Apple Sales Rise Slightly, Showing Resilience in Pandemic--2nd Update
April 30 2020 - 7:47PM
Dow Jones News
By Tripp Mickle
Apple Inc. reported a slight uptick in revenue for its latest
quarter even as the coronavirus shut down factories and dented
sales in China, as the tech giant's growing services business
offset declining iPhone sales.
The company said revenue rose 1% in its fiscal second quarter to
$58.3 billion, with iPhone sales momentum stalling after Apple
closed stores, first in China and then world-wide. Profit fell
about 3% to $11.25 billion, or $2.55 a share. Apple's stock fell
slightly in after-hours trading Thursday.
The results exceeded analysts' revised expectations for nearly
$55 billion in revenue but fell short of the company's pre-pandemic
projections for more than $63 billion for the three months ended
March 28.
In the face of historic economic uncertainty, Apple declined to
project sales for its current quarter for the first time since it
began providing concrete revenue guidance in late 2003. The
omission means Apple can avoid having to revise its sales
projections in the coming months -- something it did twice in the
past two years because of unexpected economic downturns in
China.
"Apple is one of very few companies that can survive Armageddon
because their balance sheet is in better shape than Uncle Sam,"
said Mike Frazier, president of Bedell Frazier Investment
Counselling, a Walnut Creek, Calif.-based firm with about $500
million under management.
The results highlight the strengths of big technology companies
even during an economic crisis that has rocked markets around the
world and severely tested businesses. Facebook Inc. and Microsoft
Corp. on Wednesday reported higher revenue and signaled more gains
in the current period as homebound social-media usage swells and
cloud-computing grows. Google parent Alphabet Inc. last week posted
revenue gains but provided a sober outlook, saying it experienced a
sudden slowdown in ad sales in late March.
Apple's services and wearables business proved to be the
difference maker for the company in the March period, underscoring
the value of its strategic shift from selling more devices to
selling more services and accessories across those devices. Those
businesses, which include App Store sales and AirPods wireless
earbuds, surged 18% to $19.63 billion. Meanwhile, sales of the
company's legacy products -- the iPhone, iPad and Mac -- fell
nearly 7% to $38.68 billion.
"Amid our most challenging global environment in which we've
ever operated our business, we're proud to say that Apple grew,"
Chief Executive Tim Cook said Thursday. He said the results speak
to Apple's "durability as a business and the enduring importance of
our products in our customers' lives."
Apple said it would add $50 billion to its share-buyback
program, a decrease from last year's addition of $75 billion but
still a sign of its commitment to return capital even as buybacks
have become controversial in the U.S. Its board also approved a 6%
increase in its quarterly dividend to 82 cents a share, building on
last year's 5% increase.
Executives suggested the April-to-June quarter would present
more of a mixed picture, an indication of the uncertainty that even
the strongest companies are facing. Customers appear to be spending
more on some Apple devices so far this month compared with a year
ago, Mr. Cook said. But wearables and iPhone revenue are set to
slow from the previous quarter, according to Chief Financial
Officer Luca Maestri.
For companies with significant operations in China, Apple's
results indicate the impact from the economic downturn there may
not be as bad as feared. The company's sales fell 7.5% to $9.46
billion across its Greater China region, which includes Hong Kong
and Taiwan. Apple, which relies on China for nearly a fifth of
total revenue and for almost all of its manufacturing production,
was highly exposed to the pandemic's effect on the country, the
first to lock down its economy to curtail the outbreak.
Still, Apple's dependency on China to make almost all of the
iPhones it sells world-wide proved a challenge as February factory
closures disrupted production. The stoppage delayed the release of
the iPhone SE by a month, according to analysts, pushing sales of
the smartphone out of the March quarter when it was expected to
lift revenue. A two- to three-week shutdown of factories also
slowed shipments and sales of iPhones outside China, according to
analysts.
The Wall Street Journal reported Monday that Apple is pushing
production of this year's flagship iPhones back by a month, which
could delay sales of those devices from September until October or
later. It also is cutting production volume for the four new models
by about 20% as the coronavirus weakens consumer demand.
The company this month added the $399 iPhone SE to its lineup,
its lowest-priced model since 2018 when it discontinued a previous
low-end model bearing the same name. The phone, which had been in
development long before the pandemic, now offers iPhone owners a
more affordable upgrade option at a time when many are being
pinched by economic troubles.
Mr. Cook said that Apple's operations team and suppliers have
returned to work and production reached traditional levels by the
end of March.
"This may not have been the quarter it could have been absent
this pandemic, but I don't think I can recall a quarter when I've
been prouder of what we do or how we did it," Mr. Cook said. He
said that overall demand for Apple products remained strong in
February as China shut down, but then deteriorated as European
countries and the U.S. locked down their markets.
"Over the long term, though, we have a high degree of confidence
in our enduring business," Mr. Cook said. In April, he said there
was an uptick in demand as Apple released new products, governments
made stimulus payments and customers bought new devices to support
remote work.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
April 30, 2020 19:32 ET (23:32 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Sep 2023 to Sep 2024