Apple sales in China fall by 14% in Q2

Revenue drops to $10.7b, but company hopeful about Mac, services business

CUPERTINO, California - Apple Inc reported a double-digit drop in revenue in the Greater China region and a surprise fall in iPhone sales for its second quarter on Tuesday.

Apple indicated that customers may have held back purchases in anticipation of the 10th anniversary edition of the iPhone, the company's most important product, later this year.

Apple's revenue from the Greater China region fell 14.1 percent to $10.73 billion compared with the year-ago quarter, as cheaper rivals in the region chipped away at sales. Compared with the previous quarter, Apple's revenue was down 34 percent in the region.

On an earnings conference call, Apple CEO Tim Cook said the company is still "very enthusiastic" about China but noted sales likely won't rebound this quarter.

"Where the iPhone 7 Plus did well, we didn't perform as well on some of the previous generation iPhones," Cook said. "What I now believe is that we'll improve a bit more during this current quarter, not back to growth but improve make more progress."

Apple has several Chinese smartphone competitors, such as Huawei Technologies Co Ltd, Xiaomi Inc, OPPO Electronics Corp and Vivo, which have been steadily increasing their market share.

Apple Chief Financial Officer Luca Maestri said that sales of Mac computers and the company's services were strong in China during the March quarter.

"The performance we're seeing in China should get better going forward this year," he said.

Under pressure from shareholders to hand over more of its $250 billion-plus hoard of cash and investments, Apple boosted its capital return program by $50 billion, increased its share repurchase authorization by $35 billion and raised its quarterly dividend by 10.5 percent.

Investors were unmoved, sending shares of the world's most valuable listed company down 1.8 percent, or $2.61, to $144.90 in after-hours trading on Tuesday.

Apple sold 50.76 million iPhones in its fiscal second quarter ended April 1, down from 51.19 million a year earlier.

Analysts on average had estimated iPhone sales of 52.27 million, according to financial data and analytics firm FactSet.

Maestri argued that the decline was not as bad as it looked, given the peculiarities of how phone sales are calculated.

The company reports what are called "sell-in" figures for the iPhone, a measure of how many units it sells to retailers, rather than "sell-through" figures, which measure how many phones are actually sold to consumers.

Maestri said the company reduced the volume of inventory going through its retail channel by about 1.2 million units in the quarter, meaning the company sold about 52 million phones to customers on a sell-through basis.

Despite the dip in unit sales, iPhone revenues rose 1.2 percent in the quarter, helped by a higher average selling price.

Expectations are building ahead of Apple's 10th-anniversary iPhone range this fall, with investors hoping that the launch would help bolster sales.

Apple typically launches its new iPhones in September.

A big jump in sales usually follows in the holiday quarter, before demand tapers over the next few quarters as customers, hold back ahead of the next launch.

Apple's 10th-anniversary iPhone range might sport features such as wireless charging, 3-D facial recognition and a curved display.