Apple Announces Mediocre Results

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Apple has just announced increased revenues for its fiscal second quarter ($43.6 billion vs. $39.2 billion last year) but considerably lower earnings ($9.5 billion vs. $11.6 billion last year). More dramatically, their gross margins have plummeted from 47.4 percent to 37.5 percent. Channel inventory of iPads was up by over a million units. Mac sales declined 2 percent.

And the future looks to be even worse. Apple is forecasting that revenues will be flat or slightly down next quarter and gross margins will continue to decline a bit to 36-37 percent. CEO Tim Cook calls this “frustrating.” To assuage shareholders, Cook announced that Apple would increase its share repurchase program to $60 billion and would raise its dividend by 15 percent. All told, its total “capital return program” has been doubled to $100 billion by 2015.

Bottom line: Apple is a bit adrift; competition is squeezing margins; and they have no good ideas about what to do with their cash hoard. Cook, in a rather pro forma tone of voice, insisted that Apple has lots of great ideas coming soon, but it’s hard to know what those might be. Apple TV? Anything else?

HERE ARE THE FACTS:

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