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Abu Dhabi, UAEMonday 18 June 2018

Apple’s $100 billion stock buyback overshadows iPhone

Quarterly results topped Wall St forecasts, which had dropped on growing concern over the iPhone

Apple CEO Tim Cook speaks at Lane Tech College Prep High School in Chicago, Illinois. AFP/JIM YOUNG
Apple CEO Tim Cook speaks at Lane Tech College Prep High School in Chicago, Illinois. AFP/JIM YOUNG

Apple 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 company was also more optimistic about the current quarter than most financial analysts, driving shares up 3.6 percent to $175.25.

Suppliers around the globe had warned of smartphone weakness, playing into fears that the company known for popularising personal computers, tablets and smartphones had become too reliant on the iPhone.

Sales of 52.2 million iPhones against a Wall Street target of 52.3m was a comfort and up from 50.7m last year, according to data from Thomson Reuters.

Apple bought $23.5bn of stock in the March quarter, and said it plans to hike its dividend 16 per cent, compared with a 10.5 per cent 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 $100bn 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 $50bn market capitalisation of electric car maker Tesla.

Apple posted revenue for its March quarter of $61.1bn, up from $52.9bn last year. Wall Street expected $60.8bn.

Average selling prices for iPhones were $728, compared with Wall Street expectations of $742.

The company also predicted revenue of $51.5bn to $53.5bn in the June quarter, ahead of the $51.6bn 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 $145bn.

“We are returning the cash to investors as we have promised,” chief financial officer Luca Maestri said.

Profit was $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 $9.1bn in revenue compared with expectations of $8.3bn. Heading into earnings, investors were hopeful that growth in that segment could help offset the cooling global smartphone market.

Apple traditionally updates its share buy-back and dividend program each spring, and the $100bn it added this year compares with an increase of $50bn last year.