Apple blows earnings, stock drops 8%

• Kif Leswing
 
•  

• 16h
• 33,951
 
• 32

APCEO Tim Cook.

Apple  $96.10

AAPL

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Disclaimer

Apple delivered its March-period earnings report on Tuesday afternoon.

It missed estimates for earnings per share by $0.09, and the stock is down 8% in after-hours trading.

As expected, the company posted its first year-over-year decline in quarterly revenue since 2003.

Apple's guidance for the third quarter was also significantly lower than Wall Street expectations, indicating that the iPhone business might have one more rough quarter before it picks up again.

The company also said that 67% of its sales were international in the past quarter, which means that the strong dollar contributed of the "macroeconomic environment" conditions CEO Tim Cookcited as part of the reason for the company's disappointing earnings.

"The smartphone market, as you know, is currently not growing. However, my view of that is it's an overhang of the macroeconomic environment in many places in the world, and we're very optimistic that this too shall pass," Cook said.

But one bright spot for Apple is that while iPhone sales fell for the first time in the history of the device, they beat Wall Street expectations and landed squarely in Apple's own guidance. iPad sales also beat Wall Street expectations, but they fell year-over-year as well.

During a question-and-answer session, Cook once again emphasized the company's online-services business, which was one of the few parts of the business that grew last quarter. Services revenue was up 20% year-over-year, thanks to strong sales in the App Store.

"We are very happy with the continued strong growth in revenue from Services, thanks to the incredible strength of the Apple ecosystem and our growing base of over one billion active devices," Cook said in a statement.

Apple also announced that it would increase its share buybacks from $140 billion to $175 billion, and increased its dividend by 10 percent. Overall, the company now says it will spend $250 billion on buybacks and dividends by 2018. That $250 billion is approximately the amount the company has on hand in cash and marketable securities.

Detailed numbers and charts

Here are Apple's numbers vs. analyst expectations, based on data complied by Bloomberg:

• Q2 EPS: $1.90, down 22% YoY, vs. expectations of $1.99
• Q2 revenue: $50.6 billion, down 13% YoY, vs. expectations of $52 billion
• Gross margin: 39.4% vs. 40.8% last year and expectations of 39.47%
• iPhone unit sales: 51.2 million, down 16% YoY, vs. expectations of 50.7 million
• iPhone ASP: $642 vs. $651 expected
• iPad unit sales: 10.2 million, down 19% YoY, vs. expectations of 9.4 million
• Mac unit sales: 4.03 million, down 11% YoY, vs. expectations of 4.6 million
• Q3 revenue guidance: $41 billion and $43 billion vs. expectations of $47.35 billion

Here are tables Apple provided breaking down how many iPhones, iPads, and Macs it sold:

Apple

Apple

BI Intelligence

BI Intelligence

BI Intelligence

BI Intelligence

Live blog of the earnings call

5:01: Things are getting started. First up is CEO Tim Cook. Next is CFO Luca Maestri.

5:03: Cook just called it a "busy and challenging quarter" and a "pause in our growth."

5:04: Cook talking growth in online services, which is a big emphasis for the company this year.

5:05: iPhone sales come from three places: upgraders, switchers from Android, and first-time smartphone users, according to Apple. For the first half of this year the upgrade rate is higher than the 5S cycle, but lower than the iPhone 6, Cook says.

5:06: Cook citing survey that says iPhone has 95% loyalty rate. "We added more switchers from Android in the first half of this year than in any other 6-month period ever."

5:07: "March quarter services revenue was our highest ever," says Tim Cook. Services revenue jumped 20% to $6 billion.

5:07: Apple Music has 13 million paying subscribers.

5:08: Apple Pay has 1 million new users per week, says Cook. Teases that "more expansion of Apple Pay is coming soon."

5:09: Apple Watch sales "met our expectations" this quarter, Cook says. Expects it to be seasonal like the iPod, with 40% of sales coming during holiday quarter.

5:10: Tim Cook says Apple Watch has helped "even saved lives" with its heart rate sensor, Cook says.

5:12: "The future of Apple is very bright," Cook says. Says Apple has bought 15 companies in the past four quarters.

5:14: Now CFO Luca Maestri is speaking.

5:16: iPhone momentum in business market continues to be impressive, Maestri says. Cites study that 78% of corporate buyers want iPhones.

