Apple launches $100bn buyback and lifts dividend https://www.ft.com/content/c0555be2-4d79-11e8-8a8e-22951a2d8493

Apple launched a $100bn share buyback plan and lifted its dividend by 16 per cent, marking the biggest increase yet in its capital returns to shareholders.

Shares in the iPhone maker traded 3.5 per cent higher after hours on Tuesday as it reported a 30 per cent jump in earnings per share and announced the capital return.

The world’s most valuable company issued a confident outlook for iPhone sales, despite concerns of a slowdown.

“In all the largest markets, we are doing incredibly well. We feel very good,” said Luca Maestri, Apple’s chief financial officer, in an interview with the Financial Times. “We have gained market share around the world, both in the December quarter and in the March quarter.”

Revenues for the three months to March grew 16 per cent year on year to $61.1bn, Apple said, broadly in line with Wall Street’s expectations.

It sold 52.2m iPhones in the quarter, up 3 per cent on a year ago. Apple insisted that demand for the top-of-the-range iPhone X remained strong in key markets such as the US and China, and the device’s higher price helped to drive a 14 per cent increase in iPhone revenues overall. Net income was up 25 per cent to $13.8bn, with earnings per share of $2.75.

“We’re thrilled to report our best March quarter ever, with strong revenue growth in iPhone, Services and Wearables,” said Tim Cook, Apple’s chief executive. “Customers chose iPhone X more

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than any other iPhone each week in the March quarter, just as they did following its launch in the December quarter. We also grew revenue in all of our geographic segments, with over 20 per cent growth in Greater China and Japan.”

For the June quarter, Apple expects revenues of $51.5bn-$53.5bn, suggesting growth of up to 18 per cent year on year and potentially ahead of Wall Street’s consensus forecasts of $52bn.

The quarterly numbers will reassure investors who had feared the iPhone, Apple’s most profitable product, was running out of steam.

But many shareholders were more eager to hear about Apple’s capital returns programme, which will have paid out $210bn by the end of June.

On top of that sum, Apple is adding another $100bn in share repurchases and will pay out $13bn a year in dividends. Unlike its previous approach to capital returns, Apple provided no deadline by which it plans to complete the share buybacks.

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Apple has said it wants to reduce its net cash balance, which fell to $145bn by the end of March, to zero over time.

“This announcement we are making today is the first step to get us there,” Mr Maestri told the FT, leaving open the possibility that its capital returns could increase further.

“We are a company that generates a lot of free cash flow. Twelve months from now we [will be] here again and we are going to give you yet another step towards this net cash neutral target.”

The $100bn buyback was a sign of the “confidence that we have in Apple’s future and the value that we have in Apple’s stock”, he said.

Apple began to return its cash hoard to shareholders in 2012 and since then has added between $30bn and $50bn to its buyback authorisation every year, on top of steady dividend increases. The latest package marks the largest buyback increase yet and follows $23.5bn of share repurchases in the March quarter alone. That number, reported on Apple’s earnings call, includes share trades that settled after quarter-end. Regulatory filings show $22.8bn of repurchases.

Elsewhere in its results, Apple said sales of wearable technology — which include its smartwatch and headphones such as Beats and AirPods — were up almost 50 per cent year on year.

Its services business hit a new record with sales of more than $9bn, powered by revenue from more than 270m subscriptions through its platforms, including Apple Music, iCloud and third-party

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apps such as Netflix or Spotify through the App Store.

Apple’s shares have weakened in recent weeks after suppliers ranging from chipmakers to Samsung, the iPhone X’s display provider, sounded a cautious note on sales.

Mr Maestri dismissed those concerns. “We want to caution everybody all over again [against] taking very specific data points about a specific supplier that is not necessarily unique to Apple,” he said.

“Trying to extrapolate into that potential results for Apple is always dangerous. The supply chain is very complex. There isn’t a direct correlation between what a specific supplier says and what our performance is.”

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