Apple profits beat expectations
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23 April 2014
Last updated at 23:23
Sales of Apple’s less expensive iPhone 5C have been disappointing
Technology giant Apple reported profits of $10.2bn (£6.1bn) after selling 43.7 million iPhones during the three-month period ending 29 March.
Apple also announced plans to buy an additional $30bn of its stock back from shareholders and to increase its quarterly dividend by 8%.
It also said it would split its stock for the first time in nine years.
The moves are meant to appease investors as the firm reports slowing revenue growth.
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Analysis
Apple chief executive Tim Cook warned Wall Street back in January that this would be a disappointing quarter. However, in the end that pessimism proved somewhat unfounded.
Even though the tech giant lacked any significant new driver to move the earnings or revenue needle, the performance of iPhone sales will silence critics who have suggested the new handsets are not innovative enough for consumers.
However, the iPad has underperformed – providing succour to suggestions to that the tablet needs to be a more capable Mac-like device if it is to replace the traditional PC and return to reinvigorated growth.
If the boost to Apple’s share price is to be maintained, much will depend on announcements later this year.
Quite aside from rumours of a new, bigger iPhone 6 “phablet”, speculations abounds about a fitness-centric “iWatch” and a significant update to Apple TV.
Typically the Silicon Valley giant has remained tight-lipped, except to signal it will “absolutely” enter new product categories soon.
As the smartphone and tablet market mature, it needs to resurrect its reputation not just for incremental innovation but for outright disruption – reassuring investors that, yet again, it has the vision and strategy to execute on “the next big thing”.
Shares in the firm surged more than 7% in after-hours trading, as investors also welcomed news of the seven-for-one split, which is set to take effect in June.
Christmas in February
The strong iPhone sales surprised analysts, who had been expecting a sharper decline in post-holiday buying.
Sales of Apple’s iPhone – which is the company’s most popular product, contributing to more than half of its revenue – decreased by 14% from last quarter, as users await new models.
However, they were up 17% compared to the same period earlier.
“We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services,” said chief executive Tim Cook in a statement.
On a conference call to discuss earnings, Mr Cook added that it was Apple’s biggest non-holiday quarter ever.
He said that Apple has acquired 24 companies in the last 18 months in order to expand its research and development into new features and products.
Apple has faced stiff competition from rival Samsung, which sells cheaper smartphones that mostly run Google’s Android operating system.
Also on the call, Mr Cook and new chief financial officer Lucas Maestri sought to reassure investors about iPad sales, which fell 16% – the steepest drop ever for the device.
Mr Maestri and Mr Cook chalked it up to how sales were calculated, while Mr Cook also noted that the iPad is the fastest selling product in Apple’s history, with more than 210 million in total sold since launching in 2010.
Total sales of Apple’s once-popular iPod music player continued to decline sharply, falling to just 2.8 million units during the second quarter – a 54% decrease from the previous three-month period.
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