5:17: Maestri talks services: Thanks to App Store revenue, services revenue was up 20% year over year.

5:17: Maestri says the average amount spent per person on the App Store hit a record number last quarter.

5:19: For Mac, it was a challenging quarter for personal computers across industry, though Apple thinks it gained market share.

5:19: Maestri cites IDC study says iPad accounts for 70% of professional market.

5:20: Revenue for other products rose 30% year over year, thanks to Apple Watch.

5:21: Let's talk about cash! Maestri mentions the $50 billion in bonds Apple issued earlier this year.

5:22: Maestri confirms that it will increase share repurchase authorization to $175 billion from the $140 billion level announced last year. Dividend will increase to 57 cents per share from 52 cents per share.

5:23: Apple's dividend will increase annually going forward, Maestri says.

5:26: Maestri expects average selling price for the iPhone to continue to fall, especially because Apple added the $400 iPhone SE to the mix.

Question time

5:27: Is Apple a growth company or a mature tech company?

5:28: Cook: "The smartphone market as you know is currently not growing, however my view of that is it's an overhang of macroeconomic environment in many places in the world and we're very optimistic that this too shall pass."

5:29: "All of us know that the iPhone 6 cycle was an extraordinary cycle that accelerated upgrade," says Cook.

5:30: Cook signals that Apple will target India as a growth market.

5:31: Cook on purchasing companies: "we would buy something larger than we have thus far."

5:32: The SE is attracting two customers, according to Cook. 1: Those who want latest tech but in a compact package. 2: People who want to own an iPhone but couldn't afford one before.

5:34: Now that we have both a download model and a streaming model, we've hit an inflection point, and we can start growing our music business over time, says Maestri.

5:35: Maestri says iCloud is growing faster than App Store.

5:36: Maestri says the iPhone SE will affect margins.

5:38: Cook on India: "the infrastructure is one key, and the other key is building the channel out." Apple doesn't have stores in the country yet.

5:40: "We've been working with great energy over the last 18 months, and I'm encouraged by the results we're beginning to see." Cook says India is where China was 7 to 10 years ago.

5:44: A challenge in the tablet market in general is that the replacement cycle is materially different than in the smartphone market, Cook says. The iPhone SE isn't going to be like the iPad Mini.

5:45: We're going to have the best "compare" for iPad this upcoming quarter than we've had for a long time, Cook said.

5:46: iPhone 6S upgrade cycle is slightly better than what Apple saw with the iPhone 5S. But it's lower than the iPhone 6 — "not just a hair, but a lot lower."

5:47: If Apple saw the same upgrade rate for 6S that it saw for 6, "we would have a huge party," Cook said.

5:49: "China's not as weak as been talked about, it's a lot more stable than the common view of it," Cook said. LTE adoption continues to rise. Asks investors to look "underneath" the numbers.

5:53: Cook: "The most important thing is Apple wants to have a great customer experience, overwhelmingly Apple embarks on services that helps that and adds value to the ecosystem. In doing that, Apple developed large and profitable business in online services." Wants investors to see the services businesses in both scale and growth.

5:55: Services are "huge," Cook says.

6:01: And we're done here. Thanks for tuning in!

NOW WATCH: Clever ways to reuse your old iPod

Clever Ways To Reuse Your Old IPod

VIDEO: More useful than you think.

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Growth in Britain is slowing down, but it's not just because people are scared about Brexit

• Will Martin
 

• 4h
• 64

The UK economy grew by 0.4% in the first quarter of 2016, according to the first estimate of GDP from the ONS. That number met the forecasts of economists, but was down from the 0.6% in the final quarter of 2015.

The Office for National Statistics released its preliminary estimates of GDP for the first quarter of 2016 on Wednesday and the quarterly number was bang in line with forecasts. On a year-by-year basis, GDP just beat expectations, growing by 2.1%, compared to 2% forecast, and in line with Q4's number.

Q1's figures represent a 13th consecutive quarter of positive growth for the UK economy, but represents the slowest single quarter growth since the end of 2012

Here's the chart showing the UK's long term growth trend:

ONS

There are fears that growth in the UK is being affected by the impending referendum on the UK's membership of the European Union as people brace for the potential impacts of staying in or leaving the EU. After today's data was released, chancellor George Osborne said:

It’s good news that Britain continues to grow, but there are warnings today that the threat of leaving the EU is weighing on our economy. Investments ‎and building are being delayed, and another group of international experts, the OECD, confirms British families would be worse off if we leave the EU.

