Coverage: Apple’s profits, iPhone sales drop

Apple Inc. posted its first back-to-back drop in quarterly sales and profit in more than two years, but the tech titan reported strength beyond its struggling iPhone business and said a sharp downturn in China showed signs of easing.

Tripp Mickle of The Wall Street Journal had the news:

Profit dropped 16% to $11.56 billion for the three months through March 30, while revenue slid 5% to $58.02 billion, Apple said Tuesday.

Sales of the iPhone, long the biggest driver of its business, fell 17% to about $31 billion—an accelerated decline for a product that has been hobbled by smartphone owners holding on to devices longer and by competition from rivals in China offering lower-price, feature-rich handsets.

The company’s results exceeded analysts’ expectations, which had ebbed following a surprising slump in the previous quarter. Chief Executive Tim Cook highlighted glimmers of hope in problem areas including China, where he said customers have reacted positively to Apple’s move to lower iPhone prices and offer financing programs.

“Looking back at the past five months, November and December were the most challenging, so this is an encouraging trend,” Mr. Cook said. “We like the direction we’re headed with the iPhone, and our goal now is to pick up the pace.”

Stephen Nellis of Reuters reported that new buyers came via the Apple Watch:

Wearables include the Airpods wireless headphones and the Apple Watch. Chief Financial Officer Luca Maestri told analysts on a call that 75 percent of Apple Watch buyers were new to the product.

Shares rose more than 5 percent in after-hours trading after Apple announced the results and plans for a new $75 billion share buyback. (Graphic: tmsnrt.rs/2WdDgyh)

Apple said it expects revenue between $52.5 billion and $54.5 billion for the current quarter ending in June, above analysts’ average estimate of $51.93 billion, according to IBES data from Refinitiv.

In an interview, Apple Chief Executive Tim Cook said that iPhone sales started to strengthen during the last few weeks of the fiscal second quarter.

“As we look at the iPhone results through Q2, the results were stronger on a year-on-year basis for the last few weeks of the quarter. We also saw a similar result in China,” Cook told Reuters in an interview. “These, along with the continued success with wearables and so forth, give us some confidence that things are getting a bit better.”

Michael Liedtke of the Associated Press reported that new products are coming this fall:

Nevertheless, most analysts expect the iPhone malaise to persist at least through the fall when Apple traditionally unveils its latest models. “Apple remains the iPhone company,” Chatham Road Partners analyst Colin Gillis reminded investors in a research note.

Right around the same time, Apple also is expected to launch a new video streaming service in the mold of Netflix, which has already amassed 149 million subscribers worldwide.

Cook previewed the service without disclosing how much it would cost during a celebrity-laden event last month. He touted it as an example of how Apple intends to continue make money from the iPhones, iPads and Mac computers it has already sold.

Apple already has attracted more than 50 million subscribers to a music streaming service it started four years ago. It’s now is aiming to sign up tens of millions more to the video service, as well as others for video games and news.