Apple unlocks more cash for investors as profit slides
SAN FRANCISCO (Reuters) - Apple Inc on Tuesday bowed to investors' demands to share more of its $145 billion cash pile, while posting its first quarterly profit decline in more than a decade.
The new expanded capital plan includes issuing debt for the first time to fund $100 billion in share repurchases and higher dividends until the end of 2015. The plan, doubled from a previous one set last year, makes Apple the largest dividend-paying company in the world.
The company's shares, which have declined in recent weeks, rose sharply but retreated after Chief Executive Tim Cook told analysts on a conference call that "some really great stuff" was coming in the fall and 2014. That suggested Apple would have no new products in the market for the next few months.
Apple relies heavily on new product launches to drive revenue growth. It recently refreshed its offerings in October, unveiling the 7.9-inch iPad mini and an updated full-size iPad.
The new capital plan came as Apple's fiscal second quarter profit slid 18 percent. While revenue rose 11 percent, it was a sharp slowdown from 2012 and in previous years.
Cook also acknowledged that Apple's once stratospheric growth had tempered but stressed that the company's position remained strong.
"Though we've achieved a credible scale and financial success, we acknowledge that our growth rate has slowed and our margins have decreased from the exceptionally high level we experienced in 2012," he said in a rare admission.
In the last couple of years, Apple has seen a slowdown in demand for iPhones and iPads ahead of an expected launch, which analysts said would hurt its profit for the current quarter.
Apple is forecasting revenue of $33.5 billion to $35.5 billion this quarter, lagging Wall Street's average prediction of $38.2 billion.
Once considered a near-surefire bet by Wall Street, worries about slowing growth and narrowing margins have made Apple's shares among the worst performers this year.
Since hitting a record close of $702.10 last September, the world's largest technology company has shed 44 percent or more than $280 billion of market value - more than the entire market capitalization of Google Inc.
A MATURING APPLE
The collapse of its stock price has incensed investors, who agitated for more cash directly from the company.
The tech giant's expanded plan marks a $55 billion increase to a program unveiled just a year ago.
Apple earned $9.5 billion or $10.09 a share in the quarter, down from $11.6 billion or $12.30, a year earlier.
The company reported better-than-expected second quarter revenue of $43.6 billion, beating Wall Street's average forecast for $42.3 billion, according to Thomson Reuters I/B/E/S, as iPhone and iPad sales surpassed investors' lowered expectations.
Wall Street has zeroed in on Apple's industry-leading margins, which it fears are under pressure as Samsung Electronics and other Google Android software adopters flood the market with lower-priced models.
Gross margins came in at 37.5 percent in the second quarter, while expectations were for 38.5 percent.
Apple's shareholders will now get an annual dividend of $12.20 per share, making Apple one of the highest dividend-paying companies. With about 940 million shares outstanding, Apple will return $11.5 billion to shareholders over 12 months, an amount that exceeds the market values of 200 other corporations in the S&P 500.
In a rare move, the company also said it plans to raise debt for the expanded program, but did not provide any details. Investors have urged the company to borrow rather than repatriate money from abroad, where much of its cash is parked, to avoid incurring heavy taxes.
While Apple is still growing, it's pace of growth has slowed as high-end smartphone adoption approaches saturation in the developed world and it goes head-to-head with increasingly aggressive rivals in developing countries like China and India where cheaper models are more popular.