However while Brexit fears are providing something of a drag on growth, Pantheon Macroeconomics argues that they cannot be entirely blamed.

Here's Pantheon's reaction to Wednesday's data (emphasis ours):

The slowdown in the first quarter likely marks the end of the U.K. economy’s outperformance relative to other G7 economies. Industrial production fell by 0.4% quarter-on-quarter, and construction output fell by 0.9%. Services output rose by 0.6%, but this increase partly reflected a strong starting point thanks to a 0.3% month-to-month rise in output in December. Output increased by just 0.1% month-to-month in both January and February, and the ONS assumes it rose by a modest 0.2% in March. Services sector growth therefore is on course to slow further in Q2.

Concerns about Brexit likely played a role in the Q1 slowdown and they probably will take a greater toll on GDP growth in Q2. But the downward trend in GDP growth since 2014 suggests that the E.U. referendum cannot be blamed for all of the economy’s ills. The fiscal squeeze has tightened this year after a pre-election pause, while the boost to growth in household spending from falling saving and rapid employment growth has run its course. Meanwhile, the real effective exchange rate remains uncompetitive and its recent fall likely won’t be sustained if the U.K. remains in the E.U.  As a result, hopes of a post-referendum rebound in growth look misplaced; we still expect GDP to rise by about 1.5% year-over-year in 2016.

The pound was little moved by the GDP numbers, and is currently up just 0.05% against the dollar to trade at $1.4590.

Here's everything you should look out for in Wednesday's Fed statement

• Akin Oyedele
 
•  

• 9h
• 2,061
 
• 2

Thomson ReutersJanet Yellen.

The Federal Reserve's policy-setting committee will publish its latest statement at 2 p.m. EST on Wednesday.

The Federal Open Market Committee (FOMC) is expected to leave its benchmark rate unchanged in a range of 0.25% to 0.50%.

With virtually no expectations for a rate increase, and no press conference or economic projections, it could be one of the most low-key Fed events we've seen in a while.

Since the statement is all we're getting, focus will be squarely on the Fed's wording, and on who on the committee disagrees with the consensus.

Earlier in the year, the Fed made special note of global financial markets, stressing how developments abroad could affect its actions and the US economy.

"Given the relative improvement seen abroad (particularly China) and in U.S. financial conditions since the March meeting, we believe there is scope to reintroduce a more balanced assessment on risk to the outlook," said Wells Fargo's Sam Bullard in a client note.

RBC's Tom Porcelli will be watching for whether the FOMC reinserts its "balance of risks" language. In the past, this has signified whether the Fed thinks the economy has more going for it or less in its favor, based on its forecasts.

Porcelli said in a note that if the Fed wants to signal a June rate hike, then it would need to say that the risks are "nearly balanced."

But considering how dovish the Fed was in March, Neil Dutta at Renaissance Macro does not think that the Fed will say this.

He wrote: "Inserting that sort of language into the statement would be unnecessary, in my view. Two year yields are pretty much where they were post March FOMC and stocks are up somewhat. Why would Fed want to stop this by sounding hawkish?"

Fed chair Janet Yellen has stressed that risks to the US economy are asymmetric because rates were near zero for so long. This means that if the economy improves and inflation turns higher, then the Fed has plenty of room to tighten monetary policy and raise rates. But in the opposite scenario, rates can't be cut that much lower — hence the asymmetry.

LPL Financial

The Fed Funds Futures market, which bets on future rate changes, is showing no chance of a rate hike on Wednesday, and just a 22% chance of one in June.

Even if the Fed is bent on raising rates in June, inflation has not quite caught up to its 2% target.

"The most likely reason the FOMCwould hold off on raising the fedfunds rate in June is low inflation," said PNC chief economist Stuart Hoffman.

But with oil prices gaining some footing and the dollar a bit weaker, inflation should pick up over the rest of the year, Hoffman said.

Year-to-date, the data has pinned the consensus first-quarter growth forecast at a soft 0.6%. We'll get the advance estimate on Thursday — after the FOMC meeting.

Data on business, consumer spending, and others could tame the Fed's optimism in its statement, Bullard said.

