By Daisuke Wakabayashi
Apple Inc. reported a 7% increase in quarterly profit, amid
intensifying competition for mobile devices, and announced
increases to its stock buyback and dividend programs.
Chief Executive Tim Cook said the company chose to expand its
stock-buyback program by $30 billion because it views the company's
shares as undervalued.
"That should show you how much confidence we have in the future
of the company," Mr. Cook said in an interview with The Wall Street
Journal.
Apple raised its share repurchase authorization to $90 billion
from the $60 billion level announced last year. The company also
lifted its quarterly dividend by about 8% and said it would split
its stock 7-for-1 in June.
Following the news, Apple shares jumped more than 7% in
after-hours trading. Investor Carl Icahn, who has been pushing the
company to share more of its cash holdings with shareholders,
tweeted that he was "extremely pleased."
In all, the company is boosting the size of its capital return
program to more than $130 billion by the end of 2015, up from its
previous $100 billion plan.
After more than a decade of remarkable earnings growth, the
Cupertino, Calif., technology giant's revenue and profit are
flattening and the company is fighting the perception that its best
days are behind it. It has promised to expand its product lineup
and drive growth as it did with the iPhone and iPad.
Mr. Cook's remarks came as Apple release first-quarter financial
results that exceeded analysts' expectation. Mr. Cook pointed to
the iPhone as an area of strength for the company.
Apple said it sold 43.7 million iPhone units in the three months
ended March 29, far surpassing analysts' expectations for sales of
38.2 million units. He said the company saw strength across its
entire lineup of phone models including the less-expensive 5C and
that it was bolstered by strength across many markets, including
China, Vietnam and Poland.
Overall, for the second quarter, Apple's net income rose to
$10.22 billion from $9.55 billion in the year-ago period. However,
Apple's per-share earnings jumped to $11.62 from $10.09 because the
company's stock repurchase program decreased the pool of total
shares.
Revenue rose to $45.6 billion from $43.60 billion in the same
period a year earlier.
Analysts, on average, estimated that Apple would post earnings
of $10.18 per share on revenue of $43.53 billion, according to
Thomson Reuters.
The iPhone remains Apple's most important product. It is the
largest contributor to revenue and is its most profitable hardware
product. However, the iPhone is steadily losing market share to
smartphones running on Google Inc.'s Android operating system.
In recent years, as rivals rolled out larger-screen displays and
lower-price offerings, Apple has held the line on iPhone prices
while keeping the screen size relatively small compared with the
competition. The Journal has reported that Apple is working on a
larger-screen iPhone for release later this year.
The growing competition for smartphones is also hurting Apple's
main rival, Samsung Electronics Co. When the company reports
earnings next week, Samsung is expected to report a second straight
year-over-year decline in quarterly operating profit as demand for
its Galaxy smartphones has started to slow.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
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