Apple surprises with solid iPhone sales, announces $100 billion buyback

Average selling prices for iPhones were $728, compared with Wall Street expectations of $742. (Reuters)
Updated 02 May 2018
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Apple surprises with solid iPhone sales, announces $100 billion buyback

  • Apple’s quarterly results topped Wall Street forecasts, which dropped ahead of the report on growing concern over the iPhone
  • Profits were $2.73 per share versus expectations of $2.68 per share

SAN FRANCISCO: Apple on Tuesday reported resilient iPhone sales in the face of waning global demand and promised $100 billion in additional stock buybacks, reassuring investors that its decade-old smartphone invention had life in it yet.
Apple’s quarterly results topped Wall Street forecasts, which dropped ahead of the report on growing concern over the iPhone. The Cupertino, California-based company also was more optimistic about the current quarter than most financial analysts, driving shares up 3.6 percent to $175.25 after hours.
Suppliers around the globe had warned of smartphone weakness, playing into fears that the company known for popularizing personal computers, tablets and smartphones had become too reliant on the iPhone.
Sales of 52.2 million iPhones against a Wall Street target of 52.3 million was a comfort and up from 50.7 million last year, according to data from Thomson Reuters.
Apple bought $23.5 billion of stock in the March quarter, and said it planned to hike its dividend 16 percent, compared with a 10.5 percent increase last year. Analysts believe the heavy emphasis on buybacks will bolster share prices, but some investors wished Apple had found different uses for the cash.
“I’d hoped for more on the dividend side or maybe a strategic investment,” said Hal Eddins, chief economist for Apple shareholder Capital Investment Counsel. “I assume Apple can’t find a strategic investment at the current prices that will move the needle for them. The $100 billion buyback is good for right now but it’s not exactly looking to the future.”
The cash Apple earmarked for stock buybacks is about twice the $50 billion market capitalization of electric car maker Tesla Inc.
Apple posted revenue for its March quarter of $61.1 billion, up from $52.9 billion last year. Wall Street expected $60.8 billion, according to Thomson Reuters.
Average selling prices for iPhones were $728, compared with Wall Street expectations of $742. The figure is up more than 10 percent from $655 a year ago, suggesting Apple’s iPhone X, which starts at $999, has helped boost prices.
Analysts had feared the high price was muting demand for the iPhone X, but Apple Chief Executive Tim Cook said it was the most popular iPhone model every week in the March quarter.
“This is the first cycle that we’ve ever had where the top of the line iPhone model has also been the most popular,” Cook said during the company’s earnings call.
“It’s one of those things like when a team wins the Super Bowl, maybe you want them to win by a few more points. But it’s a Super Bowl winner and that’s how we feel about it.”
The iPhone X has shaped up to be “a good, not a great product. There was a time prior to its introduction that investors expected it to be a great product,” said Thomas Forte, an analyst with D.A. Davidson Companies.
“Now that we know it is a good product, as investors have lowered expectations, that is enough, in my view, for shares to go higher from current levels.”
Apple also predicted revenue of $51.5 billion to $53.5 billion in the June quarter, ahead of the $51.6 billion Wall Street expected as of Monday evening, and the share repurchases in the March quarter drove Apple’s cash net of debt down slightly to $145 billion.
“We are returning the cash to investors as we have promised,” Chief Financial Officer Luca Maestri told Reuters in an interview.
Profits were $2.73 per share versus expectations of $2.68 per share, as of Monday, and up from $2.10 a year ago.
Apple’s services business, which includes Apple Music, the App Store and iCloud, posted $9.1 billion in revenue compared with expectations of $8.3 billion. Heading into earnings, investors were hopeful that growth in that segment could help offset the cooling global smartphone market.
Julie Ask, an analyst with Forrester, said Apple’s services segment results were positive but warned that Apple needed to continue to boost subscriptions on its platforms, which reached 270 million users in the March quarter and includes people who subscribe to third-party apps on the iPhone as well as Apple’s own services like iCloud.
“Apps are carrying most (services revenue) right now, but Apple needs to get to a place where it’s mostly subscriptions and monthly fees and not just one-off downloads,” Ask said.
Apple traditionally updates its share buyback and dividend program each spring, and the $100 billion it added this year compares with an increase of $50 billion last year.


Siemens CEO pushes plans to boost Iraqi power infrastructure

Updated 2 min 58 sec ago
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Siemens CEO pushes plans to boost Iraqi power infrastructure

FRANKFURT: Siemens said its boss Joe Kaeser met Iraq’s prime minister on Sunday to discuss a proposal by the German company to expand the Middle East nation’s power production.
The German engineering group said it was proposing a deal to add 11 gigawatt (GW) of capacity over four years, saying this would boost the country’s capacity by nearly 50 percent.
It did not give a value, but such a contract would be worth several billion euros based on previous comparable deals.
Iraq has a wide gap between electricity consumption and supply. Peak demand in the summer, when people turn on air conditioners due to high temperatures, is about 21 GW, far exceeding the 13 GW the grid is currently provides, experts say.
Kaeser said in a statement after meeting Prime Minister Al-Abadi that they had “discussed the comprehensive Siemens roadmap to build a better future for the Iraqi people.”
“In Egypt, we have done the same and successfully built up the power infrastructure in record time with the highest efficiency,” he said.
In 2015, Siemens signed an 8 billion euro ($9.4 billion) deal with Egypt to supply gas and wind power plants to add 16.4 gigawatts of capacity to the country’s power grid, marking the group’s single biggest order.
The proposal for Iraq, first pitched in February, would include cutting Iraq’s energy losses, introducing smart grids, expanding transmission grids, upgrading existing plants and adding new capacity.
The group would also help the government secure funding from international commercial banks and export credit agencies with German government support, creating thousands of jobs in Iraq.
Siemens would donate a $60 million grant for software for Iraqi universities, it said.