SEE ALSO: The market's $1 trillion bubble is unprecedented

NOW WATCH: YANIS VAROUFAKIS: Brexit won't help Britain regain sovereignty

YANIS VAROUFAKIS: Brexit Won't Help Britain Regain Sovereignty

VIDEO: You "can't take your sovereignty back."

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The US government's $19 trillion debt isn't a problem

• Bob Bryan
 
•  

• 23h
• 26,227
 
• 88

Justin Sullivan/Getty ImagesThe national debt in clock-like form.

The US government has a lot of debt, about $19 trillion of it.

That's a huge, intimidating number on the face of it, but according to Scott Brown of Raymond James, it's also not a serious issue.

"Just when you thought all the fear-mongering had subsided, the national debt has resurfaced as a topic in this year's presidential race," Brown said Monday in a note to clients.

"Yes, the deficit is large. No, it is not a problem."

In Brown's analysis there are two things happening when people talk about the debt. On the one hand, they are concerned about the current deficit, essentially the rolling short-term additions to the debt. The increase in this, Brown said, is simply a necessity of response to the latest recession.

"The federal budget deficit hit $1.4 trillion in FY09, or about 10% of nominal GDP," Brown wrote. "That is enormous, but it simply reflected the magnitude of the Great Recession.

"Revenues fell. Recession-related spending (unemployment insurance, fiscal stimulus) rose. As the economy recovered, recession-related spending went away and tax receipts improved. The deficit is now down to 2.5% of GDP, which is sustainable."

Raymond James

On the other hand, people are also concerned about the long-term amassed debt, that gnarly $19 trillion number. The issue with this line of complaint, Brown said, is there is no nominal level in which the whole thing comes crashing down.

"There is no magic level of debt that gets an economy in trouble," Brown, the chief economist at Raymond James, said in the note. "Research arguing that view has been discredited. The federal government currently has no problem borrowing, nor is there any evidence that it is crowding out private investment."

Brown's argument is fairly simple: Debt is an issue only if you can't repay it or if other people believe you can't repay it. And, as Business Insider's Myles Udland has noted, the US can literally print the money it needs to repay its debt, and it still maintains a high credit rating.

Brown posited a few solutions that could improve the situation, though some he is less inclined to support. They are:

1. Cut entitlements: "Some now argue (I kid you not) that we have to cut entitlements now so that we don't have to cut them later (which makes no sense if you think about it for more than a second)."
2. Raise revenues through tax increases: "Raising revenues is tricky. Republicans aren't going to go along with increases in tax rates (even if called "revenue enhancements," as they were during the Reagan years)."
3. Broaden the tax base: "Broadening the tax base, as part of overall tax reform, could get bipartisan support, but that means giving up certain tax breaks that some will object to (that is, those benefiting from those tax breaks)."
4. Raise effective corporate tax rates: "It's true that the U.S. has one of the highest corporate tax rates in the world, but the effective rate (what corporations actually pay) is among the lowest."

This isn't to say $19 trillion is a big number. But the US government is unlikely to descend into total insolvency, and even before it would get there, solutions are possible.

'OUTGOING' ZETI DROPS FAREWELL BOMB ON NAJIB: BNM TO TAKE ACTION AGAINST 1MDB OVER US$ 1.8BIL

'OUTGOING' ZETI DROPS FAREWELL BOMB ON NAJIB: BNM TO TAKE ACTION AGAINST 1MDB OVER US$ 1.8BIL

KUALA LUMPUR - The country’s central bank will take “administrative action” against 1Malaysia Development Berhad (1MDB) for failing to support its reasons for not moving US$1.83 billion (RM7.76 billion) from abroad back to Malaysia, Tan Sri Zeti Akhtar Aziz said today.

Bank Negara Malaysia (BNM) Governor Zeti said 1MDB has missed a deadline to produce documents to back up its purported need to keep the funds overseas to repay the state-owned firm’s foreign debts.

“At this stage we have not received documentary evidence and within a certain timeline that has been stipulated to them, as we assess that they have not fully complied with the bank’s direction, the bank is pursuing appropriate administrative enforcement action as allowed by laws under which the bank operates, and the bank has commenced the due process under the law,” she told reporters here.

Zeti also said 1MDB has not provided any reason on why it was not able to provide the documentary evidence.

