NEW YORK  - Apple is bumping up against its iPhone limits. The smartphone market is mature, and soft demand for the $1,000-plus X model suggests the company led by Tim Cook has maxed out on pricing. The company’s just-ended quarter - revenue rose 16 percent to $61.1 billion - shows Apple can still sell a lot of phones and more accessories and services. And a robust balance sheet means it plans to repurchase another $100 billion in shares and increase the dividend. But the lack of a hot product could start to test investors’ patience.

The smartphone race is largely over, with Apple and Google’s Android operating system the winners. Global handset shipments declined 0.5 percent last year, estimates market-research firm IDC, and should grow less than 3 percent annually over the next five years. Apple might steal customers, but that’s a difficult task, and one that grows harder as the pace of technological progress slows. Apple sold only 3 percent more phones in the quarter compared with a year earlier, despite what it said were major improvements.

Apple has used design and branding to raise prices. The average price of an iPhone rose 11 percent from a year earlier in the latest quarter. That’s unusual in tech, as hardware prices tend to fall. But it’s questionable whether the Cupertino-based giant can go much higher. Average sales prices fell 9 percent from the preceding quarter, undershooting analysts’ estimates, presumably implying a lower ratio of Xs sold.

The company can still wring more dollars out of buyers. Service revenue, which includes the app store, streaming music and online storage, rose 31 percent to $9.1 billion. Sales of “other products” also rose 38 percent to $4 billion, thanks at least in part to increased sales of things like headphones to iPhone users.

The shares jumped more than 3 percent in after-hours trading on Tuesday, yet excitable tech investors could lose interest in Apple’s comfortable – if capped – immediate future. Back in 2016, disappointment with the iPhone 6S sparked talk that Apple had lost its edge, and the stock underperformed the S&P 500 multiple for several quarters. Apple’s more generous payout to shareholders should take some of the sting out of any similar disenchantment today. But the company will face increasing pressure to show it has more tricks up its sleeve.

On Twitter https://twitter.com/rob_cyran

CONTEXT NEWS

- Apple on May 1 reported that revenue totaled $61.1 billion in the quarter ended March 31, up from $52.9 billion in the same period a year earlier and ahead of sell-side analysts’ consensus estimate of $60.8 billion, according to Thomson Reuters I/B/E/S. Earnings rose 25 percent to $13.8 billion. At $2.73 a share, earnings were five cents higher than the consensus estimate.

- The company also announced a new $100 billion share-buyback program and a 16 percent increase in the quarterly dividend, to 73 cents a share. It said it would complete a previously authorized $210 billion buyback program in the current quarter.

- The company sold 52.2 million iPhones in the latest quarter, up from 50.8 million in the same period a year earlier.

- For previous columns by the author, Reuters customers can click on

- SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe

 

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Tom Buerkle and Ben Kellerman)

© Reuters News 2018