* Greater China iPhone sales jump five-fold
* Shares rally 7 pct after 2-week slide
* Net income almost doubles from a year earlier
* Revenue 6.5 percent higher than average forecast
* Sales of iPad undershoot expectations
(Recasts, adds details)
By Poornima Gupta
SAN FRANCISCO, April 24 (Reuters) – Apple Inc’s
quarterly profit almost doubled, blowing past Wall Street
estimates after a jump in iPhone sales, particularly in the
greater China region, and soothing fears that the iPhone was
past its best days for sharp growth.
Shares in Apple, the world’s most valuable technology
company, shot 7 percent higher after the bell, recouping some
losses from the past two weeks that had stemmed from concerns
that iPhone sales growth rates could not be maintained.
While iPad sales were a little lighter than expected, fiscal
second-quarter revenue jumped to $39.2 billion, 59 percent more
than a year earlier and 6.5 percent higher than analysts’
average forecasts.
Lower-than-expected commodity costs also helped lift margins
way above estimates.
“That shows they are able to maintain their pricing without
compromising on growth,” said Morningstar analyst Michael Holt.
Holt added that this had come even though lower priced
competition from Google Inc’s Android phones – made by
the likes of Motorola Mobility and Samsung Electronics
were becoming more compelling.
“The concern was that Apple might sell more older models to
be more competitive. That would have shown up in the gross
margin. But aggregate gross margin and average revenue per
device show that this hasn’t happened,” he said.
Apple sold 35.1 million iPhones – which account for about
half its revenue – in the quarter, outpacing the 30 million or
so expected by Wall Street analysts, with pent-up demand for the
4S bolstering revenue for China, Taiwan and Hong Kong five-fold
to $7.9 billion.
“International iPhone sales were on fire,” Apple Chief
Financial Officer Peter Oppenheimer told Reuters in an
interview.
But sales of the iPad, the latest version of which hit store
shelves in mid-March, came in at 11.8 million iPads, below an
average forecast of up to 13 million.
“There’s no doubt looking in the last quarter and the
Christmas season, Apple has executed very well. But you are
starting to see the iPad … reach some sort of saturation with
the current product,” said Patrick Becker, a principal at Becker
Capital Management, which does not own Apple shares.
Net income rose to $11.6 billion, or $12.30 a share, from $6
billion, or $6.40 per share, a year earlier. That also outpaced
Wall Street’s target of $10.04 a share, according to Thomson
Reuters I/B/E/S.
Gross margins in the fiscal second quarter climbed to 47.4
percent from 41.4 percent a year earlier, surpassing Wall
Street’s average forecast of 42.8 percent.
The results came after a 13 percent decline in its shares –
long considered a must-have in most U.S. equity portfolios –
over the past couple of weeks in unusually volatile trading, as
investors fretted over potential competitive and pricing
pressures.
Responding to concerns that wireless carriers may reduce
subsidies for the iPhone, thereby lowering Apple’s profit
margin, Chief Executive Tim Cook said the subsidies aren’t large
when compared with what carriers can recoup from consumers over
a 24-month contract period.
So-called churn, or the rate that customers switch from the
iPhone to other models, is the lowest of any phone they sell,
which has a “significant, direct financial benefit to the
carrier,” Cook added.
As for patent litigation battles with rivals, Cook said he
preferred to settle if Apple could get a fair settlement. The
company is fighting court battles with several Android phone
makers, including Samsung, HTC Corp and Motorola in
the United States and other countries.
The company, which has said it will finally begin sharing
its record cash hoard with investors via a quarterly dividend,
added that $74 billion of its $110 billion in cash and
securities was now parked outside of the United States as of
March 31.
Apple’s stock gained to $601 from a close of $560.28 on
Nasdaq but is still far below an intraday high of $644 reached
this month.
“When you have a strong rally in a stock it often sells off
for no better reason than uncertainty. I think you’re going to
see the naysayers go away,” said Michael Yoshikami, chief
executive of Destination Wealth Management.
(Additional reporting by Liana Baker, Noel Randewich and
Alistair Barr; Editing by Edwin Chan, Richard Chang and Edwina
Gibbs)
