Apple’s crucial quarter – live

Apple has reported second-quarter earnings that beat analyst expectations, but has disappointed Wall Street with its outlook for the June quarter. The maker of the iPhone reported $43.6bn in revenues and earnings of $10.09 per share, compared with analyst expectations of $42.5bn and $10.07 in earnings per share. Its guidance for $33.5bn to $35.5bn in third-quarter sales though is well below the Wall Street consensus of $38.9bn. Apple has also increased its share buyback authorisation from $10bn to $60bn. Below is our blow-by-blow account of the earnings, analyst call and reaction to the news.

The closing bell has sounded in New York and Apple’s second quarter earnings should be out at the bottom of the hour, with the analyst call beginning at 2pm Pacific (9pm GMT, 10pm London time). The company is famous for not giving much away, but it’s usually regular as clockwork with its earnings timings. But, for once, it’s not arranging an announcement to clash with another major event – the call starts a few minutes after the Bayern Munich- Barcelona game ends.

A reminder of the expected numbers. The analyst consensus for the March quarter is for $42.5bn in revenues and $10.07 in earnings per share. They expect 34m iPhones to have been sold, around 18-19m iPads and 3.8m-3.9m Macs.

Those numbers have been framed around Apple’s new guidance. The company said on its last call that it was changing its approach to guidance, which has been conservative in the past. “Going forward, we plan to provide a range of guidance that reflects our belief of what we’re likely to achieve,” it said. That implies it should be closer to hitting the numbers it gave in guidance three months ago.

So, back in January, it provided revenue guidance of $41bn-$43bn, gross margins of 37.5-38.5 per cent and operating expenses of $3.8bn-$3.9bn.

For some idea of the pressure Tim Cook is under ahead of this earnings call, read today’s analysis from Tim Bradshaw

Trading in Apple shares has been halted, with the announcement expected in the next five minutes. Normal procedure.

Emoticon Apple reports $43.6bn revenues, profit of $10.09 per share

Emoticon37.4m iPhones sold, 19.5m iPads

Emoticon $100bn to be returned to Apple shareholders

CUPERTINO, Calif.–(BUSINESS WIRE)–Apple® today announced that its Board of Directors has authorized a significant increase to the Company’s program to return capital to shareholders. The Company expects to utilize a total of $100 billion of cash under the expanded program by the end of calendar 2015. This represents a $55 billion increase to the program announced last year and translates to an average rate of $30 billion per year from the time of the first dividend payment in August 2012 through December 2015.

CUPERTINO, Calif.–(BUSINESS WIRE)–Apple® today announced financial results for its fiscal 2013 second quarter ended March 30, 2013. The Company posted quarterly revenue of $43.6 billion and quarterly net profit of $9.5 billion, or $10.09 per diluted share. These results compare to revenue of $39.2 billion and net profit of $11.6 billion, or $12.30 per diluted share, in the year-ago quarter. Gross margin was 37.5 percent compared to 47.4 percent in the year-ago quarter. International sales accounted for 66 percent of the quarter’s revenue.

“We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad,” said Tim Cook, Apple’s CEO. “Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline.”

The Company sold 37.4 million iPhones in the quarter, compared to 35.1 million in the year-ago quarter. Apple also sold 19.5 million iPads during the quarter, compared to 11.8 million in the year-ago quarter. The Company sold just under 4 million Macs, compared to 4 million in the year-ago quarter.

So, revenues of $43.6bn beat consensus of $42.5bn, eps of $10.09 is two cents ahead of consensus.

A big beat on the iNumbers – 37.4m iPhones sold versus 34m consensus, 19.5m iPads v 18.5m, just under 4m Macs sold v 3.8-3.9m consensus.

The capital return programme announcement should please shareholders -it more than doubles the previously announced figure.

As part of this program, the Board has increased its share repurchase authorization to $60 billion from the $10 billion level announced last year. This is the largest single share repurchase authorization in history and is expected to be executed by the end of calendar 2015.

Apple shares due to resume trading after hours in about 5 minutes

Guidance for 3rd quarter is bad compared to $38.9bn consensus forecasts for revenues. Apple predicts $33.5bn-$35.5bn, gross margins between 36 and 37 per cent, opex $3.85bn – $3.95bn.

The low revenue figures being forecast for the current quarter suggest little impact from any new product launches, although they wouldn’t rule out a new device appearing in June.

Trading begins again, and after spiking to be up more than 4 per cent after hours, Apple shares are now falling back.

Apple’s cash balance is up around 6 per cent on the last quarter at $145bn.

Listening to someone beavering away on a cello, ahead of the earnings call starting any moment.

And we’re underway, Nancy Paxton, senior director of Investor Relations, speaks first. She tells us Tim Cook, chief executive, Peter Oppenheimer, chief financial officer, and Gary Wipfler, treasurer, are poised for the iCall.

Tim Cook, CEO, launches into his opening remarks:

We have a lot of news to share…we’re halfway through fiscal 2013 and we’ve ramped an unprecedented number of new products.

