Apple Beats Profit Expectations

4:54 PM, Apr 23, 2013   |    comments
Apple store (image by Spencer Platt/Getty)
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Scott Martin, USA TODAY

SAN FRANCISCO - Decoding Apple CEO Tim Cook's every word, investors haven't parsed financial clues like this since Alan Greenspan was chairman of the Federal Reserve.

Wall Street and average investors want hints of upcoming revolutionary products. Apple instead, with its hit streak in question, reported financial results that slightly beat on Street consensus estimates for both top and bottom line results.

Apple's financial report answered a huge question over whether the company's decade-long year-over-year profit streak would end. It did. Apple reported net income of $9.5 billion, or $10.09 per share, on revenue of $43.6 billion. That compares with net income of $11.6 billion, or $12.30 a share, on $39.2 billion a year ago.

"We know they didn't beat everyone's expectations," Cook said on a conference call, noting "the potential for exciting new product categories" ahead.

Worse news for investors, Apple's guidance for its current quarter came in below expectations. Despite the report, Apple shares rose 5% to $427.28 in after-hours trading.

Apple is under pressure because the profitability of its iPhones and iPads remain endangered. Samsung is nipping at its heels with the imminent release of its Galaxy S4, and competitor HTC's One phone recently launched. Apple's iPhones make up roughly 65% to 70% of its profits. That's driving intense scrutiny for what's in its product pipeline. Still, Apple sold 37.4 million iPhones and 19.5 million iPads.

The company also delivered a much-sought increase to its dividend, boosting it 15% to $3.05 per share.

Rival Google last week reported a 16% uptick in profit on a 22% rise in revenue, excluding its Motorola Mobility unit, from a year ago. Google's Android now commands nearly 70% of the worldwide smartphone market compared with Apple's 21% share for iOS, according to researcher Gartner.

Uncertainty over Apple won't end at earnings. That's because what really matters in the eyes of investors is future growth. "If they do have the next iPhone or iPad in the works, why aren't we hearing about it? Why aren't they throwing a bone to give us some teasers?" says David Tan, assistant professor of strategy at Georgetown University.

That bigger question will linger: What's next? A bearish pundit recently joked that Apple's expected product pipeline of a watch and a television was reminiscent of something from 1977.

That's because the two product categories are neither revolutionary nor profit gushers.

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