Apple Inc. Q2, a Gimmickry to Hide Stunted Growth
"We're very proud of our quarterly results, especially our strong iPhone sales and record revenue from services. We're eagerly looking forward to introducing more new products and services that only Apple could bring to market," Tim Cook said during Apple Inc.'s announcement of its second quarter fiscal year.
The company generated revenue of $45.6 billion and quarterly net profit of $10.2 billion, or $11.62 per diluted share.
"We generated $13.5 billion in cash flow from operations and returned almost $21 billion in cash to shareholders through dividends and share repurchases during the March quarter. That brings cumulative payments under our capital return program to $66 billion," said Peter Oppenheimer, Apple's CFO.
"We are announcing a significant increase to our capital return program. We're confident in Apple's future and see tremendous value in Apple's stock, so we're continuing to allocate the majority of our program to share repurchases. We're also happy to be increasing our dividend for the second time in less than two years," Cook said.
Apple Inc also announced the $130-billion capital return programme and the surprising seven-for-one stock split.
However, for analysts who had been keeping Apple Inc. on watch for years, the company's reported revenue was relatively small as compared to how the profit was growing during Steve Jobs' leadership. The stock split and buyback programmes were both an implication of Apple's stunted growth in innovation.
For Jonathan Trugman, writing for the New York Post, Apple Inc.'s Q2 is all financial gimmickry, specially its announced buyback programme and stock split.
Apple's move to buy back stock was a move to cover the fact that the company had not been producing innovative products.
While the buyback programme was a smart financial strategy for the company, it still does not address the bigger problem facing Apple - the lack of new products after Jobs' death.
And while Amazon, Google and Facebook were spending billions buying companies that will be instrumental to their technological advancement, Apple was dilly-dallying repurchasing stocks.
"But a technology company buying back its own stock is essentially buying back time it has lost by not being innovative enough. Perhaps it's being used as a tool to smooth out the fact that Apple's growth has slowed as its new-product development has stalled. Jobs would have rather run through hot coals than buy back stock or pay a dividend," Trugman wrote.
Joan Lappin, contributor for Forbes, noted that back then, Apple Inc used to surprise fans with new unimaginable products. However, for the recent announcement, the surprise hinges on the company's impressive sale of outdated iPhone 4s in China. This only goes to say that sales for Apple's newer products "were not so great" and binging on sales of old units could only save the company in few years.
"The 4s drove iPhone sales up 28% in China and good that it did. Phone devices are now about 57% of all of Apple's sales. If they can't maintain that juggernaut without resorting to sales of an old device in new lands, they are in for some serious problems down the road as competition increases from Android and now Microsoft since its purchase of the Devices and Services Business of Nokia on April 25th."
Toni Sacconaghi, an analyst for Sanford C. Bernstein, predicts that Apple's slow growth will continue in the years to come.
"If Apple grew the next five years like it did the previous five years, it would be approaching the G.D.P. of Australia. Psychologically, it's more the issue that here is this incredibly high-flying company two years ago growing at 50 percent or more. And now, at least in this given quarter, it's basically not growing," Sacconaghi said.