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?

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