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Apple Spreads the Largesse

Only one group must be somewhat unhappy about events at {complink 379|Apple Inc.} right now — the competition. I feel its pain. The consumer electronics company blew away all forecasts for the fiscal third quarter ended June 25 with staggering sales, net income, and product shipment numbers.

I was in awe after reviewing the quarterly results. Sales rose to $28.6 billion from $15.7 billion, or up 82 percent, while net income more than doubled to $7.3 billion from $3.3 billion. (Click here for Apple's third quarter results.) For now, I'll just let the words of Apple CFO Peter Oppenheimer set the record straight:

    We were thrilled to sell a record 20.3 million iPhones compared to 8.4 million in the previous June quarter. Recognized revenue from iPhone handset and accessory sales were $13.3 billion during the quarter compared to $5.3 billion in the year ago quarter, an increase of 150 percent. We sold a record 9.2 million iPads during the June quarter compared to 3.3 million in the year ago quarter, an increase of 183 percent.

    We established the new June quarter record with sales of 3.95 million Macs representing a 14 percent increase over the year ago quarter's result. This growth is more than 4 times IDC's most recently published forecast of 3 percent growth for the PC market overall.

Aside from the bewildered opposition who must be wondering what else they could do to catch up, Apple is making a lot of people deliriously happy right now. The list of contented Apple public includes customers, employees, retailers, suppliers, contractors, shareholders, banking institutions, and governments (local, national, and foreign). Apple is thriving, extremely profitable, and a rock star on the equity market: all of the groups noted above are benefiting from the company's booming success.

Even Uncle Sam must be tremendously pleased with Apple. In my opinion, corporate and personal income tax receipts for this year in the United States will bump up on the basis of larger-than-expected contributions from Apple. US congressional leaders and even the president should have taken time off their budgetary and deficit discussions on Tuesday to applaud the results announced by the world's most valuable electronic company (and perhaps they did).

Apple reserved $2.2 billion for its fiscal third quarter income tax — more than double the $1 billion it budgeted in the year-ago quarter. For the first three quarters of its current fiscal year, Apple expects to pay $6.1 billion in income tax versus $3.4 billion in the comparable fiscal 2010 period. This won't make a dent on the US government's $14 trillion-plus in debts, but it's no piddling amount either.

Investors are happy too, and banking institutions must be salivating over the company's growing cash pile. Apple's stock price has jumped more than 5 percent in pre-market trading to reach $396.75 and should burst through $400 by the opening hours. Analysts are also raising their 12-month share price target for the company on expectations its fourth quarter revenue and profit forecasts would prove to be too low — as has been the case in the past.

Even the competition is benefiting somewhat from the Apple miracle. Until Apple embraced the tablet PC market, many of its rivals did not even pay any attention to the sector, and any sales they have made in the segment since can be partly attributed to the big splash the company's iPad made in the consumer and, increasingly, the enterprise markets.

Aside from the huge run-up in the company's share price — and benefits from trading one of the more fluid stocks in the market — banking institutions must be drooling at Apple's cash hoard. The company reported its cash and cash equivalents and short- and long-term marketable securities rose 49 percent, to $76.2 billion in the latest quarter from $51 billion at the end of its September 2010 quarter. Whoever is managing this money has a “sweet” problem; they must ensure good returns for Apple, but they certainly have a lot to play with, and the commissions would naturally be hefty in return.

And there is more on the way, for everyone. Apple's sales will easily top $100 billion for its 2011 fiscal year. Already, sales for the first nine months of the year have reached $80 billion, and with a forecast for fiscal fourth quarter sales of $25 billion, the company is set to eclipse its 2010 record of $65.2 billion. Are you sharing in the Apple largesse?

14 comments on “Apple Spreads the Largesse

  1. eemom
    July 20, 2011

    I don't want to be a glass half-empty person but….

    Apple saw a huge surge of iPhone sales after it opened up sales to Verizon customers.  There were a lot of Verizon customers who were “saving” their upgrade until Verizon carried the iPhone (my husband is one of them).  My concern lies in whether Apple will be able to sustain and grow their numbers for the iPhone after this surge is done.  I know they will continue to sell iPhones in future upgrades and models, but will it equal the large amount they enjoyed with the move to Verizon.

    I have the same concern with iPads.  The proliferation of the iPad started last year but is continuing strong with high accolades from users and critics alike.  Apple has to be working on what it will offer the consumer next to sustain or grow its iPad sales for the next few years.  I purchased a first generation iPad, I would love to have the second generation, but, it is too costly to upgrade.  Will they eventually reduce the price?  How will that affect their overall sales.

