Apple Results Surprise With Strong iPhone Sales

Apple on Wednesday surprised financial analysts with strong iPhone sales, at 43.7 million units, driven by growth in China.

The company reported first-quarter profits of $10.2bn (£6.1bn), on revenue of $45.6 billion, compared to analyst expectations of $43.5bn, and announced a programme of measures to please analysts, including its first stock split in nine years, an 8 percent dividend increase and a $30bn share buyback programme.

Growth questions

As the market for smartphones and tablets matures, four years on from the iPad’s launch, Apple increasingly faces questions over its ability to deliver new products that redefine their categories. The financial programmes are a way of keeping investors content while they wait to see what the company’s next moves might be.

“We didn’t ship the first MP3 player, nor the first smartphone, nor the first tablet,” Apple chief executive Tim Cook told investors. “It means much more to us to get it right than to be first.”

Cook affirmed that Apple’s focus remains on making game-changing products: “The thing that drives us are the next iPads, if you will, the things in the pipeline,” he said.

Apple has been tipped to introduce a larger iPhone “phablet”, and there have also been reports of a health-oriented “iWatch” or a redesigned Apple TV.

Shares rose more than 7 percent in after-hours trading as investors welcomed the seven-for-one stock split, which will take effect in June. Apple’s previous stock splits, in 1987, 2000 and 2005, have been on a much smaller scale.

Cash plans

The company said it will expand its spending on dividends and share buybacks by one-third to $130bn. Activist investors such as Carl Icahn have pressed the company to take such measures, partly to make use of its cash hoard of more than $140bn. Apple also said it will increase its dividend annually and revisit its cash plans in the first quarter of every year going forward.

Investors had been expecting a sharper decline in post-Christmas sales, but iPhone sales, while down 14 percent from the previous quarter, were up 17 percent on the same period a year earlier. The iPhone contributes more than half of Apple’s revenues. Apple said this was its strongest non-Christmas quarter to date.

iPad sales underperformed, falling 16 percent quarter-on-quarter, its steepest decline so far. Cook noted, however, that the iPad is Apple’s fastest-selling product in its history, shifting more than 210 million units since 2010.

The company also said it has acquired 24 companies in the past 18 months to expand its research and development activities.

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