Though we’ve achieved incredible success, we ]acknowledge our growth rates have slowed.

Average weekly growth slowed to 19 per cent, he says – doesn’t sound too shabby.

We are guiding to flat revenues year-over-year for the June quarter, the decline of the Apple stock price “has been very frustrating for all of us”, he says

We see great opportunities…take the smartphone market…IDC expects this will doubkle between 2012-2016…Gartner says the tablet space is growing even faster.

We can’t wait to introduce new hardware, he says, we’re very confident in our product plans.

We’ve got a lot more surprises in the works

Apple shares now 5 per cent higher at $426.57

Now over to Peter Oppenheimer, CFO, for the details on the quarter.

Beginning with iPhone, 2.3m more sold than the year-ago quarter.

iPads sold 7.7m more units year-over-year and sales more than doubled in Greater China, significiantly more iPad minis were sold this quarter than in the previous quarter. The mini is mighty!!

Mac sales represented a 2 per cent decline, compared to a 14 per cent decline in the PC market for the March quarter.

Sales of iPods – 5.6m – down again, down from 7.7m a year ago – long, slow…strike that…increasingly rapid decline for this product category.

Developers have made more than $9bn in sales from the App Store.

Apple retail stores had $5.2bn revenues in the quarter, up from $4.4bn last year, more than 400 stores open worldwide now.

Cash pile was $144.7bn at March 31 , up $7.6bn on the end of the previous quarter

The CFO says Apple’s is the biggest share buyback authorisation of any company in history.

Quarterly dividend increased from $2.65 to $3.05, Apple is paying around $11bn in dividends a year, making it one of the largest dividend payers in the world, he says. That’s only recently the case though Apple, it did take you some time to get around to that.

The CFO now opens the call to analysts’ questions.

Katy Huberty from Morgan Stanley asks about gross margins – Mr Oppenheimer says they were at the low end due to selling more iPads than planned, including the lower-margin iPad mini, changes to its service policy, plus some unfavourable adjustments. For the June quarter, they will be down probably due to loss of leverage on sequentially lower revenue and the product mix.

She follows up asking about “stickiness” of Chinese customers. Tim Cook says they just had a record quarter in Greater China and quotes a lot of figures. We still see a significant opportunity in China, it’s a great market, we expect to double our 11 stores there, he says. China has a huge number of first-time smartphone buyers and Apple is making the iPhone more affordable, he adds.

Bill Shope of Goldman Sachs asks about competitive pressures – Tim Cook says Apple has the best products and continues to invest. “We have the best ecosystem by far…and that shows up in our loyalty ratings and our customer satisfaction.”

We’ve got some really great stuff coming in the fall and across all of 2014

Mr Cook won’t go into specifics about what those new products might be.

A Sanford Bernstein analyst revisits the gross-margin question, with iPhone average selling prices down. The CFO says making the iPhone 4 more affordable in many markets was a factor.

Tim Cook says tablet market declined 30 per cent in the March quarter sequentially, while the iPad declined 15 per cent.

Apple shares were up 5 per cent a few minutes ago, now they’re up just 0.3 per cent.

Ben Reitzes of Barclays asks about long-term gross margins. The CFO defends the lower-margin iPad mini, which is selling very well. “We’re willing to make short-term trade-offs in profits for the long term”.

Follow-up question is about the 5in phone market – Tim Cook says iPhone 5 has the best display in the industry. Some customers value large screen size, others value resolution etc. “Our competitors have made some significant trade-offs…in order to ship a larger display, we would not ship a larger iPhone display while these trade-offs exist.”

Apple shares now in the red, down 0.2 per cent.

Question on Macs and cannibalisation from the iPad – Tim Cook – “I think the reason we were down in the last quarter is the market for PCs is very weak”, he says, iPads are cannibalising to some extent. I don’t think this is a dead or bad market, we’re going to continue to innovate in it, he adds.

Tablets in the enterprise question – are they displacing PCs? Tim Cook says the iPad is doing very well here, he sees more and more people developing more custom apps for their businesses on iOS. The iPad is now being used in 95 per cent of the Fortune 500 companies.

And that’s the end of the Q&A.

So Apple shares slightly in the red after being up more than 5 per cent earlier in the call. The negatives have been lower-than-expected revenue guidance for the current quarter, no promise of new products before the autumn and Mr Cook seeming to rule out a larger-screen version of the iPhone. Positives were an earnings beat for the March quarter and Apple more than doubling its capital return programme.

Gross margins were a big concern for analysts as well. They are trending down, but Apple seemed to say it was a price worth paying for a product as successful as the iPad mini and to introduce more affordable products such as the iPhone 4 in many markets.

And with that, thank you for joining us for this live blog, read Tim Bradshaw’s summary of Apple’s half-bad, half-good quarter, this could be all the Apple excitement you’re getting for a while, with no product announcements on the horizon.