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New big-screen iPhones deliver big profits for Apple [Gulf Times (Qatar)]
[October 22, 2014]

New big-screen iPhones deliver big profits for Apple [Gulf Times (Qatar)]


(Gulf Times (Qatar) Via Acquire Media NewsEdge) New big-screen iPhones helped propel Apple's profit and revenue in the last quarter, as the California tech giant smashed earnings expectations.

The company reported on Monday that profit rose 13% to $8.5bn, as revenues jumped to $42.1bn in the fiscal fourth quarter ending September 27.

Apple said it sold more than 39mn iPhones in the quarter, boosted by last month's launch of the large-screen iPhone 6 and 6 Plus, which hit some markets on September 19. That compared with 33.8mn in the same period a year ago.

The iPhone accounted for more than $23bn in revenue, over half of Apple's overall earnings for the quarter.

Sales of iPads—which may have been lower ahead of the October launch of new models—fell from a year earlier to 12.3mn, producing some $5.3bn in revenues.

"I view it as a speed bump, not a huge issue," Apple chief executive Tim Cook said of the decline in iPad sales during a conference call with analysts.

"I know there is a popular view the (tablet) market is saturated, we don't see that." As appetites for tablet have diminished, Apple's market share has slipped to 25%, compared to 70% for the rival Android platform, according to Strategy Analytics.



People are holding onto iPads longer than they do iPhones, and Apple is still researching when consumers typically upgrade to new tablets, according to Cook.

He saw some promising developments for iPad sales, including a recent alliance with IBM to improve tablet capabilities for businesses.


"I am very bullish on where we can take iPad over time," Cook said.

Apple sold 5.5mn Mac computers and 2.6mn iPods in the quarter.

Growing Mac sales came as the overall personal computer market shrank.

"On the Mac, it was just an absolutely blow-away quarter," Cook said. "The back-to-school season voted, and the Mac won." The financial results were the best ever for a September quarter, and the fiscal year that just ended "was one for the record books," Cook said earlier in a statement.

  Coca-Cola Soft drinks king Coca-Cola made headway in global volume sales in its third quarter but net earnings fell sharply, hit by slower economic growth and volatile currencies.

Coke reported yesterday a slight fall in total operating revenues around the world to $11.98bn for the quarter to September 26. Net income however dropped 13.6% to $2.12bn, and earnings per share dropped to 48 cents from 54 cents.

Excluding exceptional items, earnings per share were flat at 53 cents, matching the average forecast of analysts.

Coke said volatile foreign exchange markets and especially the strengthening of the US dollar against most other currencies took a toll on the company. If currency swings were factored out, the company said, earnings per share would be up six%.

Still, the flat revenue showed the challenge the company faces in boosting sales and earnings in a tough global environment. It stressed the focus during the period on maintaining volume sales and market share with "a rational approach to pricing" and intensified marketing efforts.

Atlanta-based Coke has been challenged especially by Europe's economic slump, but also by slow growth in the US and the sharp economic slowdown in Latin America and elsewhere.

Sales volumes in Europe were down five% in the third quarter from a year earlier, and off one% in North America. Revenues gained 0.6% in Europe lost while falling 2.1% in North America.

But Coke's smallest region, Eurasia and Africa, showed firm growth, with volumes up 5% and sales up 6.0%.

And in Asia, which has shown the strongest growth for several years, volume grew two% and revenues 5.3%.

The company has also faced slower soft drinks consumption in the US—its leading market—as consumers turn to alternatives to super-sweet fizzy soda pops.

Driving volume growth was not so much the company's key brand Coke, Sprite and Fanta but non-fizzy drinks like bottled tea, still water and especially energy drinks. Energy drinks volume was up 7%.

Compared to that, fizzy drink sales volume was flat in the quarter, and up 1% for the first nine months of the year.

  Harley-Davidson Harley-Davidson reported stronger-than-expected quarterly financial results yesterday, lifted by increased motorcycle sales in key markets, including the US.

Harley's badly battered shares surged nearly 8% in early electronic trading in New York.

From the outside, the third quarter appeared to be a tough one for the iconic motorcycle maker, with several recalls tarnishing the roll-out of the Street, its first entirely new bike in more than a decade and its first Harley-badged lightweight motorcycle since the 1970s.

But appearances were apparently deceiving. Worldwide, the company's network of independent dealers sold 73,217 new Harley-Davidson motorcycles in the third quarter, up from 70,517 during the same period last year.

That helped the company report a third-quarter profit of $150.1mn, or 69 cents a share. While that was down from the $162.7mn, or 73 cents a share, it reported a year ago, it was well above the 59 cents a share analysts expected, according to Thomson Reuters I/B/E/S.

