AAPL Apple Inc

By Tripp Mickle 

Apple Inc. reported another quarterly decline in profit and revenue, its first back-to-back dip in those key metrics in more than two years, as the tech titan continued to battle weak iPhone sales broadly and in particular a slowdown in China.

Still, the company's results exceeded analysts' expectations, which had been lowered in the wake of the sharp slump in the previous quarter. Apple on Tuesday said profit for the three months through March 30 tumbled 16% to $11.56 billion, while revenue slid 5% to $58.02 billion.

Apple's core iPhone business, which accounts for about two-thirds of total sales, has been hobbled by smartphone owners holding onto devices longer and by competition in China where local competitors offer lower-priced, feature-rich handsets. Its iPhone sales fell 17% in the quarter to about $31 billion.

Apple blunted the damage from its iPhone business by extending the robust growth of services like app sales and streaming-music subscriptions, which collectively jumped 16%. It also said it would increase the size of its share buyback program by $75 billion.

The report on Tuesday capped off a mixed bag of results from tech giants, including a major stumble by Google's parent company Alphabet Inc. that caused its stock to plunge nearly 8% on Tuesday. The digital-advertising giant and e-commerce giant Amazon.com Inc. both over the past week reported their slowest revenue growth in four years as their core businesses showed signs of maturity.

The iPhone's woes threaten to define one of the worst years in Chief Executive Tim Cook's tenure. In January, Apple reported its first decline in revenue and profit for a holiday quarter. It last experienced back-to-back quarterly declines in 2016 -- a year when the iPhone 6s struggled with weak demand because it offered limited improvements over preceding models much like this year's iPhone XS and XR.

Mr. Cook has combated that adversity with a new strategy: expanding Apple's services business and increasing the price of its gadgets. In March, it announced new subscription services for original TV shows, videogames and magazines, as well as a credit card.

"What we liked was during the last few weeks of the quarter we had our best performance, across the company and in China as well," Luca Maestri, Apple's finance chief, said in an interview. "We are coming into the June quarter with a good level of confidence." Aligned with that, the company said it expects revenue in the current quarter of between $52.5 billion and $54.5 billion, above consensus expectations.

Investors have largely shrugged off the iPhone troubles and focused on the potential Apple has to generate billions of dollars in new revenue by pushing subscription offerings across the more than 900 million iPhones world-wide. They also were encouraged the company struck a multiyear agreement in April with Qualcomm Inc. for smartphone modem chips that should allow Apple to deliver an iPhone in 2020 with speedier, 5G wireless technology.

Shares of Apple rose more than 4% after-hours, after falling in regular trading. Through Tuesday's close, Apple's stock was up about 27% this year, recouping most of the losses it racked up in the final two months of last year.

"They have reset expectations," said Mike Bailey, research director at FBB Capital Partners LLC, which has $1.1 billion under management and counts Apple among its top-10 holdings. "The next catalyst Apple needs to get sales growing are features like 5G. That factor went from negative to positive in the quarter because of the resolution with Qualcomm."

Apple's $75 billion share-repurchase plan is down slightly from last year's $100 billion commitment, which was the largest ever announced by a U.S. company, according to data from research firm Birinyi Associates. The company has bought back $71.6 billion since it announcing that prior commitment, bringing total repurchases to nearly $275 billion since 2012. Apple didn't give a timetable for when it will fulfill the new commitment.

The company also said its board approved a 5% increase in its quarterly dividend to 77 cents per share, building on last year's 16% increase.

Apple has committed to eliminate the $113 billion gap between cash and debt it had in late December -- a promise made after the U.S. tax overhaul allowed it to return most of its then $269 billion in overseas cash at a lower tax rate.

"It will take several quarters, but that objective has not changed," said Mr. Maestri, noting that the difference between cash and debt on hand was nearly $150 billion a year ago.

Apple continues to struggle with broader economic challenges in China, where the country's slow growth has hurt companies like 3M Co. and Intel Corp. The iPhone maker's sales from Greater China, which includes Hong Kong and Taiwan, fell 22% in the period to $10.22 billion, an improvement from the prior period.

Apple recently reduced iPhone prices in China to make its signature device more competitive with lower-price handsets from rivals like Huawei Technologies Co. and Xiaomi Corp. The move helped sales in China during the quarter, analysts say, but iPhone shipments still fell 30% in the period to an estimated 6.5 million units, according to Canalys, a market research firm.

Mr. Maestri said the Chinese government's action to stimulate the economy combined with improved trade talks between China and the U.S. had helped Apple's performance improve in the region. "We believe that will continue into the June quarter, as well," he said.

Dow Jones & Co., publisher of The Wall Street Journal, has a commercial agreement to supply news through Apple services.

Write to Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

April 30, 2019 17:03 ET (21:03 GMT)

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