Apple sales knocked the quarter 'out of the park'
Don't start planning that funeral for the iPhone. Not yet anyway.
Apple, the maker of the popular smartphone, reported strong sales for a quarter in which analysts had expected iPhone sales to hit a slump.
Despite fears of recent softness, Apple knocked the quarter "out of the park, with iPhone sales and gross margin upticking nicely," said Brian Marshall, an analyst with International Strategy & Investment Group.
The iPhone business is healthier "than we and the Street previously expected," said Gene Munster, an analyst with Piper Jaffray, in a note to investors.
Apple on Wednesday announced quarterly sales of $45.6 billion and net profit of $10.2 billion, beating analysts' projections of $43.5 billion in revenue. The company also upped its stock-buyback program, splitting the stock 7 for 1.
"We believe our current stock price does not reflect the size of the company," CEO Tim Cook said on a conference call with analysts. The buyback shows "our strong confidence in the future of Apple."
The stock split takes place in June. On June 2, each shareholder will get six additional shares for each share held, "to make stock more accessible to investors," says Cook. The split will take effect on June 9.
Shares jumped more than 7% to $566.07 in after-hours trading. In regular trading, shares fell $6.95 to close at $524.75
The results for the fiscal 2014 second quarter are slightly up from the year-ago quarter of $43.6 billion and net profit of $9.5 billion.
"We're very proud of our quarterly results, especially our strong iPhone sales and record revenue from services," said Cook. "We're eagerly looking forward to introducing more new products and services that only Apple could bring to market."
Apple said it sold 43.7 million iPhones, 16 million iPads and 4 million Apple Macintosh computers in the quarter.
The 43.7 million iPhones beat Wall Street estimates of 38.5 million, notes Munster.
The company has been under pressure to compete with splashy rivals like those from South Korea's Samsung. The last new iPhone went on sale in September and sports a 4-inch screen, considerably smaller than newer models such as Samsung's Galaxy S5, released this month, with a 5.1-inch screen.
Consumers know that Apple historically releases new iPhones and iPads in the fall, and they tend to hold back on purchases to wait for the new stuff. But they didn't stay away in the quarter, continuing to buy the new iPhone 5s and 5c phones introduced in September.
Meanwhile, Apple is also on the losing end of a battle with Google's Android platform for the hearts and minds of mobile consumers. While the iPhone remains a huge hit and cash cow for the company, Android phones are outselling it. According to researcher eMarketer, Apple's smartphone market share in the U.S. will rise to 40.5% in 2014, up from 40% in 2013, but Android will beat it at 50%, up from 49.5% in 2013.
Apple hasn't held a public event since last fall's launch of two new iPad models. In June it will stage its annual Worldwide Developer's Conference in San Francisco. The conference historically touts new updates to the iOS mobile operating system for iPhone and iPad, and the OS X operating system for Apple computers. However, the company could shift gears and release, or spotlight, new iPhones.
Michael Walkley, an analyst with Canaccord Genuity, believes larger iPhones "will create a stronger than normal upgrade cycle among Apple's loyal and growing customer base."
Meanwhile, on the earnings call, Cook revealed sales numbers for the $99 Apple TV streaming media box for the first time, saying some 20 million boxes have been sold to date, bringing in $1 billion in revenue for both box sales, and the movies and TV shows it sells from the box for viewing. Rival Roku has sold 8 million streaming boxes to date.
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