Retail sales at dealers in the US, where Harley sells two-thirds of all its bikes, rose 3.4% during the quarter.

Harley said it continued to expect to ship 270,000 to 275,000 motorcycles to independent dealers and distributors worldwide in 2014, up 3.5% to 5.5% year over year.

The company, which rose to prominence thanks to its popularity with the Baby Boomer demographic in the US, is working hard to appeal to new riders as its core customer group ages.

It has had some success in developing new products to appeal to a younger and more diverse consumers. But the company's first, all-new platform, a lightweight bike called "the Street," suffered an ill-starred debut this spring despite a very limited roll-out because of difficulties involving its far-flung supply chain.

  United Tech United Technologies Corp yesterday posted a rise in quarterly profit, helped by a tax settlement and revenue increases across its aerospace and commercial building segments.

The diversified maker of Pratt & Whitney jet engines and Otis elevators said third-quarter revenue rose 4.6%, while orders increased across its main business segments.

Like those of rivals, shares of the diversified US manufacturer have underperformed the broader market due to concerns about the global economy. The Dow Jones industrial average component's stock was up 2% at $103.50 in premarket trading.

"Clearly, the world is not ending," United Tech Chief Financial Officer Greg Hayes said in an interview. "What we really saw was organic growth across all of the businesses in all of our regions." The company has been looking for large acquisitions but has seen a weak pipeline for prospective deals.

"We want to look for acquisitions in the core that can actually move the needle, and there just aren't that many properties out there, and the properties we do like are relatively expensive," Hayes said.

Instead, the company on Tuesday increased the amount of stock it expects to buy back this year, to $1.5bn worth from $1.35bn. The shares are "relatively attractive vis-a-vis some of the acquisitions out there," Hayes said.

United Tech said third-quarter net income rose to $1.85bn, or $2.04 per share, from $1.43bn, or $1.57 per share, a year earlier.

The company said earnings were $1.82 per share, excluding favorable items and restructuring costs. Analysts on average were looking for $1.81, according to Thomson Reuters I/B/E/S.

Revenue of $16.17bn was in line with analysts' estimates.

  Verizon Verizon Communications yesterday posted lower-than-expected quarterly earnings, but revenue rose as it added customers to its wireless business.

Verizon reported third-quarter profit of 89 cents per share, up from 78 cents per share a year earlier. Revenue rose 4.3% to $31.6bn.

Analysts, on average, expected a profit of 90 cents per share on revenue of $31.58bn, according to Thomson Reuters I/B/E/S.

In the quarter, Verizon, the largest US wireless carrier, added 1.5mn net subscribers who pay for service after use, beating Wall Street estimates of about 1mn customers.

Total revenues for Verizon's wireless business grew 7% year over year, while falling 0.8% for its broadband FiOS internet and video product.

Verizon shares dropped 1.3% to $47.84 in premarket trading.

  Omnicom Omnicom Group, the No 1 US advertising company, reported quarterly revenue and profit above analysts' expectations, boosted by higher ad spending in the US.

The advertising industry pins its hopes on the projected fall in unemployment in the US, the largest ad market followed by Japan and China.

Omnicom, whose merger with France's Publicis Groupe SA was aborted in May, said revenue rose 7.4% to $3.75bn in the third quarter while ad revenue rose 12.5%.

"Investors have been worried about an advertising slowdown globally and these numbers suggest that this is not happening," Evercore Partners analyst Douglas Arthur said.

Revenue from the US, which accounts for two-thirds of total revenue, rose 10% in the quarter ended September 30. International revenue increased 4.7%.

Global spending on advertising is expected to grow 5.6% to $545.23bn this year and reach $667.65bn by 2018, according to statistics website Statista.

Martin Sorrell's WPP said in August it benefited from strong US demand for digital advertising.

Omnicom's net income available for common shareholders rose to $239.5mn, or 95 cents per share, from $191.2mn, or 74 cents per share, a year earlier.

Analysts on average had expected an adjusted profit of 90 cents per share on revenue of $3.68bn, according to Thomson Reuters I/B/E/S.

Omnicom is home to agencies such as BBDO Worldwide, TBWA Worldwide and Goodby, Silverstein & Partners, creator of the famous "Got Milk?" campaign. It counts McDonald's Corp Adidas AG and Apple among its clients.

  ARM British chipmaker ARM Holdings' predictions of improving smartphone demand and strengthening royalty growth met with a cool stock market response after it fell short of third-quarter revenue expectations yesterday.

The third-quarter royalty income contributed to a miss on top-line revenue measured in dollars, which was up 12% to $320.2mn against market expectations of $326.3mn.

