locations as part of the deal. Researcher Trefis estimates that China Mobile would be able to sell an additional 20 million iPhones this year. Soon after its launch, Apple has seen developers in the country publish nearly 130,000 apps in the App Store. Within Japan too, Apple has reached a similar agreement with NTTDoCoMo, the largest player in the Japanese market.

Apple’s Product Expansion

Meanwhile, Apple is also looking to grow their product portfolio. Market reports suggest that Apple is now working on a big screen iPhone and will be selling phones with two screen options, 4.5 inch and 5 inch. Additionally, they are also developing a new Apple TV set-top box that could launch early this year. The new box is expected to have a more intelligent user interface that will let users connect to the app store and download games. Some analysts also expect this new box to have a motion sensor that could let users control the television with hand gestures. Apple has not given much insight into their product development.

Apple’s stock is trading at $550.50 with a market capitalization of $495.31 billion. It touched a year high of $575.14 last month. However, the stock is still way down from its highs in 2012.