Apple Announces Record Q2 Revenue, Increased Stock Buyback
Apple announced the results of its fiscal 2014 second quarter April 23, and while the arrows are pointed in the right direction, the angle of the incline still has investors mumbling.
During Apple’s fiscal 2014 second quarter, which ended March 29, it sold 43.7 million iPhones (up from 37.4 million a year ago), brought in revenue of $45.6 billion (beating analyst projections of $43.5 billion and up from $43.6 billion a year ago) and saw profits of $10.2 billion (up from $9.5 billion).
iPads, of which Apple sold 16.35 million, represented the rare downward-pointing arrow, with sales declining from 19.5 million a year ago.
But Apple CEO Tim Cook explained away with phenomenon with two reasons: Last March Apple increased iPad channel inventory, while this year it reduced it; and last year ended with a “backlog” of the iPad mini whereas this year supply and demand were in balance.
But on the iPad front, as in so many others (such as Apple’s market in China, where the pace of Apple’s growth is slowing) Cook insisted he was positive.
In China, Apple established an “all-time quarterly revenue record of almost $10 billion; in Japan, revenue was up 26 percent; Apple set new record for iPhone sales in BRIC countries; it now has almost 800 million iTunes accounts; and its app store made 85 percent more global revenue than Google’s Play during the quarter.
“It is wonderful to add tens of millions of first-time Apple product users, especially considering the strong halo effect we’ve seen over and over again in our history,” Cook said during the call. “Customers who have a great experience with their first Apple products often become loyal and happy owners of multiple Apple products over time.”
What investors would like to see Apple do is add more new device categories—such as the smartwatch and connected televisions it’s rumored to be working on—to come under those halos.
But while Apple works (or doesn’t) on these new categories, or others, investors are growing restless. In January, BTIG analyst Walter Piecyk wrote in a research note that the firm had expected Apple to introduce a new product that would “generate $5 billion of revenue in fiscal 2014.” He added, “That new product never materialized. We can’t say we are not concerned.”
To appease investors, Apple announced during the call that it will split its stock 7-for-1 in June.
“We are increasing the size of our program once again with an addition of over $30 billion for a total program size of over $130 billion,” said Cook. “The size and pace of our program is unprecedented, and we still expect to complete it by December of 2015.”
Cook said that Apple thought “very deliberately” about how much and in which way to return cash to its shareholders, and decided to “continue to allocate the vast majority of the incremental capital return to share repurchases because we believe our current stock price does not reflect the full value of the company.”
Apple investor Carl Icahn, who has pressed Apple to increase its buyback program, Tweeted that he is “extremely pleased with the results.” Though he added, “Believe we’ll also be happy when we see new products.”
Cook, on the call, suggested that they’re coming soon.
In regard to the buyback and Apple’s need to maintain “financial flexibility” Cook said that Apple has acquired 24 companies in the last 18 months.
“We are expanding Apple’s products and services into new categories,” said Cook, “and we are not going to under invest in this business.”