Favourable currency movements, however, meant revenue in pounds was in line with expectations while cost control helped to lift pretax profit 9% to £101.2mn ($163.4mn), broadly in line with expectations. The company that provides the technology that powers the iPhone 6 pointed to Apple's booming sales, but investors will take more convincing over long-term prospects in the face of slowing demand for high-end smartphones from the likes of Samsung Electronics.

The strongest part of the market is in cheaper mobile handsets from Chinese manufacturers, containing older ARM technology that commands lower royalty rates.

ARM's shares, which had fallen 14% since the launch of the iPhone 6 on September 9, rose as much as 4% in early trading but by 1013 GMT were down 4.7% at 811 pence.

Analysts at Liberum said they remained cautious on the stock, expecting royalty growth to be weaker than current market expectations.

Shorter-term prospects were buoyed, however, by news from Apple late on Monday of a better than expected 16% jump in sales of the iPhone, which uses ARM's latest 64-bit technology.

ARM recognises royalty revenue a quarter in arrears, so the iPhone numbers will not be seen in its results until the next quarter and the first quarter of 2015.

Chief Financial Officer Tim Score said strong iPhone sales were "helpful" in underpinning the short-term outlook for royalty revenues, supported by data from ARM's other chipmaking partners.

"We certainly have seen an uptick in mobile," he told reporters, adding that he expected group dollar revenues for the fourth quarter to be in line with market expectations of about $350mn.

  ASOS British online fashion retailer ASOS believes it can reach its target of £2.5bn ($4bn) in annual sales by 2020, with price cuts helping to reignite growth after three profit warnings this year.

Shares in ASOS, which had lost two-thirds of their value this year following a procession of bad news, jumped as much as 19% yesterday on signs the business was stabilising.

Until this year, ASOS had been the great success story of UK retailing and a darling of the stock market, helped by its appeal to internet-savvy twenty something and high-profile fans including singer Rita Ora and US First Lady Michelle Obama.

Having floated at 20 pence in 2001, ASOS shares hit a high of 71.95 pounds in February.

But they were then clobbered by a slowdown in growth due in part to the strength of sterling, as well as disruption from investments in warehouses, a fire at its Barnsley, northern England, depot in June, and the launch of its business in China.

ASOS said last month it would cut prices to reverse the slowdown in sales growth in foreign markets.

Chief Executive Nick Robertson said yesterday the strategy would take time to deliver, but that 10% growth a year in its active customer base for the next five to six years—"which would be not particularly heady growth"—would add another billion pounds of sales.

ASOS's pretax profit fell 14% to £46.9mn $75.9mn) in the year to August 31 2014. That was just above analysts' reduced expectations but down from the £54.7mn made in 2012-13.

Though total retail sales grew 27% to £955.3mn, the strength of sterling hit sales growth overseas, particularly in markets such as Australia and Russia.

Robertson, ASOS's founder and 9% shareholder, expects flat profits in 2014-15 and "a small increase" in 2015-16.

  GKN British engineering company GKN reassured that it was on track for growth in 2014, posting third quarter profit ahead of expectations, helped a strong performance in its aerospace and automotive units, and boosting its shares.

GKN, which supplies car makers such as Volkswagen with components, reported trading profit for the three months ended September 30 of £160mn($258.62mn), above a company-supplied consensus of £156mn.

The company also said that 2014 would be "another year of progress", repeating guidance given earlier in the year that currency headwinds would adversely affect its reported results.

Its expectation for "robust" aerospace markets, where it supplies components to Airbus and Boeing, was ahead of its previous forecast of "modest" growth.

GKN's shares rose 2.2% to 308.6 pence, making it one of the top risers on Britain's bluechip index. The stock had fallen 10% over the last month.

"A good update and better than the bears would have been expecting in recent weeks," Investec analysts said in a note.

Analysts at Societe Generale said GKN's execution "remains impeccable".

Analysts expect GKN to post annual pre-tax profit of £603mn for this year according to Thomson Reuters data, compared to the £578mn it made in 2013.

  Whitbread Whitbread is to expand into Germany after record demand for rooms at its Premier Inn hotels and a strong performance from the Costa Coffee chain gave the British group the confidence to take its business model into mainland Europe.

Whitbread, Britain's biggest hotel and coffee shop operator said it had acquired the freehold of a 200 room hotel in Frankfurt to trial its Premier Inn offering.

"We believe that the German hotel market is attractive for Premier Inn with its large scale, low level of branded budget penetration and relatively similar property market characteristics to the UK," it said.

The group, which is also expanding into the Middle East, South East Asia and India, announced its move into Germany as it reported first-half underlying pretax profit up 18.5% to £256mn, ahead of a company compiled analyst consensus of £249mn.