    I think Apple's results are wonderful for the industry.  I do however worry about exponential growth and how companies will success in maintaining it.

     

     

     

  2. JADEN
    July 20, 2011

    With the way Apple moves across the ccomputer and home entertainments, their success is attributed to branding value. People don't just buy products, they buy brand, when customers are in doubt of what to buy, they buy what the other people have.

  3. AnalyzeThis
    July 20, 2011

    @eemom, you're correct about Verizon and that certainly helped boost sales an unusual amount. I do think that this type of growth in iPhone sales certainly cannot be expected to continue at this pace… but I acknowledge that there is the possibility that it just might.

    But regardless, Apple certainly has a nice problem: people aren't really debating about if Apple will be successful in the future, they're just arguing about the extent of their success: will they be INCREDIBLY successful or “merely” very successful?

    It's rather amazing to see all this given that many of us can clearly remember the Newton-era Apple which seemed destined for complete and utter failure. Which I had purchased some cheap Apple stock back then…

  4. eemom
    July 20, 2011

    Thanks Dennis.  That's my point.  Will Apple be able to sustain the level of growth expected.  I worked with one of the early Apple Computers when I was in college – now I'm dating myself – but had I invested in Apple then rather than worked endless hours, perhaps I'd be a richer person.

  5. Barbara Jorgensen
    July 20, 2011

    Me too, eemom. Never bought stock in Apple. I just re-watched Forrest Gump recently: there's a scene where Forrest talks about Lt. Dan investing his Bubba Gump Shrimp profits in a “fruit company.” The envelope containing the dividend check had the Apple logo on it.

    Sigh….

  6. jbond
    July 21, 2011

    This is great news for Apple and their consumers. I am a little curious on what they have in store for the future. Apple is living large in its second life. They are doing much better than the previous Apple of the 80's and early 90's. Since Apple has a huge lead in multiple market segments like smartphones (Iphone), music and video players (Ipod), and tablets (Ipad), what is their next venture? You can only sell so many of your current offerings at premium prices before everybody has one and aren't in the market for a replacement. Apple is doing great now, but hopefully they are looking well into the future and eyeing up other potential marketable products.

  7. DataCrunch
    July 21, 2011

    Apple will eventually reach a plateau in terms of growth, but that may be a while since the company has yet to reach its full potential.  Just recently, Apple announced their plans to partner with China Mobile, which currently has 600 million potential iPhone users.  China is still an untapped market for Apple and there may not be any slowdown for Apple any time soon.

  8. Eldredge
    July 21, 2011

    Guess we'll have to look for the next fruit company…..

  9. FLYINGSCOT
    July 21, 2011

    I have been married a good many years now and over those years have learned the art of selective hearing when it comes to my wife's badgering and nagging me to do the chores etc.  So to keep my sanity I have learned to appear as if I am listening but inside I am pondering other worldly things.  However about 5 years ago my wife said we should buy a lot of Apple stock but I poo-pooed the idea saying it was way overpriced and that company would not go much further.  So on to the lesson for today……ALWAYS LISTEN TO YOUR WIFE…….it leads to a long,  happy and prosperous marriage.

  10. hwong
    July 21, 2011

    Haha. That's an interesting post. However, I think that you might not have been 100% wrong when you resisted buying Apple a couple years back. Who would have known that Apple keeps being creative in its product and become mainstream in the market?  I mean, I would have thought the same thing because iphone is an iphone. How much more innovative could it get?

  11. Mr. Roques
    July 22, 2011

    I can only say WOW! (as the rest of the World). Apple continues to amaze me. 

    What are good options for all that cash? Maybe vertically integrate and buy a few factories in China? or what options do you think they are looking into?

  12. Wale Bakare
    July 23, 2011

    Infact Apple will continue to rule world of smartphones. @Mr. Roques, what factories do you have mind Apple should purchase in China, Assembly plant?

  13. Anna Young
    July 24, 2011

    Reading the article, I could only say “Wow” amazing.Apple is truly worth applauding.

    Certainly Apple did “spread the Largesse” I'm sure the US government,(expecting to receive $6.1 billion from Apple in tax returns) the Bank and the employees too,( surely they will share in the profit sharing) are smiling all the way.

    I hope it continue to innovate and excel well into the foreseable future.

     

  14. Mr. Roques
    August 30, 2011

    Well, maybe Foxconn… they have that cash, and they have issues with counterfeit and leakages, why not go for the source?

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