During the tail end of the March quarter, the Chinese media was conducting an all-out blitz against Apple (NASDAQ:AAPL). The Mac maker was being criticized for its warranty practices, and state-owned media outlets were out looking for blood.

It continued for two weeks before CEO Tim Cook took a stand, issuing a formal apology to set the record straight, acknowledging some miscommunication and tweaking of warranty policies. Cook's letter was immediately well received, with the Chinese media promptly flipping its stance and praising the company for its quick response.

Ahead of Apple's earnings, I wondered if the damage had already been done, since the "Greater China" segment is Apple's hottest growth geography and the anti-Apple campaign spanned nearly a sixth of the quarter. With Apple's figures now out, let's take a look.

The meddling Middle Kingdom
Apple's reported Greater China revenue climbed to $8.2 billion. However, this figure doesn't include retail operations, and Apple has 11 stores in the region. Including retail revenue, total Greater China revenue was $8.8 billion. That's a new record, but Apple is seeing some growth deceleration as its now growing off a larger base.

Source: SEC filings and conference calls. Calendar quarters shown.

The falling growth rates are what some investors may be worried about, though.

Source: SEC filings and conference calls. Calendar quarters shown.

There are several ways to dig deeper.

First, investors can get a sense of consumer sentiment by looking at Apple's retail operations in China. Apple didn't open any new stores in the region, but it did open four in China late last year. Retail revenue put up a solid 25% sequential gain to $587 million, and average revenue per store climbed from $42.7 million to $53.3 million.

Source: SEC filings and conference calls. Calendar quarters shown.

Apple's retail business in China didn't seem to suffer. Keep in mind that the first quarter is the holiday quarter in the Middle Kingdom, which is why sequential growth is expected.

On the call, Cook also noted that iPad units were up 138% from last year, and Apple saw new records for both iPhone and iPad sell-through. There were also some timing differences to acknowledge. Last year, the iPhone 4S was launched in the first quarter on both China Unicom and China Telecom, while this time the iPhone 5 launched in the fourth quarter. Boosting iPhone channel inventories last year ($1.6 billion in China) increased revenue, negatively affecting this quarter's year-over-year comparison since building channel inventory already took place last quarter.

That said, Apple's work in China is far from over. The company is looking to double retail stores over the next two years, and Cook still thinks iPhone distribution points are too low.

Apple saw some deceleration in China for a number of reasons, and the media blitz probably played a small role in that. The good news is that there aren't likely to be any long-term effects and Cook knows what needs to be done.


Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.