Strong iPhone prices, cash plans buoy Apple shares after muted outlook

(Reuters) – Stronger iPhone prices and hints by Apple Inc on Thursday that it could return more than half of its $285 billion in cash to shareholders eased concerns among investors, even as the world’s biggest technology company gave a disappointing revenue outlook for the current quarter.

Apple also reported it sold fewer iPhones over the holiday quarter than Wall Street had expected.

But the revenue outlook for the first three months of 2018 “was not as bad as some feared,” said Jun Zhang of Rosenblatt Securities Inc. Apple’s comments about plans for its $163 billion in net cash helped boost shares 3.3 percent to $173.48 in after-the-bell trading.

“Over time, we are trying to target a capital structure that is approximately net neutral. We will have approximately the same level of cash and debt on the balance sheet,” Apple’s chief financial officer, Luca Maestri, told Reuters in an interview.

“We’re going to take that balance down from $163 billion to zero,” Maestri said, referring to Apple’s current level of cash net of debt.

He did not say whether the reduction in net cash would come in the form of returning capital to shareholders, capital expenditures or acquisitions.

Apple’s user base grows, but analysts probe for more detail

“That’s something to watch as we roll further into 2018,” said Miller of Gullane Capital. “Does that continue to stagnate, or was that a one-time bump in the road?”

Maestri also said Apple’s installed base of active devices reached 1.3 billion, 30 percent higher than two years ago and representing an expansion of potential customers for the services business.

Apple said it expected its tax rate for the March quarter to be 15 percent following changes in U.S. tax law. The company said last month it plans to make a one-time tax payment of $38 billion on its overseas cash and has a five-year, $30 billion U.S. capital expenditure plan.

The company did not say how much of its overseas cash it would bring back to the United States in the short term and gave no new information about its capital return program, which it typically updates each April.