Chinese growth drives another strong iPhone quarter

After an uncharacteristically turbulent period for the stock, Apple reassured the markets by almost doubling its second quarter profits, announcing strong growth for the iPhone, which now accounts for half its sales.

The company, which now has over $100bn in its cash mountain, sold 35.1m iPhones in the quarter, ahead of analyst forecasts of 31m to 32m, and with especially strong showing in China, where Apple recently signed a second carrier, China Telecom. That detail will rub salt in Nokia's wounds, since Chinese slippage was a key factor in the Finnish giant's own Q1 slump, and it recently ceded its market lead in the huge country to Samsung. The iPhone's Asia-Pacific sales doubled year-on-year and shipments in Greater China were up fivefold. Such growth is important, as the iPhone becomes truly global, with Asian sales compensating for slowdown in the US. Sales at AT&T and Verizon Wireless were down compared to the holiday quarter of Q411.

Apple also shifted 11.8m iPads and 4m Macs in the quarter. The latter was on target, according to analyst predictions, but as often happens, the iPad disappointed somewhat - Wall Street had looked for shipments of 12m to 13m on the back of the iPad HD launch. Although the Apple gadget remains the clear market leader in the nascent tablet segment, with only Amazon's differently positioned Kindle Fire threatening its numbers, the sector as a whole continues to underperform expectations.

In Apple's Q1, sales rose to $39.2bn, up from $24.67bn a year ago while profit leapt by 94% year-on-year to $11.6bn, or $12.30 a share. These figures were well ahead of analyst consensus forecasts of $10.06 per share on sales of $36.8bn. Gross margin was 47.4%, while Apple had only forecast 42%.

However, Apple does not turn in untarnished good news these days. Its forecast was underwhelming, with guidance of sales of $34bn and profit of $8.68 per share, instead of the $37.4bn and $9.93 figures Wall Street was looking for. Of course, Apple often offers a conservative guidance.

CEO Tim Cook said in his statement: "We're thrilled with sales of over 35m iPhones and almost 12m iPads in the March quarter. The new iPad is off to a great start, and across the year you're going to see a lot more of the kind of innovation that only Apple can deliver", perhaps a pointed barb directed at the various Android vendors whom the firm is suing for allegedly copying its iDevices or infringing its patents.

Although the stock has been more volatile than usual in recent weeks, amid concerns over a possible carrier clampdown on subsidies and a shortage of chips for the next iPhone, analyst Gene Munster of Piper Jaffray thinks Apple is on course to break the $1,000 price barrier for its shares within the next two years, and to become the first firm with a $1 trillion valuation. In a client note, he said he expected the 'iPhone 5', when it arrives, to be a "revolutionary update" which would drive a new growth spurt. More critical observers believe it is essential that Apple does, indeed, deliver a "revolutionary" handset this time around, to avoid seeing its lead over Android rivals being chipped away by increasingly high profile offerings like Samsung's Galaxy family.