Oct. 19 (Bloomberg) -- Apple Inc. said China has become its largest market after the U.S. as the iPhone, iPad and iMac computer maker opened an online store last year and six retail outlets in the past three years in the Asian nation.

China, the world's most populous country, accounted for 16 percent of Apple's fourth-quarter sales, or about $4.5 billion, Chief Executive Officer Tim Cook said on a conference call yesterday. Revenue in the nation was almost four times the year- earlier level, he said.

Demand in China was a bright spot in Apple earnings reported yesterday, which missed analyst estimates for the first time in at least six years as iPhone sales lagged behind targets. The Cupertino, California-based company's sales in the Asian country jumped to $13 billion in the year ended Sept. 24 from $3 billion the previous 12 months, Cook said.

“I've never seen a country with as many people rising into the middle class that aspire to buy products that Apple makes,” Cook said on the call. “China, the sky's the limit there.”

Apple has a network of more than 200 “Apple Premium Resellers” in the country that are focused on the company's products, Cook said. Combined with other types of resellers and partner China Unicom (Hong Kong) Ltd., the nation's only carrier now offering the iPhone with a service contract, there are 7,000 points of sale for the iPhone in China, he said.

Largest Market

Even at that rate, Apple isn't expanding fast enough in China, said Shaun Rein, managing director of China Market Research Group., a Shanghai-based company that advises retailers and other clients about doing business in the country.

“China should be Apple's largest market, and I think they are actually underperforming here,” Rein said. “They haven't opened enough Apple stores. Apple needs to accelerate store openings much, much more.”

The China market can sustain 100 or more stores “easily,” Rein said.

Carolyn Wu, a Beijing-based spokeswoman for Apple, said she had no comment on Rein's analysis beyond remarks made by Cook that the company is “continuing to make investments” in China.

China is the world's largest mobile-phone market by subscribers, with 940 million users registered as of the end of August, according to the nation's Ministry of Industry and Information Technology.

‘Feverish' Growth

The country probably overtook the U.S. as the largest personal-computer market in the second quarter, after three decades of American dominance in an industry pioneered by Apple and International Business Machines Corp., research firm IDC said in August.

Personal-computer shipments in China rose 14 percent to 18.5 million units during the second quarter, the first time they surpassed the number in the U.S., where they fell 4.8 percent to 17.7 million, IDC said at the time.

Apple sales in China, Hong Kong and Taiwan rose to 12 percent of the company's total last fiscal year, compared with 2 percent in 2009, Cook said on the call.

Revenue is growing “at a feverish pace,” in the region, making it the company's fastest-growing “by far,” he said.

Apple opened its first store in Hong Kong last month, as well as its third store in Shanghai. The company also has two outlets in Beijing.

“It's an area of enormous opportunity,” Cook said. “It has quickly become No. 2 on our list of top revenue countries, very, very quickly. We're obviously placing additional investment. We're building more stores there, as well as doing quite a few other things.”

Fourth-quarter profit was $6.62 billion, or $7.05 a share, compared with $4.31 billion, or $4.64 a share, a year earlier, Apple said yesterday in a statement. That missed analysts' predicted profit of $7.31 a share, the first time Apple disappointed in at least 26 quarters.

 

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Apple is also involved in legal wrangles with manufacturers other than Samsung. Taiwan-based HTC accused Apple of patent infringements a while back, claiming that Apple had copied four of its patents relating to power management and phone dialing.

 

While back in July the US International Trade Commission (ITC) ruled that Apple infringed on 2 of HTC’s patents, ITC Judge Charles Bullock ruled again on Monday, this time saying Apple did not violate HTC’s patents.

 

But Apple isn’t off the hook yet. More verdicts have been scheduled, with the ITC expected to decide on November 13 on the preliminary ruling that Apple infringed on 2 HTC patents. February will be a critical point for the two companies because the full commission will decide whether to accept or reject Judge Bullock’s decision.

 

And on December 6 the ITC will decide on a preliminary ruling that HTC violated 2 Apple patents. According to the Wall Street Journal, Apple is trying to ban sales of HTC Android devices in the US, while HTC is hoping to gain a “cross-licensing agreement” via counter suits.

 

Consumers would love to see the two companies reach a middle ground. The mobile industry would be sorely deprived if HTC devices were banned.

Oct. 19 (Bloomberg) -- Stocks rose a second day, the euro strengthened and bond risk fell amid speculation leaders will stem the region’s debt crisis. U.S. equity futures declined after Apple Inc.’s profit missed analyst estimates.

The MSCI All Country World Index rallied 0.5 percent as of 8:04 a.m. in London and the Stoxx Europe 600 Index added 0.4 percent. Standard & Poor’s 500 Index futures dipped 0.5 percent and Nasdaq-100 Index contracts lost 1 percent. The euro gained 0.3 percent to $1.3792, while South Korea’s won led emerging- market currencies higher. The Markit iTraxx Asia index of debt default risk sank six basis points. Yields on German 10-year bunds increased two basis points to 2.03 percent.

Analysts partly attributed stock gains to a Guardian newspaper report that said Germany and France agreed to boost the region’s rescue fund, even after a person with direct knowledge told Bloomberg News no deal has been reached and Moody’s Investors Service cut Spain’s credit rating. While Apple’s income trailed the average estimate by 3.5 percent, Bank of America Corp. swung to a profit and Intel Corp. forecast fourth-quarter sales that topped some analyst predictions.

“Whatever progress we get out of the euro zone will certainly help add some calm to the market,” Kelvin Tay, the Singapore-based chief investment strategist at UBS Wealth Management, said in a Bloomberg Television interview. Investors will still remain “very wary” before leaders meet this weekend to discuss the crisis, he said.

