Apple back on track

Published July 27th, 2016 - 08:00 GMT
The technology giant reported better-than-expected iPhone sales in the third quarter. (File photo)
The technology giant reported better-than-expected iPhone sales in the third quarter. (File photo)

After a rough fiscal second quarter, Apple gained some ground in its fight to regain lost glory.

The technology giant reported better-than-expected iPhone sales in the third quarter, and had even more good news that its revenue for the current quarter would surpass analysts' views.

The positive tone from the Cupertino, California-headquartered company somewhat eased fears that demand for its flagship device had hit a snag. Shares were up around seven per cent in after-hours trading - a far cry from what happened as a result from its debacle in the previous quarter and reflecting the optimism seemingly shared by investors.

The results - released during a live conference call at 12:30am Dubai time on Wednesday - for the period ended June 25 "reflect stronger customer demand and business performance than we anticipated at the start of the quarter", CEO Tim Cook said in a Press release.

Revenue for the quarter was at $42.4 billion, while net income was at $7.8 billion. The former was down 16 per cent from the second quarter's $50.56 billion.

Sales of the iPhone were at 40.4 million, slightly besting the industry prediction of around 40 million, but down 21 per cent from the previous quarter. Revenue was at $24.05 billion, a 27 per cent decline.

Both revenue and iPhone sales suffered back-to-back declines in the last two quarters.
Unit sales of the iPad edged down three per cent to 9.95 million in the quarter from the previous' 10.25 million. Revenue, however, was up at $4.88 billion from $4.4 billion.

Macs were more positive, with sales at 4.25 million and revenue at $5.24 billion, both up five per cent and three per cent, respectively, from the second quarter's 4.03 million and $5.11 billion.

Services - which include Internet services, AppleCare, Apple Pay, licensing and others - were almost flat with a revenue of $5.98 billion. However, on a year-on-year basis, it was up 19 per cent, thanks to the App Store hitting an all-time high.

Revenue from other products - which include sales of Apple TV, Apple Watch, Beats products, iPod, and Apple-branded and third-party accessories - barely nudged up one per cent, from $2.19 billion to $2.23 billion.

All regions - the Americas, Europe, Greater China, Japan and the rest of the Asia-Pacific - suffered revenue drops of six per cent, 16 per cent, 29 per cent, 18 per cent and 25 per cent, respectively. On a year-on-year basis, however, Japan stood out, posting the only growth with 23 per cent.

For the current fourth quarter, Apple forecast revenue of between $45.5 billion and $47.5 billion. This will most likely be above analysts' previous estimates, but with good reason: results for the period, which is due to come out in October, will include a slice of the numbers from the highly-anticipated new iPhone in September. Cook, though, during the question-and-answer portion of the call, remained tight-lipped on what is to be expected from the new iteration of the device.

Apple chief financial officer Luca Maestri said that over $13 billion has been returned to its investors through share repurchases and dividends, and that almost $177 billion of the company's $250 billion capital return programme has been completed.

Apple's board of directors declared a cash dividend of $0.57 per share of the company's common stock, payable on August 11. 

Confident

Cook - who remained defiant during the second quarter call in April amid disappointing results at the time - beamed confidence on the prospects of Apple in the future.
He lauded the launch of the lower-end iPhone SE, which he termed as "very successful".

The CEO was also "thrilled by customers' and developers' response to the software and services previewed at the Worldwide Developers Conference in June".

Cook further added that demand for the iPhone SE outstripped supply, and it helped attract more new users from both emerging and developed markets.

He also touted the Apple Watch as the "best-selling smart watch" in the world, though - once again - the company did not provide any figures. The International Data Corporation, in a July 21 report, said that Apple Watch sales declined 55 per cent year-over-year, though it still lorded over the field with a 47 per cent market share in the second quarter of 2016. Apple's top rivals in the segment - Samsung, Lenovo, LG and Garmin - all posted positive growth, but were all way behind in market share.

Cook also reiterated the new products unveiled by Apple at the WWDC, believing that these will boost the company. Among these are macOS Sierra - replacing the OS X brand on its computers - which will integrate Siri into it, as well as iOS 10.

On investments, Cook said that Apple continues to hunt for opportunities that will help the company expand its business. He mentioned the company's $1 billion splurge for Chinese Uber rival Didi Chuxing in May; though he called this investment "unusual", the CEO said that the move will help them learn more about the huge Chinese market.

Further on China, while Apple had shut down a number of its services there such as Movies and Books, Cook said that the company is ironing out things with the country's government agencies.

And even the Apple results conference was not spared by the Pokemon GO craze. Cook said it is paying attention to augmented reality; though he would not want it to be called a new computing platform, he acknowledges that it has the potential to be a huge market.

"It's a statement to what happens with an innovative app," Cook said on the AR-powered Pokemon GO.

On tvOS, the CEO said that the updates on the platform are laying the groundwork for potentially more things to come. He did not elaborate.

By Alvin R. Cabral


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