NEWS

Apple profit up 20% as iPhone 6 sales soar

10/20/2014 11:26 EDT | Updated 12/20/2014 05:59 EST
Apple shares were soaring in after-hours trading Monday after it reported quarterly net profit of $8.5 billion, or $1.42 per diluted share, a 20 per cent increase from the year-ago quarter on strong iPhone 6 sales.

The company posted quarterly revenue of $42.1 billion worldwide. Both profit and revenue beat analysts’ expectations.

Apple claimed a record launch of iPhone 6 and iPhone 6 plus, which CEO Tim Cook described as “the biggest iPhone launch ever.” Total iPhone sales jumped 12 per cent to 39.3 million.

Apple also is projecting strong holiday sales of its products. It forecasts revenue between $63.5 billion and $66.5 billion in the first quarter of 2015, and made the unusual step of announcing it would pay taxes at a rate of 26.5 per cent. Apple has been under fire for using profit shifting to escape U.S. corporate taxes.

Apple Pay launched

Apple rolled out its Apple Pay mobile payment system today in the U.S., with hundreds of banks signed on for the new technology.

While mobile payments aren’t new, Apple’s entry into the field is expected to change consumer habits so there is an expectation to pay via cellphone. It's also a strategic shift into a whole new area for the tech giant that could position Apple as an intermediary in dozens of transactions.

To use Apple Pay at a retail store, consumers need an iPhone 6 or 6 Plus and must enter a credit card – they may have a card already registered at the iTunes store. 

Cards from the largest U.S. banks, such as Citi, Wells Fargo, Bank of America, Capital One and JP Morgan Chase, are already hooked into the Apple Pay system.

Apple has also managed to sign on 500 regional and local banks, whose cards should work by early next year, according to Apple CEO Tim Cook.

Fingerprint sensor

The tech giant aims to replace the traditional credit card swipe in retail stores with a mobile payment, verifying the user’s identity with a fingerprint sensor. But the merchant also needs to be onboard — with McDonald’s , Whole Foods and Walgreen signed up for the service.

Gartner tech analyst Van Baker says consumers are increasingly worried about the security of traditional credit and debit cards, after high-profile hacking of Target and Home Depot computer systems. This provides an alternative with a biometric backup system – the TouchID feature that works with a user’s fingerprint.

The Apple Pay system also has an app-based version that extends to online sales made through an iPad Mini 3, iPad Air 2 or iPhone 5s. Each of those devices also has TouchID.

The service is "hugely important" says Forrester Research analyst Frank Gillett, as it puts Apple in the middle of a wide range of consumer transactions, underscoring Apple's value as a brand.

Slow rollout expected

It not only encourages consumers to buy the newest Apple products, it also demands that retailers and financial institutions strike relationships with the company. 

"It's a strategic advance not just because it may be a new revenue source, but because it injects Apple into a whole different value stream" for customers and the company's business partners, Gillett says.

But the service will be slow rolling out, in part because not everyone has the newest devices, but also because Apple needs to win over more retailers.

Apple Pay is not yet offered in Canada.

The company is set to reveal it's fourth-quarter and year-end results for its fiscal year after stock markets close at 4:30 p.m. eastern time on Monday.

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