Apple reports higher profits, unveils big share buyback

NEW YORK: Apple reported a hefty jump in second- quarter earnings Tuesday and unveiled a new US$100 billion share buyback plan, alleviating worries about the iPhone’s prospects and a hit from US- China trade tensions.

Apple shares rose decisively after the report, which beat analyst expectations in terms of profit and sales. The company notched higher revenues in all regions and across most product categories, although iPhone sales lagged expectations.

Apple chief executive Tim Cook offered a bullish outlook on the company, touting the company’s product pipeline as the “best we’ve ever had” and championing good sales of the iPhone 10, a recently unveiled model whose US$ 1,000 price tag has aroused worries about being too high. Shares jumped on the report, rising 3.8 per cent to US$ 175.49 in afterhours trading.

Earnings for the quarter ending March 31 rose 25.3 per cent rise in earnings to US$ 13.8 billion following 15.6 per cent increase in revenues to US$ 61.1 billion.

The company, flush with a huge cash pile on strong earnings enhanced by the US tax cut plan of 2017, announced US$ 100 billion in new share buybacks plus a 16 per cent boost to its quarterly dividend.

Chief financial officer Luca Maestri told an analyst conference call that the company would undertake the share purchases at “a very fast pace,” but that the schedule would depend on market dynamics.

Analysts especially praised a big jump in revenues in Apple’s services business, which is seen as an important element of diversification away from having revenues tied to gadgets.

A 31 per cent rise in services to US$ 9.2 billion followed big jumps in Apple Pay, Apple Music and other programs.

Angelo Zino, analyst at CFRA Research said the gain was evidence of “significant increase in paid subscriptions within (Apple’s) ecosystem.”

Sales of iPhones, which account for nearly two-thirds of company revenues, rose during the quarter, although total volume came in at 52.2 million units, a bit below consensus estimates of 53 million.

Neil Saunders, managing director of Global Data Retail, pointed to “some less satisfactory nuances” in the Apple’s iPhone data in spite of the positive headline figure.

“That unit growth is well below the run rate for new phone launches, signals that the replacement cycle is slowing down,” Saunders said.

“In essence, we maintain our view that Apple is struggling to persuade many consumers to update their phones.”

“No matter how Apple tries to spin it, the iPhone X is essentially an incremental product that lacks the excitement and newness earlier models brought to the market,” Saunders said.

But Cook noted that the iPhone 10 was its topseller during the quarter, including in key markets like China, saying “I could not be prouder of the product.”

Cook also downplayed talk that the smartphone market lacks significant room for growth, noting tremendous upside still exists in key markets in India and more broadly among the large population that still hasn’t bought the gadget. — AFP