Apple growth hinges on China, new devices

Wed Apr 25, 2012 7:54pm EDT
 
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By Poornima Gupta

SAN FRANCISCO (Reuters) - Sometimes even eye-popping results are not enough.

Apple Inc'sO> shares may have risen 9 percent on Wednesday on the back of another spectacular quarter that included soaring iPhone sales in China, but the naysayers are still asking if the most valuable American company might need yet another revolutionary product in the next year to sustain its sizzling growth.

The skeptics certainly lost some credibility when the company's shares surged 9 percent on Wednesday, adding about $50 billion to Apple's market value, but some have not been silenced.

Their case is based on the law of large numbers - it is going to be more difficult for Apple to grow as fast the bigger it gets - and on the unforgiving nature of the technology business that can turn heroes into has-beens overnight.

The bulls point to emerging markets - in particular China, whose mobile market is the world's largest and far from saturation - and upcoming products like a 4G-enabled iPhone 5 and the oft-rumored Apple TV, as sustaining eye-popping growth such as the near-doubling of its net income in the second quarter.

But the bears, with a longer-term view, fear that Google Android devices will eventually put pressure on Apple's margins in China as they have elsewhere, and wonder if Apple will be successful in tacking on another blockbuster consumer device to its portfolio.

Sales in China, particularly, are key for Apple to maintain its pace of revenue growth in the longer term, said Carolina Milanesi, consumer technologies analyst at Gartner.

"That's the big question," she said, referring to market share in China. "From an affordability perspective, I think the opportunity is there to allow it to maintain that growth or at least not to see an immediate drop in sales."   Continued...

 
A man looks at his Apple iPad in front an Apple logo outside an Apple store in downtown Shanghai in this March 16, 2012 file photo. REUTERS/Aly Song/Files