By Julia Love and Anya George Tharakan
(Reuters) - Apple on Tuesday reported quarterly results below Wall Street targets and forecast another disappointing quarter, while sales of iPhones, its most important product, declined for the first time.
Apple also said it was raising its capital return program by $50 billion through a $35 billion increase in its share buyback authorization and a 10 percent rise in the quarterly dividend.
Apple said it sold 51.2 million iPhones in its second fiscal quarter, down from 61.2 million in the same quarter a year ago but above analysts' estimates of about 50 million devices.
Earnings of $1.90 per share fell short of the average analyst estimate of $2 per share, according to Thomson Reuters I/B/E/S. Revenue of $50.56 billion missed expectations of $51.97 billion.
Shares of Apple fell 6 percent on heavy volume in after-hours trade, falling below $100 for the first time since February.
Apple was hard pressed to top sales from the year-ago quarter, which was boosted by the recent launch of a new generation of iPhones, Apple Chief Financial Officer Luca Maestri told Reuters in an interview. The phones featured larger screen sizes and sparked historic sales.
"The iPhone 6 is an anomaly, and so it creates a very difficult comparison for us," he said.
Apple forecast third-quarter revenue of $41 billion to $43 billion, short of the Wall Street consensus of $47.3 billion.
While Apple executives had predicted iPhone sales would decline this quarter, they must reassure investors that the drop represents a momentary roadblock for the company, rather than a permanent shift for the product that fueled its meteoric rise.
After years of blockbuster sales, many investors fear that the iPhone has reached a point of saturation, spelling the end for Apple's era of exponential growth.
The company has yet to present another device that can drive sales on that order, though last year it released the Apple Watch, its first new product without legendary co-founder Steve Jobs at the helm.
"Apple is going to be put in a position, in a defensive position of how they show growth, and this is an area that Apple has not had to do for the last few years," said Patrick Moorhead, an analyst at Moor Insights & Strategy.
In March, Apple released the iPhone SE, a smaller, 4-inch-screen phone featuring much of the company's latest technology. Although sales of the phone were not captured in the second quarter, the device is off to a strong start, particularly in emerging markets, Maestri said.
"The situation right now around the world is that we are supply-constrained," he said. "The demand has been very, very strong."
Although Apple's revenue in Greater China fell 26 percent from the year-ago quarter, Maestri stressed that the company's commitment to the market, its second largest, is unchanged.
"We continue to be extremely optimistic about the Chinese market, and we continue to make a lot of investment there," he said.
Rather than buying the iPhone 6S and 6S Plus, many consumers are waiting for the release of the expected iPhone 7 later this year to upgrade their phones, according to analysts.
In reaction to Apple's report, shares of its suppliers Skyworks Solutions , Qorvo, Broadcom and NXP Semiconductors all fell 1 percent or more on Tuesday.
Apple had planned to release its quarterly results on Monday but delayed the event by a day due to the memorial service for Bill Campbell, a longtime Apple board member who mentored many prominent executives in Silicon Valley.
(Reporting by Julia Love in San Francisco and Anya George Tharakan in Bengaluru; Editing by Cynthia Osterman)