Q2 sales likely to fall short of Wall Street expectations, Apple says

eBay to pay dividend with better-than-expected sales and online shopping surge

Apple said sales for its fiscal second quarter would most likely be lower than Wall Street expected. Photograph: Jason Lee

Apple said sales for its fiscal second quarter would most likely be lower than Wall Street expected. Photograph: Jason Lee

 

Apple said sales for its fiscal second quarter would most likely be lower than Wall Street expected, a signal that it continues to face weak demand for its iPhone, especially in China, the world’s biggest smartphone market. However, chief executive Tim Cook, who is in regular contact with US president Donald Trump, said he sees some hope that trade tensions between the United States and China have eased. He also made upbeat comments about Apple’s fast-growing services business and said the company is considering pricing its phones in local currency in China and other international markets, which may spur sales.

Apple shares rose 2.5 per cent to $158.55 in after-hours trading. The company said it expected revenue between $55 billion and $59 billion for the current quarter ending in March, largely below analysts’ average estimate of $58.83 billion, according to IBES data from Refinitiv. For the quarter ending in December, Apple’s busiest due to the holiday shopping season, Apple reported revenue of $84.3 billion, slightly above analysts’ average estimate of $84 billion.

Apple warned in early January that the quarter’s sales would miss targets it gave in November.

Apple reported earnings per share of $4.18 for the December quarter, compared with Wall Street’s average estimate of $4.17, according to Refinitiv data. The company said revenue from services such as Apple Music, the App Store and others – which investors are counting on to fuel growth – reached $10.8 billion, in line with Wall Street estimates. Services gross margin hit 63 per cent. The company said it now had 360 million subscribers to both its own and third-party services, and set a goal to expand that to 500 million by the end of 2020. It said it now had 1.4 billion active devices, an increase of 100 million from last year, and that 900 million of those are iPhones.

Apple’s iPhone revenue declined 15 per cent year on year to $51.9 billion. Mr Cook said China’s economic weakness hurt iPhone sales there.

Meanwhile eBay will begin paying a dividend, it announced on Tuesday, while also reporting better-than-expected sales and profit for the fourth quarter as it benefits from a rise in online shopping.

Shares up

Ebay’s shares rose 4 per cent in after-hours trading after the online retailer set a quarterly dividend of 14 cents per share and announced an increase to its share buyback programme of $4 billion.

Ebay’s results for the final quarter of 2018 showed sales had risen 6.3 per cent year-on-year to $2.88 billion, exceeding Wall Street’s average estimate of $2.66 billion, according to IBES data from Refinitiv. The results and dividend come as eBay faces increased calls from two high-profile shareholders – Elliott Management and Starboard Value – to sell some divisions and restructure others. A multiyear effort by eBay to make its platform simpler to user, by introducing grouped listings, personal recommendations and an easier-to-use payment process is helping yield results for the San Jose, California-based e-commerce company.

Ebay said quarterly net income from continuing operations reached $763 million or 80 cents per share, compared with a loss of $2.6 billion or $2.51 per share, a year earlier, when it recorded a one-time tax-related expense of more than $3 billion. Excluding one-time items, the company earned 71 cents per share, beating analysts’ average estimate of 68 cents.

iPhone pricing

Apple is rethinking how it prices the iPhone outside the US after largely setting the price in US dollars, which made the phones more expensive in local currencies. “When you look at foreign currencies and then particularly those markets that weakened over the last year those [iPhone price] increases were obviously more,” Mr Cook said. “And so as we’ve got into January and assessed the macroeconomic condition in some of those markets, we’ve decided to go back to more commensurate with what our local prices were a year ago in hopes of helping the sales in those areas.”

Mr Cook said he was optimistic that the US and China could resolve trade tensions that had weighed on the Chinese economy and that the situation seemed to improve this month.

Apple issued a surprise profit warning earlier this month on the back of weak Chinese sales. It was the first time the iPhone maker had cut its revenue forecast in 16 years. Its shares took a battering on the news, falling 10 per cent on the day.

Apple employs about 6,000 people in Ireland, most of them in Cork. It has had a presence here since since 1980. During a visit last year, Mr Cook said the company was still committed to Ireland despite the setback of failing to secure planning permission for an €850 million data centre in Athenry, Co Galway, and the ongoing dispute with Europe over a €13 billion tax judgment.