The big, obvious take away from Apple’s Q4 earnings report earlier today was that it once again crushed the estimates. And not just its own forward-looking estimates, which are always laughably low, but even the estimates of the most optimistic analysts — by a lot. But some of the other numbers from today were just as impressive, and some of the information, even more interesting.
Apple now has $34 billion in cash in the bank. Apple watchers will also know that they have no debt. So what are they going to do with all this money? That’s $10 billion more than they had a year ago, and this past quarter alone, they added about $3 billion to the pile. Apple keeps saying that it will use the cash for “preservation of capital,” which is a fancy way of saying that they’ll be take little risk and keep it close.
That’s more cash than Microsoft has, and for some comparison, $34 billion is $10 billion more than the overall market cap of Yahoo. It’s also about $1.5 billion more than the market cap of eBay, and $4 billion more than the market cap of Dell. It’s almost exactly the same as the market cap of News Corp.
Apple’s stock could open tomorrow at or near its all-time high. Let me repeat that, all-time high. You probably haven’t heard that too often over the past year, but it’s true. Apple’s all-time high is $202.96 a share, which it reached on Dec. 27, 2007, nearly 2 years ago. Today, after earnings were released, the stock shot up over 7%, pushing it past $203 a share. It has since settled a bit lower, but it’s not out of the question that the stock could hit the mark again tomorrow during regular trading hours. Apple’s stock price has more than doubled over the past 7 months alone.
Sales of the iPod touch were up 100% year over year. This is especially impressive considering two things. First, overall iPod sales were down, once again. Second, despite indications that they would, Apple did not add a camera to the iPod touch during that line’s refresh a few months ago. Instead, the iPod nano got the camera, but it would seem that the iPod touch is still the hot sibling in the family.
OS X Snow Leopard came out of the gates twice as fast as OS X Leopard. This really shouldn’t be all that surprising, considering the upgrade costs just $30. Still, impressive.
Half billion apps downloaded in the last quarter alone. We already knew the big 2 billion app download milestone was hit, but Apple clearly stated that a full half billion of those came just in the past three months. That’s huge.
Portable sales were up 35% year over year. Apple didn’t want to seem to talk about its desktops at all when it came to the Mac business (which had its best quarter ever). Instead, it’s very clear that notebook sales are the driving force (nearly 3/4th of Mac sales now). Of course, some new iMacs, which may launch as soon as tomorrow, could help balance the sales a bit more.
China is getting the iPhone on October 30, but Korea should get it this quarter as well. Obviously China is a huge key to the Apple’s plan for international success, but getting the iPhone in Korea won’t hurt either. Apple COO Tim Cook made a quick reference to the unlocked iPhone issue in Asia, and noted that the company is excited to finally be able to meet a demand that is clearly there.
Apple has some new products coming that have relatively low margins and cost a lot on to ship in. The obvious guess here would be Apple’s tablet. But the latest rumors had the thing being announced in January, but not shipping until closer to mid 2010 — neither of which are fiscal year Q1 (which ends December 31). Instead, the lower margins could well be related to new iMacs and MacBooks that have been rumored to be cheaper.
But the more interesting bit comes from Cook’s wording about why Apple spending more on shipping: “In general, we spend more in freight in Q1, but this increase is larger than usual. I’m sorry, I can’t be specific on the product, but it’s an abnormal sequential increase.” That would seem to suggest a new type of product outside the ones it already offers, like the iMac and MacBook, which it has, of course, shipped in the past. Could the tablet come early? It seems unlikely, but something is causing Apple to worry about out-of-the-ordinary shipping costs.
Apple has until Q1 2011 to use the new accounting rules. The changes allow Apple to count money made of off its so-called “subscription” devices, the iPhone and the Apple TV, immediately, rather than spreading the money over a 2-year period. While they were approved in September, Apple is still debating on when to start using them, and will not for Q1 2010. Cook noted that Apple was “pleased” with this new rule.
[photo: flickr/stu_spivak]
too bad i sold all my apple stocks at below $10 price over 10 years ago
yes, that would have been one to hang on to in hindsight.
Yeah, well, It’s easy to say now…
Yeah, well, he did say “in hindsight”.
I had some cash in 1997 and convinced my wife to let me buy some cheap Apple stock – $19/share and two splits ago because I knew Steve Jobs would prevail and do something insanely genius. I’m not up there with Forrest Gump but my retirement is looking a bit rosier these days.
I bought at $22 in the 1990s and sold at $11, because it seemed Apple was about to implode.
Bah.
Understandable. At the Apple wasn’t so hot, so don’t beat yourself up about it.
I bought some AAPL about a year ago at around $80. My friends made fun of me but it worked out pretty well, I’d say.
that was really one of the easiest calls in the imploding stock market last year. don’t listen to your friends…
Unlikely, but perhaps the new product with the extra shipping costs is the rumored Apple branded TV with built in iTunes store, etc.
Don’t you know!?!? they are going to try buy microsoft in cash!
And they’d get what in return? Balmer?
Are there any news about Apple-TV or even an Apple TV-set?
Most of that Money was made selling iPods and iPhones, its good to see Apple in a healthy position.
Hmm, Apple just keeps on impressing…
34 billion eh? with that kind of money they could buy a country – I suggest the bankrupt state of Ireland. It’s pretty run down and shabby and the weather isn’t the best but the beer is pretty good and it gets you a seat at the EU table, go for it Steve!
The extra shipping costs in Q1 will probably be that Apple will recall all iPhone’s G1 & 3G out there and swap them for a 3GS for free!!
Unusual shipping costs? It has to be that rumored Apple TV set…
Yeah, a tablet’s weight vs. a TV. They’d have to be shipping millions of tablets for the first weekend if it was THAT unusual.
