By Daisuke Wakabayashi
Apple Inc. continued to defy the problems gripping the rest of
the smartphone market, posting a 33% increase in quarterly profit
on the back of surging iPhone sales and explosive growth in
China.
The Cupertino, Calif., technology giant is riding momentum from
release of its latest iPhones last September. The larger-display
phones are helping Apple defy the pricing pressure plaguing other
smartphone makers, including prime rival Samsung Electronics Co.,
and regain market share.
On the heels of the most profitable quarter in the history of
corporate earnings, Apple delivered another round of strong
results.
Net income totaled $13.57 billion in its fiscal second quarter
ended March 28, versus $10.22 billion in the year-ago period.
Earnings per share rose more sharply, to $2.33, from a
split-adjusted $1.66, because the company's stock-repurchase
program reduced the share count.
Revenue rose 27% to $58.01 billion from $45.65 billion in the
year-ago period.
Analysts polled by Thomson Reuters estimated that Apple would
post earnings of $2.16 a share on revenue of $56.1 billion.
Apple also reported gross margin, a closely watched measure of
profitability reflecting the percentage of revenue that remains
after manufacturing costs, of 40.8%, above its estimated range of
38.5% to 39.5%.
For the current quarter, Apple again said it expects a gross
margin of 38.5% to 39.5%. It projected revenue of $46 billion to
$48 billion, in line with analysts' estimates for that period.
Apple also boosted its dividend 11% and its share-repurchase
program by $50 billion, to $140 billion. In all, Apple pledged to
return $200 billion to shareholders through buybacks and dividends
by March 2017. It had previously promised to return $130 billion by
the end of 2015.
Despite the share repurchases, Apple's cash grew to $193.5
billion from $178 billion at the end of December.
Apple said it sold 61.17 million iPhones in the three months
ended March, up 40% from the year-earlier period. That is ahead of
a forecast of 56.8 million units by analysts polled by Fortune
Magazine. It is shy of the record 74.5 million units that Apple
sold in the December quarter, which historically is the
best-selling period for iPhones.
Apple is pulling off a feat rarely seen in any industry, much
less the cutthroat world of consumer electronics: gaining market
share while also raising prices. For its latest iPhones, Apple
raised the base price of its high-end handset, the iPhone 6 Plus,
by $100 to $749 without a two-year contract.
Research firm Gartner said Apple passed Samsung in the fourth
quarter to be the top-selling smartphone manufacturer by sales.
Gartner said Apple captured 20.4% of the global market versus
Samsung's 19.9%. By comparison, in the fourth quarter of 2013,
Samsung captured 30% of the market versus 18% for Apple.
Apple is doing particularly well in China, where its expensive
products compete with low-cost local brands such as Xiaomi Inc.
Revenue in Apple's greater China region, which includes Hong Kong
and Taiwan, soared 71%, surpassing Europe for the first time to be
Apple's second-largest market.
The iPhone has overshadowed the other parts of Apple's business.
The iPad continues to slump in the face of larger-screen
smartphones and ever-lighter laptop computers. On the other hand,
the Mac remains a bright spot, steadily gaining market share
against its PC competitors.
Apple's latest hardware product, Apple Watch, started shipping
on Friday. So far, availability is limited for the new device with
Apple's website estimating that new orders won't be delivered until
June. Nonetheless, the Apple Watch isn't expected to deliver a
major earnings impact for the company in the near future.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
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