For Apple, a couple of unusual financial terms came into the conversation during the company’s Q2 2013 quarterly earnings call on April 23: “earnings decline” and “debt market.”
Amid what amounts to a free fall in its stock price since last September, the world’s No. 2 total revenue producer (after Exxon) reported its first decline in year-over-year quarterly earnings in a decade, showing profit slipping 18 percent to $9.5 billion. Wall Street analysts knew what was going to happen and had projected a drop of 19 percent.
Overall, Apple brought in $43.6 billion in sales, a record second-quarter amount for the company. Revenue was up 11 percent from $39.2 billion a year ago.
The revenue total was sparked by the sales of 37.4 million iPhones—up 7 percent year over year—and 19.5 million iPads, up 65 percent year over year.
Stock Price Keeps Slipping
The stock price closed at $406 on April 23. It had reached a high of $702.10 on Sept. 19, 2012; the price has dropped 42 percent in seven months.
In stating Apple’s financial outlook for its Q3 ending in June, Chief Financial Officer Peter Oppenheimer said the company sees revenue ranging from $33.5 billion to $35.5 billion, with gross margins expected to be 36 percent to 37 percent.
Oppenheimer also said that Apple believes “incorporating debt into our capital structure will provide benefits.”
Apple, in continuing to fuel speculation that company eventually wants to go private, announced an aggressive plan that more than doubles the size of the capital-returns program to a total of $100 billion by the end of calendar year 2015. This will mostly be in the form of share repurchases, CEO Tim Cook said.
Share Buyback Program Approved to $100 Billion
Cook explained that the company’s board of directors has authorized a share-buyback program increase of up to $60 billion.
“This is the largest share buyback authorization of any company in history,” Cook said. “We are very confident in Apple’s future and believe strongly in this program. To facilitate our program, we will access the debt markets.”
In answering a question during the conference call about his take on the Mac-versus-PC market, in which Apple outsold competitors by only a slim margin, Cook was candid.
“I think the reason we were down last quarter (down 2 percent in the personal computer sector) was that the market for PCs is incredibly weak,” Cook said. “In the meantime, we sold almost 20 million iPads, and it’s certainly true that some of those iPads cannibalized some Macs, but I personally don’t think it was a huge number.
“Probably the larger thing, at least for the PC side, is that people are extending their upgrade cycles. That said, I don’t think this market is a dead market or a bad market by any means. I think it has a lot of life to it. We’re going to continue to innovate in it. We believe that the huge growth in tablets may end up benefiting the Mac,” Cook said.
Cook said in his prepared remarks that “our teams are hard at work at some amazing new hardware, software and services that we can’t wait to introduce this fall and throughout 2014.
“Apple has many distinct and unique advantages as the only company in the industry with skills in hardware and software services. We’ve got a lot more surprises in the works,” Cook said.