More than four shares rallied for every one that fell on the Stoxx 600, which snapped a two-day, 1.3 percent drop. The MSCI Asia Pacific Index increased 0.8 percent, helping the gauge rebound from a 2.4 percent drop yesterday that was the steepest since Oct. 3.

Stocks Climb

Commonwealth Bank of Australia gained 1.2 percent after Reserve Bank Assistant Governor Guy Debelle said the nation’s banks are benefiting from rising domestic deposits and U.S. investment in their debt, shielding them from stresses experienced by European lenders. TPK Holding Co., a supplier of touch panels for Apple devices, retreated 6.9 percent in Taipei.

Futures signal the S&P 500 may give up some of yesterday’s 2 percent rally. Among the 38 index members that have released quarterly results since Oct. 11, more than 60 percent have beaten analysts’ profit estimates. Apple, the world’s largest company by market value, sank 6.7 percent to $394.05 after it missed analyst estimates for the first time since at least 2004. The maker of iPhones and iPads makes up about 15 percent of the Nasdaq-100 Index’s value.

Morgan Stanley will release its third-quarter results before the start of U.S. trading today.

‘No Conviction’

“There’s just no conviction that seems to survive,” John Carey, a Boston-based money manager at Pioneer Investments, said in a telephone interview. The firm oversees about $250 billion. “Apple’s results have disappointed some people. People are wondering where the economy is going, what earnings will look like and whether Europe will work its way through this crisis.”

Treasury 10-year yields were little changed at 2.18 percent before U.S. data today that may show consumer prices rose 0.3 percent in September, the median forecast in a Bloomberg News survey of economists. That would follow a 0.4 percent increase in August. Separate figures may show housing starts climbed to 590,000 last month from 571,000 in September.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell six basis points to 201 basis points, Royal Bank of Scotland Group Plc prices show. That would be the lowest closing level since Sept. 20, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Won, Ringgit

The won rose 1.2 percent to 1,132.30 per dollar after South Korea and Japan said they will increase a currency-swap accord to $70 billion. The Malaysian ringgit strengthened 0.8 percent to 3.1080 and the Taiwan dollar added 0.3 percent to NT$30.099.

The euro strengthened against 11 of its 16 major counterparts. The shared currency appreciated yesterday after the Guardian said Germany and France agreed before a weekend summit to boost the 440-billion euro ($604 billion) European Financial Stability Facility to 2 trillion euros.

The two nations are also in favor of recapitalizing the region’s banks to meet a 9 percent capital ratio that may be required by the European Banking Authority, the newspaper reported. A spokesman for German Chancellor Angela Merkel declined to comment.

Germany and France have yet to agree on how to bolster the European bailout fund as they seek to overcome technical hurdles and to complete a plan to stem to debt crisis, said a person with direct knowledge of the talks. FTSE 100 Index futures jumped 1.3 percent.

‘Premature’

The reported increase in “the European Financial Stability Fund is really significant and the market viewed that as a high positive,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Still, at this stage, it looks all premature and nothing has been agreed.”

Oil for November delivery decreased 0.1 percent to $88.26 a barrel in afterhours electronic trading on the New York Mercantile Exchange. Futures advanced 2.3 percent yesterday to settle at the highest price since Sept. 15, helping the S&P GSCI Index of commodities to a 0.7 percent gain.

Three-month copper declined 1.3 percent to $7,352.50 a metric ton on the London Metal Exchange, a third day of losses. Wheat for December delivery advanced as much as 1 percent to $6.3175 a bushel before trading at $6.275.

--With assistance from Nick Baker and Rita Nazareth in New York, Sarah McDonald in Sydney, Ranjeetha Pakiam in Kuala Lumpur and Nick Gentle in Hong Kong. Editors: James Regan, Linus Chua

Taiwanese phone maker HTC has said that it’s willing to talk things out with Apple over the two companies’ recent patent spat, Reuters reports.

“We are open to all sorts of solutions, as long as the solution and the terms are fair and reasonable,” HTC CFO Winston Yung told Reuters in an interview. “On and off we’ve had discussions with Apple, even before the initial determination came out.”

The news comes after Apple scored a significant patent victory over HTC from the U.S. International Trade Commission two weeks ago. The victory could ultimately force HTC to stop selling Android phones in the US, and could potentially be applied to Android phones from other manufacturers (in a worst case scenario). HTC has said it will appeal the decision, but we won’t know the full outcome until the end of the year.

Earlier this month, HTC acquired S3 Graphics for $300 million, giving it access to S3′s technology and significant patent portfolio. S3 also scored an ITC patent win of its own over Apple just a week before HTC announced its intentions to purchase the graphics company. But just like Apple’s win over HTC, the S3 ruling is subject to review.

HTC is already paying licensing fees to Microsoft for every Android phone it sells, a strategy that seems to be paying off quite well for Microsoft. Paying out additional fees to Apple could end up being a major hit to HTC’s revenues, but it’s certainly better than some alternative outcomes.

Google, not surprisingly, has little patience for these escalating smartphone patent wars. “The tech industry has a significant problem,” Google general counsel Kent Walker told Reuters. “Software patents are kind of gumming up the works of innovation.”

“Each side can blow the other up on some level — everybody can block the other’s products from coming to market,” he said. “You create this mutually assured destruction scenario, but it’s very expensive to get all those munitions.”

Walker went on to say that “it’s not good form” to acquire patents just to disarm competitors. Former Google CEO Eric Schmidt also expressed frustration last week over Apple’s pursuit of lawsuits instead of innovation.

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