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Apple profit soars but misses high expectations
by Staff Writers
San Francisco (AFP) Oct 18, 2011

Samsung chief stresses 'fair' competition with Apple
Seoul (AFP) Oct 19, 2011 - Samsung Electronics will maintain its components partnership with US rival Apple, a top executive of the South Korean firm said Wednesday, despite their heated legal battles over patents.

Samsung's chief operating officer Lee Jae-Yong said he met Apple's chief Tim Cook during a memorial service for Apple co-founder Steve Jobs, who died on October 5 after a long battle with cancer.

The Korean firm supplies memory chips, display panels and other components for Apple products even though the two companies are in locked in legal disputes over the finished items.

Apple was Samsung's second-largest client in 2010 after Japan's Sony Corp, accounting for four percent of its 155 trillion won ($142 billion) annual revenue.

The Korean company will continue to supply parts to Apple next year, Lee said, adding his meeting with Cook covered the issue of promoting "good relations".

"There was discussion on how to supply even better parts for the 2013-2014 period," Lee told reporters on his return, according to his spokesman.

Samsung and Apple have been embroiled in a series of patent suits accusing each other of copying designs and technology for their smartphones and tablet computers.

Lee, the only son of Samsung chairman Lee Kun-Hee and heir apparent to the country's largest company, did not say if he had discussed a truce with Apple.

"There is a need to compete intensively in a fair manner for the benefit of consumers," he said, adding top managers would consult legal advisers on whether to expand the court fight with Apple.

The battle over the $100 billion market began in April in the United States when Apple accused Samsung of "slavishly" copying the design of its market-leading iPhone and iPad.

Apple has since sought a ban on sales of Samsung's Galaxy S smartphones and Galaxy Tab in Germany, Australia and other countries, prompting Samsung to file counter-suits.

Samsung is seeking to block sales of Apple's newest iPhone 4S in Italy, France, Japan and Australia in separate suits alleging a violation of technology patents.

Apple's net profit in the recently-ended quarter soared with booming iPad sales but its stock sank Tuesday on the eve of a workplace tribute to Steve Jobs due to missed iPhone expectations.

The iconic California company reported record-high September quarter profit of $6.62 billion on revenue of $28.27 billion boosted by iPad sales that nearly tripled to 11.12 million in comparison with the same period last year.

The enviable earnings, however, did not measure up to expectations Wall Street had set for Apple and the company stock price slid more than six percent to $394.05 in after-hours trading.

"We are thrilled with the very strong finish of an outstanding fiscal 2011, growing annual revenue to $108 billion and growing earnings to $26 billion," said Apple chief executive Tim Cook.

"Customer response to iPhone 4S has been fantastic, we have strong momentum going into the holiday season, and we remain really enthusiastic about our product pipeline."

The company saw iPhone sales rise to 17.07 million and Macintosh computer sales climb to 4.89 million in 26 and 21 percent increases, respectively, from the third fiscal quarter in 2010.

But analysts had expected iPhone sales to be stronger.

It was the second miss for Apple when it came to managing market expectations, according to independent Silicon Valley analyst Rob Enderle.

"Steve Jobs always beat the street because he was expert at managing expectations," Enderle said, noting that the stock was punished because Wall Street thought Apple's fourth quarter earnings would be better.

And while the new iPhone 4S is superb, people had anticipated a dazzlingly different fifth-generation Apple smartphone, according to Enderle.

Cook unveiled the 4S on October 4, one day before visionary Apple co-founder Jobs died following a long battle with cancer.

His health failing, Jobs, for whom a private memorial will be held Wednesday at Apple headquarters in Cupertino, California, had stepped down as chief executive in August and was replaced by Cook.

Word spread Tuesday that Apple retail stores would close in homage to Jobs during the workplace tribute.

Apple executives, meanwhile, downplayed the break in iPhone sales momentum, saying rumors buzzing before the launch last week of the iPhone 4S caused people to wait to snap up the latest model.

"I am confident we will set an all-time record for iPhone this quarter," Cook said during an earnings conference call.

"In our wildest dreams we couldn't have gotten off to as good a start as we did with the 4S."

Apple has sold more than four million iPhone 4S smartphones since it was released Friday in seven countries: the United States, Australia, Canada, France, Germany, Japan and Britain.

It will be available in 22 other countries, including much of Europe, by the end of October, and more than 70 countries by the end of 2011, the company said.

Apple executives predicted iPad sales will also shatter records during the year-end holiday shopping season.

Sales of iPod MP3 players slid 27 percent to 6.62 million in a predictable decline in the fourth fiscal quarter as people increasingly rely on smartphones for video and music.

Mainland China has become Apple's fastest growing region, with revenue there second only to the United States.

"I've never seen a country with as many people rising into the middle class that aspire to buy products Apple makes," Cook said. "The sky is the limit there."

And Apple is seeing "significant opportunity" as well in Brazil, Russia and the Middle East.

A formidable iPad challenger has yet to arrive, according to Cook, who believes that the tablet market will become larger than the personal computer market.

Apple has sold more than 40 million iPads since Jobs introduced the tablet early last year.

Cook also said iPad sales are cannibalizing desktop computer and laptop sales, but that the biggest bite is coming out of the market for machines powered by Microsoft's Windows operating systems.

"We are coming out very well in the cannibalization category," Cook said, noting that Macintosh sales in the past quarter were at a record high.

"With cannibalization like this, I hope it continues," but he declined to comment on patent battles that Apple is fighting with makers of Android-powered smartphones and tablets in an array of courts.

Apple finished the quarter with slightly more than $80 billion in cash.


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