I’m hoping it’s iPhones for South Korea. The local location tech BS has been lifted…should be soon (I hope, just moved here).
This $34 Billion amount for cash in the bank does not seem to mesh with what they posted in their financial statements, which shows a more modest amount of $5.2 Billion.
It’s still a lot of money.
It’s also a very lazy balance sheet. I fail to see how that sort of cash is always seen as some sort of positive by people outside of the investment industry.
you have to include short term investments, as well.
Unusual shipping costs probably means large or small or more delicate. So new sensitive mouse that is similar to bamboo drawing pad or could be an Apple tv.
“That’s more cash than Microsoft has…”
Of course, Microsoft gave out a $32 Billion dividend in 2004 and has been paying an increasing quarterly dividend ever since. The current 0.13$ dividend equals to more than $1 billion every quarter.
Shh! Don’t cloud the topic with facts!
Yes, they’ve had to, since MS stock has remained relatively flat over the last 5 years, while Apple stock has shot through the roof. If you held Apple stock, you could care less about a .13 dividend when your stock goes up like crazy.
On a side note-Apple could buy ATT (or help them invest in more towers), thus removing the #1 complaint from people about the iPhone, and also could give every Mac laptop 3G internet….
Does that count the bit where Apple’s stock value halved in 2008?
What short memories people have.
Your problem is your equating a stock whose value is entirely locked in its growth potential against one that doesn’t have that growth potential but pays a dividend. If you actually knew anything about investing you would know the two are different.
Exactly, at double the shares, this is referred to as a stock split.
Where it halved because the real steve got sick. Yeah. Then it went up 160% and shows no sign of stopping. Think about it, when a recession quarter outperforms all previous quarters except last holiday’s season (iPhone 3G + new unibodies + iPod touch + higher iPod sales), that’s the sign of a strong-@$$ company.
They have to give dividends, that’s what you do when your stock doesn’t move in 10 years
No, it is a different philosophy
Not surprising — Apple is going to continue to grow for quite a long time if they keep innovating at the rate they have the past several years.
Must be the new Airport Express 3×3 boxes…
Well… I don’t know.
Apple’s had a great quarter for a company of Apple’s size and portfolio but what do the figures tell us?
* Less than half of Apple’s sales are ex-US. This suggests dificulty in penetrating foreign markets.
* Mac sales are good but it’s still 3.05 million a quarter compared to about 60 to 70 million total.
* iPod sales are down with the emphasis firmly on iPod Touch as the winner and Nanos and Classics as the losers.
* iPhone 3GS sales are good but also worrying – there is no massive shift in its markets over the 3G – a rise of 7% is kind of OK. Ex us sales (assuming 50%) are, at best, 4 million which means they’re still getting their clock cleaned by Nokia.
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I wonder how much room for growth Apple has? We seem to have moved past the 35%-40% growth phase into high single/low double digits and I’m not sure how much wiggle room they have left.
I am always surprised that Apple hasn’t added a cell card to the AirPort Express. But, with respect to the tablet, shipping or announcing now for pre-Christmas sales would allow apps in January or so. Shipping in January –> early summer.
It makes a lot of sense to get this moving.
“Sales of the iPod touch were up 100% year over year.”
Sure. Everyone who loves the iPhone but can’t abide AT&T bought an iPod Touch.
Facts at this time:
Last Trade: 199.289
Trade Time: 3:42pm ET
Change: 9.429 (4.97%)
Prev Close: 189.86
Open: 200.47
Bid: 199.26 x 300
Ask: 199.27 x 400
1y Target Est: 206.55
Mark Cap.: 178.4Bn.
Cash: 34 Bn.
Loan: Zero.
As we see, near 20% of the Market Capitalization of Apple, is in Cash. No Loans. Apple only has, by now, three success lines: Computers, Music and Phones. In the last two, Music and Smart Phones [Giga OM, call the iPhone a Super Phone] are leading the competence. I bid for Apple, when Dr. Amelio, bought the NeXt OS from Steve Jobs [previous Cannon bought the Hardware], and when I see, Bill Gates, put near $51 Millions in Apple Stock I think, that is time to believe in Apple.
Today, for must people Apple looks like the must under estimate company. But just wait, when Apple build their own processors inside all their machinery and run multi core processor in the mid term future in iPhone. We are still waiting for full iChat and private communication there…
Another explanation for the higher shipping costs is that based on last quarter’s blow-out sales, they upped their internal forecasts for Q4 and needed to increase inventories at the last minute. That would translate into higher shipping costs, particularly if they need to move some of it by air to get it here in time.
Doesn’t it seem like Apple is just stoking the rumor mill here? Sorta like what they did last year with the Mac Mini, possibly leaking several shots to increase buzz. All their little hints, all their non-denials, etc. It sure seems like, if the tablet wasn’t coming, they’d try to stop the rumors, not keep fanning the flames.
Apple has always had cash. Back in the dark years of the 1990s, it maintained $4B in cash when the stock traded at $11/share. So this is typical of Apple to hold a lot of cash on its balance sheet.
This does many things: The company doesn’t need to lever up to add value, it has it in cash. It also doesn’t need to distribute in a dividend, because that would induce leverage to compensate for the loss in value to prevent a takeover. It also allows the company to enter new markets (diversify) through strategic acquisition or brute force (MP3 music players–iPod) and minimize the risk of doing so by using cash versus any form of additional outside cash infusion (leverage, floats, etc.)
It is an innovative way to utilize large cash reserves which is atypical in current US corporate financial management.
The way Apple runs its business is innovative and prudent. It has increased shareholder value and contributed to growth. Rather than ponder what should do with the cash, observe what they are doing with the cash–not through spending it, but how it can help them with growth in unique ways.