Still on launch pad

Apple: Apple is still about the iPhone — for now. Sales and earnings both grew by two-thirds or more in the tech group’s latest quarter compared with a year earlier. Yet teething pains kept iPad sales below bullish predictions of nearly 5 million. In the meantime, the iPhone’s growth looks an at least equally important story.

Apple’s sales have risen almost fivefold since 2005. Few companies, especially those as big as Apple, with a nearly $300 billion market capitalisation, can keep up that kind of growth. To do so will need another source of growth on a par with the groundbreaking iPhone.

The iPad appears poised to oblige. The tablet device is vying for the title of the most successful consumer electronic gadget launch ever. Analysts have been steadily bumping up projections, with bullish prognosticators estimating Apple will sell more than 40 million of them next year.

The fact the company sold only 4.2 million in its fiscal fourth quarter ending September 25 was a setback of sorts. Analysts on average had projected 4.7 million, and Apple’s stock lost more than 5 per cent to dip below $300 — a level it first topped only last week — after hours on Monday.

Yet investors should not be too worried. The device was only introduced earlier this year, and it will take time for production to fully scale up. Meanwhile big firms like Verizon, Target and Wal-Mart have just signed on to sell iPads.

For the moment, though, the iPhone is still critical, bringing more than 40 per cent of Apple’s revenue in the past quarter on the back of a 91 per cent surge in unit sales against a year earlier. Growth should continue for a few more quarters at least. The 80 per cent of Fortune 500 companies trying out or deploying the device, for example, are a potentially rich seam of revenue. And it helps that BlackBerry maker Research In Motion, a big competitor, appears to be losing the race. However, phones powered by Google’s operating system, Android, are coming on strong. Indeed, Apple boss Steve Jobs spent several minutes identifying problems with the rival platform.

Apple will fix its production issues with the iPad. The bigger question for the company’s next few quarters is whether Google can do the same with the technical shortcomings of Android.