Apple Inc. took steps Wednesday to reassure its investors, reporting that it sold more iPhones than expected last quarter, increasing its payout to shareholders and announcing a split of its stock for the first time in nine years.
The world’s most valuable company posted fiscal second-quarter results that exceeded analysts’ estimates after making the iPhone available through China’s largest wireless carrier, China Mobile Ltd., earlier this year. IPhone sales were 43.7 million, topping analysts’ estimates of 37.7 million, the company said in a statement after the markets closed.
Apple said it will expand its shareholder payout program, increasing its repurchase authorization to $90 billion from $60 billion. The stock split will be seven-for one, and the company also increased its dividend. Apple said it plans to take on debt to pay for the added stock buyback and dividend plans.
The results and expanded capital program helped alleviate investor concern that Apple’s business is slowing and that the company isn’t doing enough with its cash,sending the stock soaring in extended trading. The actions also buy Chief Executive Officer Tim Cook time to reignite growth with new products that he has said are in development. The company is said to be readying bigger-screen iPhones; a watchlike, wearable device; and a new Apple TV set-top box.
“The possibility is out there that in the next several months, they will have a string of new devices so that by the time Christmas time comes around, they will be ready to sell them all,” said Giri Cherukuri, head trader at OakBrook Investments LLC, which has about $3.2 billion under management.
Shares rose as much as 8.5 percent in extended trading. The stock, which closed Wednesday at $524.75, is down 6.5 percent for the year and 25 percent from an all-time high in 2012.
The company reported second-quarter net income of $10.2 billion, or $11.62 a share, up 7 percent from $9.55 billion, or $10.09 a share, a year ago. Sales were $45.6 billion, up 4.7 percent from $43.6 billion a year earlier. Analysts had projected net income of $9.1 billion, or $10.17 a share, on sales of $43.5 billion.
Yet while iPhone sales were above expectations, iPad sales fell 16 percent, the steepest drop on record. As lower-cost tablets flood the market, the iPad isn’t the growth-driver for Apple that it once was.
Gross margins, a measure of Apple’s profitability, were 39.3 percent, up from 37.5 percent a year ago.
Cook said on a conference call that Apple’s current stock price doesn’t reflect the proper value of the company.
“Apple has created tremendous value for shareholders by creating great products that enrich people’s lives,” he said. “That will always be our top priority.”
Apple has been struggling with growth in recent quarters as the iPhone and iPad, which together account for about three-quarters of total revenue, face stiffer competition from rivals such as Samsung Electronics Co. and other lower-cost device-makers using Google Inc.’s Android operating system.
Meanwhile, the biggest locations of mobile-device growth are in emerging markets such as China, where inexpensive and bigger-screen models are popular. Many customers in the U.S. and Europe also already own an adequate smartphone or tablet, leading to less-frequent upgrades.
Apple said it will increase its quarterly dividend about 8 percent to $3.29 per share. With the stock split, Apple said, each investor on June 2 will receive six additional shares. The split adjusted shares will begin trading on June 9.
Information for this article was contributed byThe Associated Press.
Business, Pages 25 on 04/24/2014