Today: Apple meets profit expectations but sales come up short as iPads seemingly decline in popularity, part of a raft of earnings reports from technology companies including Microsoft, EA, VMware and Intuitive Surgical.
The Lead: Apple's iPad troubles top busy earnings day
Apple continued to show off massive profits and sales in its earnings report released Tuesday, but the Cupertino company's tablet offering continued to slip in the second quarter of the year, leading Apple to post revenues below outside expectations on a busy earnings day for technology companies.
Apple announced net income of $7.7 billion, or $1.28 a share, on sales of $37.4 billion, record returns for what is typically the slowest quarter of the year for the world's most valuable company. Apple's profits easily beat expectations as the company sold 35.2 million units of its biggest moneymaker, the iPhone, but revenues were held back by sales of just 13.3 million iPads, down 19 percent from the previous quarter and 8 percent from the same quarter a year ago.
Apple's expected announcement of a larger iPhone in the fall could be an even bigger drag on iPad sales, as consumers could choose to buy a larger iPhone and avoid the iPad or iPad Mini, but CEO Tim Cook pointed to a recent deal with IBM for the true future of the iPad.
"Penetration in businesses for iPads is still low," Cook noted in a conference call Tuesday. "We think there is substantial upside in business."
Apple faces tough competition in the enterprise game from Microsoft, but the Washington tech giant was held back by its attempt to challenge Apple's iPhone in results released Tuesday.
Microsoft reported net income of $4.61 billion, or 55 cents per share, on sales of $23.4 billion. In the reverse of Apple, Microsoft met expectations with revenues but came up short in profits, explaining that the recent purchase of Nokia's phone business -- a move that put Microsoft in more direct competition with Apple as a smartphone manufacturer -- cost it 8 cents a share in income, a likely reason for the massive layoffs Microsoft is planning in that division.
Electronic Arts continued a bounceback year that has seen its stock shoot higher with earnings results that easily topped expectations, especially in profits. Redwood City-based EA announced net income of $335 million, or $1.04 a share, on sales of $1.2 billion, representing year-over-year profit growth of 50.9 percent and sales growth of 27.9 percent. However, EA tamped down expectations by delaying the release of the much anticipated game "Battlefield Hardline" until early 2015 and "Dragon Age: Inquisition" until November, which caused the company to bring down forecasts for the rest of the year.
Palo Alto software company VMware posted profits of $167 million, or 38 cents a share, on sales of $1.46 billion as parent company EMC faces pressure to divest its 80 percent ownership of the company. The same activist investor that is fighting EMC, Elliott Management, has already taken a run at Juniper Networks and helped convince its new CEO to lay off workers; Sunnyvale-based Juniper boosted its margins and posted net income of $221.1 million, or 46 cents a share, on sales of $1.23 billion.
Another Sunnyvale company, surgical robot maker Intuitive Surgical, posted a rebound quarter after beginning shipments of the newest version of its sole product, the da Vinci robot system -- the company said that more than half of the 96 systems it sold in the quarter were the new da Vinci XI. Intuitive Surgical announced profits of $104 million, or $2.77 a share, on sales of $512.2 million, showing off a 135.7 percent profit gain from the previous quarter even as revenues advanced only 10.2 percent. San Jose chipmaker Xilinx closed out its fiscal year by producing $156 million in income during the quarter, or 53 cents a share, on sales of $617.8 million.
Apple lost its gains from Tuesday's regular session after announcing earnings, falling back down near $94 after closing with a 0.8 percent gain at $94.72, while Microsoft added less than 1 percent in after-hours action following a day of no movement. EA declined slightly after failing to move in regular trading, VMware moved close to $97 after closing with a 3.3 percent advance at $96.03, and Juniper dropped to less than $24 after adding 1.5 percent Tuesday to close at $24.82. Intuitive Surgical and Xilinx had the biggest after-hours swings following their reports: Intuitive Surgical zoomed more than 10 percent higher, topping $434 after closing at $392.16, while Xilinx plummeted to less than $44 after closing at $48.15.
SV150 market report
Up: GoPro, VMware, LinkedIn, Intel, Hewlett-Packard, Pandora, Juniper, SolarCity, Oracle, SanDisk, Yahoo, Intuit, Google, Apple, Workday
Down: Netflix, Zynga, Applied Materials, Twitter, Tesla, Nvidia, Facebook
The SV150 index of Silicon Valley's largest tech companies: Up 12.05, or 0.79 percent, to 1,543.63
The tech-heavy Nasdaq composite index: Up 31.31, or 0.71 percent, to 4,456.02
The blue chip Dow Jones industrial average: Up 61.81, or 0.36 percent, to 17,113.54
And the widely watched Standard & Poor's 500 index: Up 9.9, or 0.5 percent, to 1,983.53