As Apple celebratesof the Mac, all eyes are on the runt of the smartphone litter, the iPhone 5C.
The Cupertino, Calif.-based technology company has for the past half-decade enjoyed strong success in the December holiday quarter. Based on the latest round of Wall Street analysts' notes, it's clear that the iPhone remains the star of the show.
With the introduction of a lower-cost device, the iPhone 5C — at the same announcement as the premium iPhone 5S, there was general concern either one could cannibalize the other and affect Apple's overall profits.
And that almost certainly is exactly what happened. Although, the plus side is that it was the iPhone 5C with a lower price point and margins that failed to spark much interest across the globe. But it still leaves Apple with a problem child that needs fixing, or axing.
Wall Street is expecting the technology giant to post earnings of $14.09 per share, on revenue of $57.46 billion for the holiday quarter.
The company's operating margin is expected to be between 36.5 and 37.5 percent, with analysts expecting the figure to fall in the higher end of the scale at 37.3 percent. The expected margin could have been higher had Apple not incentivized newer iPhone, iPad, and Mac sales with free software and upgrades.
Analysts are nevertheless expecting strong sales across the board due to the festive season, where sales are typically significantly higher.
iPhone 5S to take biggest sales slice
According to average analyst estimates gathered by Fortune, Apple is expected to announce about 55.3 million iPhones sales during the quarter.
Apple's bread and butter rests on the iPhone's success. The smartphone division still makes up about half the company's total revenue. But analysts remain cautious on the state of affairs from its newer, lower-end smartphone sibling, the iPhone 5C, which reports suggestdue to weak demand.
Credit Suisse analysts Kulbinder Garcha et al said in a research note on Thursday that the iPhone 5S could take up as much as 65 percent of all Apple's smartphone sales, leaving about one-third being lower-cost iPhone 5C devices. It falls in line with regional research figures from the U.K. in December suggest the iPhone 5S is.
Apple historically hasn't broken out sales of its device portfolios, and that isn't expected to change.
Thanks to the iPhone's further reach into the Chinese market. Thanks to a customer base of, analysts pegged a 15-20 million boost to iPhone sales.
Many (but not all) China Mobile-related builds were at the end of December, and will account for a spike in first quarter sales. Chinese New Year lands a week after the Apple first quarter earnings call, so expect the second quarter to see another significant bump in sales.
Jefferies analyst Peter Misek concurred, adding:
Our recent round of checks indicates the total builds remain unchanged but further mix shift away from the 5C and toward the 5S and 4S. We note that the volatility in the supply chain is particularly high this quarter and depends on which particular [device version] the part is for. We theorize that could be the source of divergent sell-side [first calendar quarter 2013] build plan estimates.
Misek said in the note he believes solid iPhone 5S demand will offset the iPhone 5C's weakness, but in order to shift inventory price cuts are almost inevitable.
Macs: year-over-year growth expected
Apple is expected to sell about 4.6 million Macs during the quarter, according to Fortune estimates, up by 13 percent year-over-year.
Of course, the holiday sales patch will boost numbers, but the year-over-year increase can be attributable to the decline in first quarter of 2013 sales as a result of the missed iMac deadline. Taking this out of the equation, sales are about flat year-over-year.
iPad in troubled waters?
Meanwhile, just one fiscal quarter after the latest tablet iteration, the iPad Air, was introduced, analysts have concerns about Apple losing ground as the low-end tablet market continues to grow.
Apple is expected to announce sales of about 24-25 million iPads during the quarter, Fortune reported based on average analyst estimates, up a modest 10 percent year-over-year. In terms of Apple's market share, in spite of the strong sales, average forecasts suggest a drop of a nearly half from the full year of 2012.
Garcha added later:
Within the competitive landscape, we forecast Apple's tablet share at 22 percent in 2014 down from 41 percent in [calendar year] 2012. While we see the tablet market growing to 447 million units by 2017 (nearly twice 2013 estimates) we see most of the incremental growth in the sub $200 [average selling price] segment where Apple is not currently exposed.
Apple reports its fiscal first quarter earnings after the market closes on Monday.
Correction: Initial Wall Street estimates were incorrect. They have now been corrected.