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Apple, Ever the Conundrum, Buys Off Stockholders

It said it would raise its young annual dividend 15% to $12.20 a share

In the most anticipated quarterly report in recent memory, Apple - which a few brief months ago was the largest company in the world before its record stock price collapsed - indicated Tuesday that its growth has tempered and its margins have been crimped.

It made $9.5 billion, or $10.09 a share, down 18%, on revenues up 11% to $43.6 billion in the March quarter, against earnings of $11.6 billion, or $12.30 a share, on $39.2 billion in revenue a year ago.

It was the company's first earnings decline and first revenue slowdown in years although it beat Wall Street's lowered revenue estimates of around $42.3 billion.

It also forecast flat revenues of only $33.5 billion to $35.5 billion this quarter against Wall Street expectations of $38.2 billion, which could mean its first year-over-year decline in a very long time.

However, Apple's June quarter is usually weak.

Anyway, to compensate - and capitulate to investor demand that it parcel out the humungous $145 billion in its bank account - Apple said it would raise its young annual dividend 15% to $12.20 a share, making it one of the largest dividend-paying companies in the world, returning $11.5 billion to stockholders over a 12-month period.

Pay-outs will start next month.

It's also going to take on debt for the first time - rather than pay taxes on repatriated money - to underwrite a huge $60 billion share-repurchase plan, up from $10 billion, the largest buyback authorization in history.

It will spend the money by the end of 2015.

Apple's largesse did nothing to relieve its deflated stock price.

The second disappointment came when CEO Tim Cook suggested Apple wouldn't have new products until the fall and then on into next year but - shades of a new hit product - he teased his audience with the idea that Apple would introduce new product categories.

The company was expected to field a new iPhone and iPads this summer.

Apple needs new products to drive revenues given its Android competition.

Its last new product was the iPad mini, which came out in October, and now investors supposedly believe it will never come up with a revolutionary product again, an impression reinforced by its plans for its money.

Apple has lost 44% of its value, a giant $280 billion, more than the entire market cap of IBM or Google, since September.

Still, Apple shipped 37.4 million iPhones in the March quarter, up 7%, but a weak number compared to the quarters when shipments doubled year-over-year.

iPad sales were up 65% to 19.5 million.

Both did better than Wall Street expected.

Sales of the iPad mini and iPhone 4 pushed Apple's margins and ASPs down.

It also sold just under four million Macs, better than PCs did by a long shot, but not the 4.1 million Wall Street hoped for, and revenue from iTunes and other software and services grew nearly 30% to $4.1 billion.

It may introduce new services.

Apple is now getting two-thirds of its revenues from overseas. Revenues from Mainland China, Hong Kong and Taiwan were up 11% to $8.8 billion. iPad sales doubled in China and Japan.

The company said 300 million people are now using iCloud.

Its gross margin narrowed to 37.5% down from 47.4% a year earlier. It's expecting gross margins of 36%-37% this quarter against the 38.7% estimated by analysts.

Cook, who claimed to be frustrated over the fall in the company's stock price, said, "We do want to grow faster but we don't view it as the only measure of our health.

Analysts cut their stock price estimates, expecting share losses, although many have buy ratings given the current low price.

Wall Street Journal columnist Walter Mossberg called the new Samsung Galaxy S4 phone - that's supposed to eat Apple's lunch - "good but not great."

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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