Apple surprises with major share buyback

Apple surprises with major share buyback

The quarterly results electronics giant Apple announced yesterday were better than expected, even though the company had to swallow a drop in profit for the first time in ten years. Apple especially surprised by announcing the buyback of fifty billion dollar (38.5 billion euro) of its own shares between now and 2015.

Profit down 18%

The results of the second quarter of the financial year of Apple were highly anticipated, but CEO Tim Cook had no other choice than to admit Apple had a drop in profit for the first time since the third quarter of 2003.

 

Still, the results were better than originally expected: compared to a year earlier profits dropped by 18%, but analysts had predicted an average drop of 18.9%. It has to be said that predictions were particularly pessimistic: many analysts believe the glory days of Apple are over.

 

Rise in sales thanks to growth markets

Sales also were slightly better than expected and rose to 43.6 billion dollar (33.5 billion euro), 11.2 percent more than in the same quarter of the previous financial year. Analyst predictions were around 42.26 billion dollar (32.5 billion euro). A reason for the growth is the rising demand of iPhones and iPads in especially growth markets.

 

In total 37.4 million iPhones and 19.5 million iPads were sold. As was to be expected, the sales of Mac-computers stagnated at almost 4 million units.

 

Buyback of 50 billion dollar

The biggest surprise were the plans of Apple to buy back 50 billion dollar of its own shares by the end of 2015. This is mainly a counter-action to the persisting criticism the company is getting about its enormous pile of cash, which is about forty percent of the company’s market value.

 

Earlier this year influential American hedge fund manager David Einhorn filed a lawsuit against Apple, because he believed the technology giant should put more effort in creating a higher value for shareholders. Apple seems to be tackling that problem: with the buyback Apple will have 77 billion euro flow back to shareholders between now and 2015.

 

Extraordinary about the buyback is it puts Apple that had a pile of cash worth 112 billion euro at the end of March, in debt. This is because two thirds of the money is abroad an can only be transferred to California at a heavy fiscal cost.

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