Apple Inc. (NASDAQ:AAPL) Chief Executive Officer Tim Cook, after making do with an aging lineup of phones and tablets last quarter, will need to look to updated devices and fresh ways to distribute its products to return to growth.
Apple, which hasn’t refreshed its iPhone and iPad since last year, managed to top analysts’ earnings projections in its fiscal third quarter yesterday, even as profit declined from a year earlier and sales rose less than 1%. The stock jumped as much as 5.1%, the most in eight months.
The challenge now is using new products and markets to get Apple back on the offensive. The company is slated to release updated versions later this year of its iPhone and iPad, Apple’s top-selling devices. Cook also aims to wring more revenue from Apple’s services, applications and 408-store retail network. Concern about the lack of a new hit product since the death of former CEO Steve Jobs and falling phone prices had helped push the shares down 40% from their record in September through yesterday.
“They’re laying the groundwork,” Mark Moskowitz, an analyst at JPMorgan Chase & Co. in San Francisco. “The hardware is like the skeleton, and the content and services and apps are like the muscle.”
Shares of Cupertino, California-based Apple rose 4.8% to $439.21 at 9:36 a.m. in New York.
The company reported earnings of $7.47 a share in the period, beating the $7.30 average estimate compiled by Bloomberg.
For now, Apple’s sales and profit remain mired in the biggest slump in more than a decade. Revenue rose to $35.3 billion, narrowly beating the $35 billion estimated by analysts. Net income fell 22% to $6.9 billion. Analysts estimate that profit growth will resume in the March quarter, according to data compiled by Bloomberg.
To get Apple growing faster, Cook mentioned a number of levers he can pull, regardless of whether new products prove as popular as the iPhone or iPad. The company can expand its retail store network, increase efforts to sell to businesses and emerging markets such as India, and boost the amount of software and services that consumers buy. While he didn’t rule out a cheaper iPhone -- something predicted by analysts -- he said Apple could win its share of price-conscious shoppers by continuing to push its older iPhone 4 model.
“What we’re going to see from here on out is numbers going up across the board for a couple of quarters,” said Brian Blair, an analyst at Wedge Partners in New York. “We’re going to see a product refresh and the kinds of things that get investors excited.”