She added that the central bank’s action on 1MDB is purely administrative and could possibly result in penalties or compounds, stressing that it is different from the criminal enforcement action that the Attorney-General (AG) had decided not to pursue.

She said the bank will go through the due process and submit its recommendation for administrative action to the AG, whose decision will be final.

“So Bank Negara has not yet submitted this and it plans to submit it during the remaining part of my term in office, that submission will be made and that outcome will be known,” said the 68-year-old who took office in 2000 and whose term expires next month.

She explained that the main reason BNM was pursuing administrative action against 1MDB was to “uphold the integrity of the functioning of our financial system”.

That meant ensuring all companies “regardless of who their shareholders are” comply with existing rules and regulations, she said.

Zeti confirmed this is the final action that BNM will be pursuing on 1MDB, reiterating that she wants closure on this matter to allow the next central bank governor to start with a “clean slate”.

Last year, BNM ordered 1MDB to repatriate funds amounting to US$1.83 billion (RM7.76 billion), following the central bank’s revocation of three permits to the state fund under the Exchange Control Act 1953 (ECA) for investments abroad.

1MDB had in return indicated that it was unable to repatriate the money as demanded as the funds had either been spent or earmarked for debt transfer.

Last November 13, Zeti said BNM was seeking additional information from 1MDB to validate the firm’s claim.

She also said that it is incumbent on companies to provide updates on their overseas investments at BNM’s request, especially when dealing with large amounts that exceed RM100 million. - Malay mail

Last modified on Thursday, 24 March 2016 08:21

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Full article: http://www.malaysia-chronicle.com/index.php?option=com_k2&view=item&id=612746%3Azeti-fires-parting-missile-at-najib-bnm-to-take-action-against-1mdb-over-us%24-18bil&Itemid=2#ixzz46wUFW6gK
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Spain on cusp of new election pending last-ditch political talks

• Reuters

• 15h
• 52

Thomson ReutersNegotiation members of Cuidadanos, Podemos and PSOE parties sit at the start of their meeting at the Parliament in Madrid

MADRID (Reuters) - Spanish political leaders meet King Felipe on Tuesday for a final round of talks to resolve a four-month-old political stalemate, but with a successful outcome unlikely, the stage could be set for a new election.

Political parties have been unable to form a new government since an inconclusive election last December, and with less than a week until a deadline to agree on a prime minister, Tuesday's talks are the last chance to broker some form of coalition.

After consultations with smaller forces on Monday, King Felipe will on Tuesday meet with leaders of the four main parties in his third attempt to unblock the situation, culminating in a session with caretaker Prime Minister Mariano Rajoy of the center People's Party (PP).

Most leaders have already recognized they lack the support from rivals to secure a parliamentary majority, making it unlikely a last-minute candidate will emerge to try and lead a viable pact between parties.

"The feeling everyone has is that there will be no surprises," Alberto Garzon, leader of the former communist party Izquierda Unida ("United Left") told a news conference on Monday after meeting the king.

Felipe was keen to see the process through and try to seek a consensus, politicians involved in Monday's talks said, though they added that the monarch had already asked parties to keep the costs of campaigns down if they were another ballot.

The rise of new forces such as anti-austerity Podemos ("We Can" and centrist Ciudadanos ("Citizens") after a deep economic crisis meant all parties fell short of a parliamentary majority in December, in the most fragmented result for decades.

The PP won the most votes and 123 seats in the 350-seat lower house of parliament, while the Socialists took 90, Podemos 69 and Ciudadanos 40.

The parties' failure to anoint a prime minister by May 2 - after a Socialist pact with Ciudadanos was rejected in parliament in early March - will automatically trigger a repeat election, likely to be held on June 26.

But beyond Tuesday parties will be running out of time to even hold the necessary parliamentary votes, bringing the process to a head.

Opinion polls have so far shown a new election would do little to resolve the deadlock, while politicians such as Garzon said they were concerned about a rise in abstention among frustrated voters.

Many leaders have already entered a pre-campaign mode, blaming each other for the impasse which could start taking its toll on the economy more noticeably if Spain remains without a government for many more months, according to analysts.

"I'm ready to fight for Spain once again," Rajoy told PP supporters at a rally on Sunday.

(Reporting by Sarah White, Editing by Jesús Aguado and Angus MacSwan)

Read the original article on Reuters. Copyright 2016. Follow Reuters on Twitter.