The group said the strong momentum from the first half had continued into the first few weeks of the second half, meaning it was well positioned to hit its full-year targets.

Whitbread also raised its interim dividend by 15.6% to 25.2 pence.

Its shares, which have soared 11% since the beginning of 2014 compared to a 7% fall in Britain's bluechip index, traded down 1.3% at 4,171 pence in early morning trading.

"The negatives around the investment case relate to a fairly anaemic dividend yield despite the increase, some tough comparatives to follow later in the trading year and a competitive trading environment which will continue fully to test the company's resolve," Hargreaves Lansdown's head of equities Richard Hunter said.

Calling the Premier Inn and Costa brands "the twin irresistible force" he also said Whitbread's half-year results defied economic gravity.

Whitbread has grown rapidly in recent years due to demand from cost-conscious customers for affordable hotels and takeaway coffee, which has driven growth at its Costa chain.

Total half-year revenue rose 13% to £1.3bn, including underlying sales growth of 9.6% and 6.1% at Premier Inn and Costa Coffee respectively.

  Swedbank Swedbank is to cut around 5% of staff to reduce costs to combat expected revenue pressures from a weak economy after reporting stronger-than-expected third-quarter profits.

Swedbank, the first large Nordic bank to report third-quarter earnings, aims to cut costs to 16bn Swedish crowns ($2.23bn) by 2016 from a projected 17.6bn in 2014. That includes reducing staff by 600-800 employees in Sweden, around 5% of total staff.

"The door for new recruits will essentially be closed," Chief Executive Michael Wolf said on a conference call.

Cost reductions would also come from benefits relating to Swedbank's acquisition of Sparbanken Oresund.

Swedish banks have performed more strongly than many European peers due to the country's robust economy. But Swedbank warned that bank revenues could come under pressure from a low interest rate environment, fierce competition and political uncertainty in its Swedish home market.

"Sweden's economic growth is being jeopardised by a shaky global economy and uncertainty about the new government's economic policies and weak parliamentary support," the bank said in a statement.

Nick Anderson, banking analyst at Berenberg, said he was impressed by Swedbank's savings programme and that the revenue pressure was an industry-wide problem in Europe.

"What I think is so important is that they are being very honest with us and that they are managing for such an environment whereas other, non-Swedish banks are still in denial about these revenue problems," he said.

The bank, which pulled out of Russia and Ukraine last year to focus on Sweden and the Baltics, warned that credit demand in the Baltics could be hit by turmoil in Ukraine but said it had not yet seen any direct financial impact on its business.

Swedbank, one of Sweden's biggest mortgage lenders, and Swedish rival SEB are two of the biggest banks in Latvia, Lithuania and Estonia.

Wolf said he did not expect Swedish banks to have any problems passing the European bank stress tests when results are released on October 26, as Swedish regulators already have done thorough stress tests on the Swedish banking sector.

Swedbank's operating profit rose to 5.73bn Swedish crowns ($799.6mn) from 5.19bn a year ago, boosted by lending to corporate and mortgage clients. The profits were higher than a mean forecast for 5.28bn in a Reuters poll of analysts.

Net interest income rose to 5.83bn, beating an analysts' forecast of 5.61bn and compared with 5.64bn a year earlier.

Loan losses were 235mn crowns in the quarter, bigger than an average forecast of 154mn.

  McDonald's McDonald's yesterday said profit slumped in the third quarter as global sales fell amid a food-safety scandal in China and intense competition in the US.

Net income plunged 30% in the July-September quarter from a year ago to $1.07bn, the US fast-food restaurant giant said.

Earnings per share of $1.09 were well below the Wall Street estimate of $1.37.

McDonald's president and chief executive Don Thompson was blunt about the results: "By all measures our performance fell short of our expectations." Thompson said the company's business and financial performance was "pressured by a variety of factors—from a higher effective tax rate, to unusual events in the operating environments in APMEA and Europe, to under-performance in the US, our largest geographic segment." Total revenue declined 4.6% to $6.99bn, missing expectations of $7.18bn.

Operating income fell 14% to $2.07bn.

Global comparable sales—sales at restaurants open at least 13 months—fell 3.3% from a year ago as the home of the "Golden Arches" attracted fewer customers in all major segments and the China meat scandal hit sales in Asia.

In the crucial US market, sales also fell 3.3% amid tough competition, and operating income dropped 10% "as initiatives to address the current market dynamics did not translate into improved financial results." McDonald's said the US segment's recently elected president, Mike Andres, was moving quickly to implement a more locally based strategy, including a simplified menu that features "locally relevant" menu options and new customisable options.

(c) 2014 Gulf Times Newspaper Provided by SyndiGate Media Inc. (Syndigate.info).

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