By Stephen Nellis
April 30 (Reuters) – Apple reported sales and earnings that exceeded Wall Street expectations on Thursday, with CEO Tim Cook saying sales in China were "going in the right direction" as the country reopens the new coronavirus.
But Cook said it was impossible to predict overall results for the current quarter due to the uncertainty created by the virus.
With its global brand, few American companies have been exposed to the spread of the coronavirus, such as Apple, whose iPhone sales fell in the March quarter, with the forced sale of devices, only in many places. Sales of services like streaming television content have increased with billions of people locked in their homes. China, where the virus was first detected, is an important market for Apple, providing about a sixth of its total sales, and is also home to most of Apple's contracted factories.
Apple saw sales in China of $ 9.46 billion, down less than $ 1 billion from the previous year, a potential sign of how the company will fare as other markets emerge from the blockades.
"When the blockade took effect in late January, we saw a very sharp drop in demand in February," Cook told Reuters. Apple slowly reopened Chinese stores, with all of them running again in mid-March. "In relation to February, we saw a good improvement in March and another in April. China is going in the right direction."
Apple reported sales of $ 58.3 billion and earnings of $ 2.55 per share in the second fiscal quarter ended in March, results above the previous year of $ 58 billion and $ 2.46, and above estimates from analysts of US $ 54.5 billion and US $ 2.27, according to data from the IBES Refinitiv.
Cook said that during the first five weeks of the second fiscal quarter, "it was an incredible time when we were growing very fast and were essentially ready to reach the high point of our guidelines," between $ 63 billion and $ 67 billion in sales. The quarter quickly changed when the virus spread in China, reaching Apple's supply chain and sales, and then it hit the rest of the world when Apple's contract stores and factories went back online. Apple broke with its usual practice of providing an estimated sales range for the current quarter.
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"The question is, when stores reopen, when shelters open, when is it comfortable to go back to work in stores and get consumers out?" Cook said. "Instead of pretending that we can design it, we're being very direct and saying that we don't have the visibility to do it."
In February, Apple warned investors that it was unlikely to comply with its financial guidelines for the March quarter and that it could face an iPhone shortage as blocking orders in China kept factories closed and forced Apple to close its stores for over there.
Apple reopened its stores in China in mid-March and factories resumed production – but at the time, the pandemic spread to Europe and the rest of the world, which left Apple stores outside mainland China, Hong Kong, Taiwan and South Korea.
The closings, along with blocking orders in many of Apple's major markets, such as the United States and Europe, have forced Apple and its largest sales partners in the retail and mobile operator sectors to make the majority of sales online or through the sidewalk bite, including the newly launched iPhone SE 2.
Cook declined to comment on whether Apple faces disruptions in the device supply chain that will be launched later this year, saying the company does not comment on future products. He said Apple's supply chain was "up and running by the end of March".
Cook said he was pleased with anticipated sales of the new device, along with the new Macs and iPads launched during the second fiscal quarter, but that Apple will be subject to broader market forces in the coming months.
"We are clearly not immune to the macroeconomic environment – I'm not sure that almost anyone is immune at the moment," Cook told Reuters. "We are mainly focused on doing what we can to help the situation that the world is in, and we will let the economy take care of itself. Compared to the last part of March and the beginning of April, we have seen a second best second in April" .
Apple said iPhone sales were $ 29.0 billion, down from $ 30.9 billion a year ago, compared with analyst estimates of $ 28.4 billion, for FactSet data.
Sales to Apple's services segment, which includes iCloud storage, as well as its streaming services for music and television programs, were $ 13.4 billion, compared with analyst estimates of $ 12.9 billion , according to FactSet data. Cook said Apple had 515 million subscribers to applications and services on the Apple platform, an increase of 125 million over the previous year.
Apple's apparel and accessories segment, which includes AirPods and Apple Watch, was $ 6.3 billion, compared with analysts' estimates of $ 6.7 billion, according to FactSet data.
(Reporting by Stephen Nellis in San Francisco and Munsif Vengattil in Bengaluru; edited by Lisa Shumaker)