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Apple Reports 18% Drop in Earnings Narrowly Beating the Street

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Apple's conference call hasn't officially begun and MarketWatch is already reporting this afternoon that Apple Inc. reported an 18% drop in earnings for its second fiscal quarter on Tuesday afternoon, though the results came in slightly ahead of Wall Street's estimates. This marks Apple's first profit decline since 2003. This Report has  been updated right up until 4:19 PM MST with new information, stats and a few conference call notes. 

For the period ended March 30, Apple reported net income of $9.5 billion, or $10.09 per share, compared to net income of $11.6 billion, or $12.30 per share, for the same period last year. Revenue grew 11% to $43.6 billion.


Analysts were expecting earnings of $9.97 per share on revenue of $42.3 billion, according to FactSet. Apple's gross margin for the quarter was 37.5% - at the low end of the company's forecasted range from January. Apple's shares were halted in after-hours trades, as the company also announced a raised dividend and share buyback plan.


Apple is increasing its share repurchase program to $60 billion from $10 billion and increased its quarterly dividend by 15% to $3.05 a share.


According to the Wall Street Journal, Apple sold 37.4 million iPhone smartphones in the latest period, up 6.6% from a year earlier. It introduced the iPhone 5 in late September.


Apple also sold 19.5 million iPad touch-screen tablet computers in the most recent quarter, a 65% year-over-year increase. The company released the iPad Mini, which has slimmer margins than the iPad, in November.


Peter Oppenheimer, Apple's VP and CFO stated during the conference call that Apple's iPod holds a 70% market share of the MP3 Market.  


Apple is providing the following guidance for its fiscal 2013 third quarter:


  • revenue between $33.5 billion and $35.5 billion
  • gross margin between 36 percent and 37 percent
  • operating expenses between $3.85 billion and $3.95 billion
  • other income/(expense) of $300 million
  • tax rate of 26%


Apple's CEO Tim Cook stated that sales in China were at $8.8 billion, up 11% year over year. Apple will be doubling the number of Apple Stores in China over the next two years. He also stated that Apple will be introducing new hardware, software and services later this year and throughout 2014. Specifically, Cook noted new "categories" of products in the plural would be coming to market but hesitated on providing a timeline beyond what he had earlier stated. That will likely mean 2014, but never say never with Apple sneaking something new in for later this year.


And lastly, Cook was asked about larger 5" smartphones. The analyst wanted to know if Apple was rethinking their position on an a 5" iPhone. Cook stayed on the straight and narrow by saying a 5" display would have been a tradeoff for Apple at the time the iPhone was delivered. Cook seemed to hint that the "tradeoffs" may not be a factor in the future. Cook admitted that "some customers value size" but wouldn't say anything beyond that. 

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On another note, Wall Street's Fly on the Wall reports that Standard & Poor's assigns 'AA+' corporate credit rating to Apple with a stable outlook, significant net cash balances and a commitment to a minimal financial risk profile.



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