Apple CEO Tim Cook sees uncertain future despite increase in sales amid coronavirus

Apple reported sales and profits that beat Wall Street expectations

Reuters May 01, 2020
Apple CEO Tim Cook speaks during Apple's annual Worldwide Developers Conference in San Jose, California, US June 3, 2019. PHOTO: REUTERS

Apple reported sales and profits that beat Wall Street expectations Thursday, with Chief Executive Officer Tim Cook saying China sales were “headed in the right direction” as that country reopens from the novel coronavirus.

But Cook said it was impossible to forecast overall results for the current quarter because of uncertainty created by the virus. Shares declined 2.4% to $286.56 in extended trading.

With its global brand, few American companies have been exposed to the spread of the coronavirus like Apple, whose iPhone sales declined in the March quarter as device sales were forced to online-only in many places.

Sales of subscription services such as streaming television content rose with billions of people locked in their homes, which pushed the overall number of subscribers to paid apps and services on Apple’s devices to 515 million.

China, where the virus was first detected, is both a major market for Apple, supplying about a sixth of its overall sales, and is also home to most of Apple’s contract factories.

Apple saw China sales of $9.46 billion, down less than $1 billion from a year ago, a potential sign of how the company will fare as other markets emerge from lockdowns.

Apple slowly reopened Chinese stores, with all running again by mid-March. “As compared to February, we saw a nice improvement in March and a further improvement in April. China is headed in the right direction,” Cook told Reuters in an interview.

Apple reported overall sales of $58.3 billion and earnings of $2.55 per share for its fiscal second quarter ended in March, above year-ago results of $58 billion and $2.46, and above analyst estimates of $54.5 billion and $2.27, according to IBES data from Refinitiv.

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Cook said the first five weeks of the fiscal second quarter, “it was an incredible time where we were growing very fast and we were set to essentially come in at the high end of our guidance” of between $63 billion and $67 billion in sales.

But the quarter changed quickly, and Apple broke with its usual practice of providing an estimated range of sales for the current quarter.

“Rather than pretend we can project it, we’re being very straightforward and saying we lack the visibility to do it,” Cook told Reuters.

Apple stores outside mainland China, Hong Kong, Taiwan, and South Korea remained shuttered. In an interview with Bloomberg Television, Cook said that Apple plans to reopen retail stores in Austria and Australia in one to two weeks and a small number of stores in the United States in the first half of May.

Lockdowns forced Apple to release its newest iPhone SE 2 mostly via online sales. Cook said that he was pleased with the early sales of the new device, along with new Macs and iPads released during the fiscal second quarter. “As compared to the last part of March and the beginning of April, we’ve seen a better second half of April,” Cook told Reuters.

Cook declined to comment on whether Apple faces supply chain disruptions for devices that will be released later this year. He said Apple’s supply chain was “back up and running at full-throttle at the end of March.”

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Apple on Thursday also said it would buy back another $50 billion of its own stock, a smaller figure than in past updates to its capital return program, but “we expect them to use those funds aggressively,” said Brian Pirri, a principal at Apple shareholder New England Investment and Retirement Group.

“They also managed to do all of this with only a $14.3 billion drawdown on their cash holdings, which still sit at a whopping $192.8 billion.”

Apple said iPhone sales were $29.0 billion, down from $30.9 billion the year before compared with analyst estimates of $28.4 billion, to data from FactSet.

Sales for Apple’s services segment, which includes iCloud storage as well as its streaming services for music and television shows, were $13.4 billion, compared with analyst estimates of $12.9 billion, according to FactSet data.

Cook said Apple had 515 million subscribers to apps and services on Apple’s platform, up by 125 million from one year earlier. Cook said during a conference call with analysts that Apple News reached 125 million monthly active users, up from 100 million in January.

“The group was quiet on AppleTV+, and we wonder how many subscribers were added in the quarter, especially following updates from rivals like Netflix and Disney+,” said Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown.

Apple’s wearables and accessories segment, which includes Apple’s AirPods and Apple Watch, was $6.3 billion, compared with analyst estimates of $6.7 billion, according to FactSet data.


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