Apple’s S$57.3b revenue beats expectations but pressure mounts

SAN FRANCISCO — Apple’s remarkable growth streak — now more than a decade old — is starting to show its age and pressure is growing on the iPhone-maker to introduce the next big thing as the market for existing products gets closer to saturation.

The company reported on Wednesday that revenue for its fiscal second quarter climbed 5 per cent from the corresponding period a year earlier to US$45.6 billion (S$57.3 billion), boosted by iPhone sales after its recent partnership with China Mobile, the biggest phone carrier in the world.

The company’s earnings for the three months ended March were up about 7 per cent to US$10.2 billion for the period, an amount that exceeds what most technology companies make in an entire year.

Analysts had expected revenue of US$43.5 billion and a net profit of US$10.2 billion, a Thomson Reuters survey showed. Although the turnover beat expectations, the firm’s rate of profit and revenue growth has slowed considerably, putting pressure on chief executive Timothy Cook to release products in new categories such as a smartwatch or an Apple television.

At its earnings release, Apple resorted to other means to assuage investors’ concerns about the pace of growth. The company said it would buy back US$30 billion of its stock in addition to the US$60 billion it had announced last year.

It also raised its quarterly dividend by 8 per cent and said it would split its stock, exchanging seven shares for one on June 2. The stock split should go down well with individual investors who want a piece of a household name but cannot afford to fork out over US$500 a share. It would also increase the likelihood that Apple will be added to the benchmark Dow Jones Industrial Average index.

Investors cheered the news and Apple shares soared almost 8 per cent to US$566.50 each in after-hours trade, the highest since December and boosting its market value by US$35 billion to about US$505 billion.

Apple sold 43.7 million iPhones in the quarter, up from 37.4 million in the same period last year, boosted by sales in China, the world’s second-largest economy. However, smartphone sales are slowing down industry-wide, notably in China, which poses a potential problem for Apple. Smartphone sales there are expected to grow only 20 per cent this year, compared with growth of 60 per cent last year, said research firm IDC, as many people with stable incomes have already bought the devices.

Meanwhile, sales of iPads in the quarter, at 16.35 million, were down from 19.5 million last year, despite a major redesign for one of the iPads introduced in the autumn. Sales are slowing down much faster than expected, a decline that Apple attributed to supply changes.

Apple’s competitors, such as Amazon and Samsung Electronics, offer much cheaper tablets, which may also be stifling the growth of iPad sales. Many cheap tablets that cost half as much as an iPad, such as Amazon’s Kindle Fire, have improved in quality, said Mr Tero Kuittinen, managing director at Frank N Magid Associates, a strategic consulting firm. AGENCIES