Apple's Cook still upbeat about China despite poor sales

Company chief tries to downplay a disquieting drop in revenue in the region and attributes part of the problem to a weaker economy.

Apple CEO Tim Cook. James Martin/CNET

After coming off its best quarter in China, Apple turned in markedly lower revenue for the region for its fiscal third quarter . But not too worry, CEO Tim Cook told analysts, China is still a "huge opportunity" for the software and hardware maker.

Apple on Tuesday said it earned $4.65 billion in revenue from sales in Greater China, which includes China, Hong Kong, and Taiwan. The amount was down an astounding 43 percent from the previous quarter when Apple made $8.2 billion from the same market. The China revenue figure was also 14 percent lower from the year-ago quarter.

The reveal is a particularly disquieting one considering that China had previously been the company's fastest growing territory and had ballooned to become Apple's second most lucrative region.

"I think it's important to put it in perspective," Cook said on the Cupertino, Calif., company's earnings call with analysts. "In the last 12 months, we've done $27 billion on a trailing basis, so it's a huge business for us."

Cook blamed the drop largely on a weaker Chinese economy, but also singled out Hong Kong -- an "International shopping haven" where there was "a more dramatic downturn" in revenue for Apple -- as a major culprit.

Hong Kong was down on sell-through -- or the percentage of units shipped that are actually sold -- by about 20 percent, Cook said, which weighed down greater China. "It's not totally clear exactly why that occurred."

The Apple chief added that the company's third-quarter revenue for greater China offered outsiders an incomplete narrative around what's actually happening in the region, especially if you throw out Hong Kong. Sell-through in China was only down 4 percent from the year-ago quarter when you normalize for channel inventory, he said, and mainland China was actually up by 5 percent.

The iPad, Cook insisted, remains a hot commodity in the area with sell-through up 37 percent for mainland China in the quarter. "Year-to-date, iPad units are up 48 percent year-over-year," said Cook about the device's popularity in greater China. Cook also stressed that Apple's developer base is blooming in the region.

"I continue to believe that in the arch of time here, China is a huge opportunity for Apple," Cook said. "I don't get discouraged over a 90-day kind of cycle."

 

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