Apple has found a big investor that still has faith in its future: itself. On Tuesday, the technology giant announced that it planned to more than double its programme to return cash to shareholders through stock buybacks and a higher dividend, spending $100 billion on the effort through the end of 2015. Its share repurchases alone will increase to $60 billion from the $10 billion it committed previously, the largest such plan in history, the company said.
The move to renew investors’ love affair with Apple’s stock came as the company announced its first profit decline in a decade. Apple said its net income fell 18% in its fiscal second quarter, as one of the most successful technology franchises in recent years, the iPhone, showed signs of slowing and other, less profitable products began to make up more of its sales.
The rarity of Apple’s profit decline, which was expected, underscores how one of the most remarkable winning streaks in business has come to an end, at least for now. Investors have battered the company’s stock for months, sending its shares down from their peak of more than $700 last year as warning signs began to emerge about its growth prospects.
In regular trading on Tuesday, Apple shares rose nearly 2% to close at $406, but they fell slightly in after-hours trading as investors digested the quarterly earnings news and Apple’s plan to return cash to shareholders. One thing that spooked investors is that Apple told them to expect little to no sales growth in this quarter.
One of the biggest questions facing Apple is whether it can innovate its way out of its funk by delivering a breakthrough new product, perhaps in a category like television, which rekindles growth and investors’ passion.
Timothy D Cook, the company’s chief executive, said in a conference call with analysts that the decline in the stock price has been “very frustrating to all of us”, but that Apple remains strong. “Our teams are hard at work on some amazing new hardware, software and services that we can’t wait to introduce this fall and throughout 2014,” Cook said. He even dropped a hint about “exciting new product categories” that Apple could enter, suggesting the company is preparing a move into a new market.
For its fiscal second quarter, which ended March 30, the company said that its net income dropped 18% to $9.55 billion, or $10.09 a share, from $11.62 billion, or $12.30 a share, during the same period a year earlier. Revenue rose 11% to $43.6 billion from $39.19 billion.
Sales of iPhones, the company’s biggest business, grew only 3% to $22.96 billion in the second quarter. The company has warned that new products like the iPad Mini have lower profit margins than older items like its full-size iPad sibling. It is also selling more of its older model smartphones, like the iPhone4, which have lower margins. Apple is widely thought to be preparing a new low-cost version of the iPhone to compete more aggressively with smartphones based on Google’s Android operating system. A cheaper device could hold special appeal in huge markets like India and China where average incomes are far lower than in the West.
The company said on Tuesday that its board had approved a 15% increase in its quarterly dividend. It declared a dividend of $3.05 a common share.
Source-Times of india