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Apple optimistic about sales, with cuts in iPhone prices help in China

Apple on Tuesday posted stronger-than-expected third-quarter revenue, and Chief Executive Tim Cook said iPhone sales began to stabilize in China, a sign that price cuts by Apple Apple are helping to reduce sales.

ARCHIVE PHOTO: An Apple logo printed in 3D is seen in front of a stock chart shown in this illustration taken April 28, 2016. REUTERS / Dado Ruvic / Illustration

IPhone sales were the biggest decline ever, falling 17 percent in the second fiscal quarter from a year earlier and slightly losing analysts' expectations. But Apple executives said a rebound in iPhone sales at the end of the second quarter, coupled with growth in sales of services and handheld devices, left them optimistic about the current quarter.

Stocks rose more than 5 percent to $ 211.50 after the close of trading after Apple announced the results.

Apple said it expects revenue of between $ 52.5 billion and $ 54.5 billion for the current quarter ended June, above the analysts' average estimate of $ 51.93 billion, according to Refinitiv's IBES data.

In an interview, Apple chief executive Tim Cook said iPhone sales began to strengthen during the last few weeks of the second fiscal quarter.

"Looking at iPhone results through the second quarter, the results were stronger than the previous year in the last weeks of the quarter. We also saw a similar result in China, "Cook told Reuters in an interview. "These, coupled with continued success with wearables and so on, give us some confidence that things are getting a little better."

Apple reported net earnings per share of $ 2.46 for the March quarter, compared with the Wall Street average estimate of $ 2.36.

Apple reported that iPhone revenue was $ 31.05 billion, slightly below analysts' estimates of $ 31.10 billion, according to FactSet data.

Revenue from services, which includes sales from Apple Music, the App Store and other companies, reached $ 11.45 billion, compared with estimates of $ 11.32 billion, according to FactSet.

Apple has struggled with a slowdown in iPhone sales in key markets such as China and saw its first decline year after year in iPhone revenue for the year-end shopping season.

The slowdown was in part due to the high cost of the iPhone and the competition from rivals like Huawei Technologies, Xiaomi, Oppo and Vivo – which sell cheaper phones with iPhone-like features.

But Cook said price adjustments in China, coupled with lower Chinese taxes on the iPhone and the trade-in and financing arrangements offered by Apple, helped iPhone sales rebound at the end of the quarter. Cook also said it was "optimistic" that the United States and China would soon reach a trade agreement.

"The business relationship, compared to the previous quarter, is better. The tone is better, "Cook told Reuters. "The sum of all this together, this has helped us."

Investors are looking at Apple's service business to boost growth, as iPhone sales are slowing. Last month, Apple unveiled a new offering of credit card and subscription services for news, television and games, though only news subscription is currently available for purchase.

Apple said on Tuesday it had 390 million subscribers of its own and third-party services on their handsets. The company has set a target of 500 million by 2020.

FILE PHOTO: Apple CEO Tim Cook addresses the "Never is Now" conference of the Anti-Defamation League in New York, USA, December 3, 2018. REUTERS / Brendan McDermid

Apple also surpassed analyst expectations for its business, generating sales of $ 5.13 billion, compared to estimates of $ 4.79 billion, according to FactSet data.

For the second fiscal quarter ended in March, Apple reported revenue of $ 58.02 billion, above the analysts' average estimate of $ 57.37 billion, according to Refinitiv data.

Apple also reported that its board authorized another $ 75 billion in share buybacks and raised its dividend by 5 percent. Apple said it spent $ 27 billion in share buybacks and dividends during the fiscal second quarter, which is a record for the company.

Report of Stephen Nellis in San Francisco; Editing by Lisa Shumaker

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