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Apple Allays Fears, Reports Blowout Quarterly Results

Tuesday, 24 April 2012 04:46 PM

Apple Inc. profit rose almost doubled last quarter, reflecting robust demand for the iPhone in China as well as purchases of a new version of the iPad tablet, allaying the concerns that had fueled a 12 percent, two-week slump in the stock.

Net income in the fiscal second quarter climbed to $11.6 billion, or $12.30 a share, as revenue increased 59 percent to $39.2 billion, Cupertino, California-based Apple said in a statement after regular stock-market trading ended Tuesday. Analysts had predicted profit of $10.02 a share on revenue of $36.9 billion, data compiled by Bloomberg show.

Chief Executive Officer Tim Cook is increasingly relying on regions outside the U.S. for sales growth. Apple sold 35.1 million iPhones in the period after releasing the latest model in China and 21 other countries in January. That helped make up for sales declines from the previous quarter at the top U.S. mobile-phone carriers, Verizon Wireless and AT&T Inc. It also quelled speculation that Apple’s growth pace may slacken.

“China has been a very fast-growing region for them,” said Abhey Lamba, an analyst at Mizuho Securities USA Inc. in New York. “There’s more disposable income, strong demand for high-end products and their penetration has been very low in that market. They have been highlighting that region as one of their focus areas.”

Apple shares rose in extended trading, after having dipped 2 percent to $560.28 at the close in New York. The company’s shares slumped $75.95 since a record close of $636.23 on April 9. The company sold 11.8 million iPads last quarter. Analysts had predicted Apple would sell 31.2 million iPhones and 11.9 million iPads, according to the average of estimates compiled by Bloomberg.

 Stock Decline

Apple’s stock came under pressure this month after reports indicated a possible shortage in key components for its mobile devices and showed a decline in iPhone sales at wireless carriers. Some traders also took cues from so-called technical indicators that rely on historical trends to predict stock movements.

Apple dipped below its 50-day average yesterday for the first time since December. A weekly close below that level may signal a decline of as much as 19 percent from its record high is under way, according to UBS AG.

In looking ahead to results for the current quarter, Apple forecast revenue of about $34 billion and profit of $8.68 a share. That compares with the average analysts’ predictions for sales of $37.5 billion and profit of $9.96 a share.

IPad’s ‘Great Start’

Analysts including Chris Whitmore of Deutsche Bank AG have predicted that Apple’s sales growth may slow ahead of the release of the next-generation iPhone, likely to come later in the year. “The new iPad is off to a great start, and across the year you’re going to see a lot more of the kind of innovation that only Apple can deliver,” Cook, who took over for late co- founder Steve Jobs last year, said in a statement.

Apple sold 4 million Mac computers and 7.7 million iPods, compared with 4.5 million Macs and 7 million iPods projected by analysts in a Bloomberg survey.

Gross margin, the percentage of sales remaining after deducting costs of production, was 47.4 percent, compared with 41.4 percent in the same period last year.

China, where Apple’s products are manufactured, has become a centerpiece of Apple’s sales growth since the introduction of the iPhone there in 2009. The company generated $13 billion in sales in China last year, Cook said earlier this year. Apple’s sales in the broader Asia-Pacific region grew to $22.6 billion last year, accounting for 21 percent of the total, from $3.18 billion in 2009.

China Gains

“They are just getting started in China,” said Peter Karazeris, an analyst at Thrivent Financial for Lutherans, which owns Apple shares. The company will get a lift when the iPhone is available on China Mobile, the country’s biggest carrier, with more than 600 million subscribers.

Cook visited China last month, meeting with government officials and visiting assembly plants where the company’s products are built. The visit came just as a labor group said workers at those facilities, which are operated by Foxconn Technology Group, were violating local laws for excessive work hours. Cook has vowed to improve conditions at the facilities.

In China and elsewhere around the world, Apple is in the midst of a growing rivalry with Samsung Electronics Co., Asia’s largest consumer-electronics maker. While Samsung is a supplier of components for Apple devices, the company also is a leading maker of the most popular products that run Google Inc.’s Android software. These include the Galaxy lineup of smartphones and tablets. The two companies also are entangled in patent litigation in the U.S., Europe and Asia.

Earlier this month, Samsung reported profit rose to a quarterly record of 5.8 trillion won ($5.1 billion).

Apple and Samsung’s results contrast with those of Research In Motion Ltd. and Nokia Oyj, which have cut jobs and reorganized operations after falling behind in smartphone sales.

Apple’s growth also is bringing more government scrutiny. The U.S. Justice Department is suing Apple for allegedly colluding with book publishers to raise the price of e-books. Apple has denied wrongdoing.

© Copyright 2018 Bloomberg News. All rights reserved.

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Tuesday, 24 April 2012 04:46 PM
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