Apple slightly beat analyst estimates when it reported earnings today for its fiscal second quarter. But it also said that revenue for its fiscal third quarter (the quarter we’re in currently) could be lower than the same period last year, which could mark the first time its sales have declined year-over-year in 10 years.
With Apple’s stock already under pressure, the company decided to whip out its financial magic tricks. Apple announced it was increasing its quarterly dividend by 15% ,and boosted its share buyback program by $50 billion. The question is whether Apple’s other numbers will still give investors pause about Apple’s future.
The tech company had initially planned to wait until after this earnings report to announce that it would return more of its $137 billion cash stock pile to investors, according to sources. But Apple has seen its stock dip below $400 for the first time since December 2011 and had been trading at that level for a few days before it recovered yesterday. Investors, including hedge fund manager David Einhorn, were pleading for Apple to do something to boost its stock price.
The buyback and dividend increase will no doubt please Apple shareholders, and its shares were up by more than 4.5% in after-market trading. But Apple’s future doesn’t look so rosy. It already reported its first profit decline in 10 years today. One of Apple’s chip suppliers, Cirrus Logic, also reported a lower revenue forecast because of slowing growth in demand for the iPhone. Besides a lower sales forecast for the next quarter, Apple also expects lower margins, partly due to lower-priced products such as the iPad mini.
That means Apple isn’t out of the woods yet. The share buyback and dividend increase don’t answer how Apple will combat the increasing competition from Samsung and Google. The rumored iPhone 5S and other upcoming products need to be big hits. Financial maneuvering with its cash can only take Apple so far.