Exxon-Mobil and Apple

[Larry Gude]

Okay, then: Thanks to government policies, they realize their profits by taking the oil out of the ground and delivering it to the refineries.

Too bad we, the people, didn't realize this.

I want $30 oil and I am willing to go to war over it, damn it.

 

[Tilted]

Too bad we, the people, didn't realize this.

I want $30 oil and I am willing to go to war over it, damn it.

To war even with reality, apparently.

Anyway, $30 oil is easy to get to. All you have to do is get us drilling / recovering as much oil as we can AND convince a #### load of people (to include some of those in China, India, and Brazil) to stop using it.

 

[Larry Gude]

To war even with reality, apparently.

Anyway, $30 oil is easy to get to. All you have to do is get us drilling / recovering as much oil as we can AND convince a #### load of people (to include some of those in China, India, and Brazil) to stop using it.

When I get done, were I to be your president, they wouldn't be able to use it.

I've had my fill of globalism. I am interested in the US and A.

 

[Pete]

To war even with reality, apparently.

Anyway, $30 oil is easy to get to. All you have to do is get us drilling / recovering as much oil as we can AND convince a #### load of people (to include some of those in China, India, and Brazil) to stop using it.

 

[FromTexas]

It's easier to run a tighter ship when you aren't stifled by (real) democratic processes.

Maybe we should go banana republic...

 

[Tilted]

Target to test-drive Apple mini-stores - MarketWatch

NEW YORK (MarketWatch) -- Target Corp. said Thursday it is moving closer to committing to opening Apple Inc. shops within its own stores, announcing a test in select stores.

"We will have 25 stores (in Targets) with unique display and assortment," said Target spokeswoman Dustee Jenkins, who described the move as "a test."

 

[Tilted]

2011 Was the Second-Worst Year for U.S. PC Sales in History - Arik Hesseldahl - News - AllThingsD

Last year, for the first time since 2001, the U.S. market for personal computers shrank, according to separate research reports issued yesterday by the research firms Gartner and IDC. The year 2011 was, by IDC’s reckoning, the second-worst year in the PC industry’s history.

U.S. consumers and businesses bought 71.3 million PCs, representing a drop of nearly 5 percent over 2010, when they bought more than 75 million, IDC said. So much for the year.

 

[Tilted]

The iPhone 4S went on sale in mainland China and a number of other countries today. That won't impact the results from this previous quarter, but it should help sustain results, to some extent, into the current quarter.

iPhone 4S Sales Canceled at Beijing and Shanghai Apple Stores - John Paczkowski - Mobile - AllThingsD

“The demand for iPhone 4S has been incredible, and our stores in China have already sold out,” an Apple spokesman told AllThingsD. “Unfortunately, we were unable to open our store at Sanlitun due to the large crowd, and to ensure the safety of our customers and employees, iPhone will not available in our retail stores in Beijing and Shanghai for the time being. Customers can still order iPhone through the Apple Online Store, or buy at China Unicom and other authorized resellers.”

Eggs Thrown in China iPhone 4S Scuffle - CNBC Video

Also, it's being reported that Apple released a list today of its suppliers. I'm trying to find a copy of it now. That surprises me, and it strikes me as indicative of a change of culture at Apple. They generally don't comment on who their suppliers are and their suppliers generally don't comment either (though, in the latter case, we can assume that's not by choice).

 

[Tilted]

Apple stock touched new highs again today. It poked its head above a $400 Billion market cap yesterday before closing just below that level. It's back above that level now (perhaps, in part, on the iBook2 news from this morning).

$400 Billion. Incredible. That's enough to fund the federal government for, what, 5 or 6 or 7 weeks?

 

[Larry Gude]

Apple stock touched new highs again today. It poked its head above a $400 Billion market cap yesterday before closing just below that level. It's back above that level now (perhaps, in part, on the iBook2 news from this morning).

$400 Billion. Incredible. That's enough to fund the federal government for, what, 5 or 6 or 7 weeks?

See, people see that and they think Apple HAS $400 billion in cash. If they had to convert that to cash today, hell, what would they have, a billion shares netting something like $24 each for the year so, at best, three times that or about $100 billion if someone wanted to 'buy' the company outright for cash? And no one would pay that looking back, paying that sort of premium. So, maybe 1/2 of that is what they could come up with in cash?

 

[Tilted]

See, people see that and they think Apple HAS $400 billion in cash. If they had to convert that to cash today, hell, what would they have, a billion shares netting something like $24 each for the year so, at best, three times that or about $100 billion if someone wanted to 'buy' the company outright for cash? And no one would pay that looking back, paying that sort of premium. So, maybe 1/2 of that is what they could come up with in cash?

I was going to follow up on this with some points about the value of a business based on what it earns and might earn (particularly relative to what else someone might do with investment capital), and to provide some details about Apple with regard to things you referenced (e.g. how much cash it has, how much its earning per year). But, when I was typing it became clear to me that - despite whatever qualification I might include - my comments would be hard to interpret as anything other than me assessing (and giving my opinion on) the current stock price. I don't really want to do that. For one thing, I believe strongly that no one should buy individual stocks unless they can and do figure out for themselves if, and importantly why, they should. So, I try to avoid discussing some kinds of specifics in open environments. Second, I have a particular friend that has been bugging me about whether or not they should buy or sell Apple stock ahead of this afternoon's earnings release, and I've steadfastly refused to tell them what I think. I'd hate for them to read something I said, which would implicate long term expectations without concern for short term expectations, and convince themselves that it reflected what I thought about likely short term price performance. Plus, they just need to do the freaking homework and come to conclusions themselves.

Anyway, maybe we'll get a chance to discuss the issue in general in a different context, or in specific in a different setting at some point.

With that said, Apple's Q1 FY 2012 earnings will be out this afternoon. I've been reading some crazy estimates for iPhone sales (especially considering the 4S wasn't available in China in the quarter). Estimates usually creep up going into earnings. My guess is that iPhone units will indeed be enormous (maybe 30 million +), that Mac units will be very strong (5 million +), and that iPad units will be strong - meaningful growth - but not as strong as some are expecting (13 million +). I'd guess that earnings beat consensus estimates (which are currently about $10 / share), but I wouldn't be shocked if they didn't. As for immediate price action in the stock, I have no idea. Exxon-Mobil's earnings will be out next week, then we can compare.

 

[Tilted]

Wow!!!!

I think they're actually going to beat Exxon-Mobil for this last quarter. When I suggested that possibility, I thought it was quite a long shot. These results are unbelievable.

 

[Tilted]

Earnings were $13.06 billion. I think that will beat Exxon-Mobil's earnings for this last quarter, but we'll have to wait to see for sure.

37 million iPhones - and the noteworthy thing (to me at least) is that the per unit revenue on iPhones was actually up from previous quarters, so that 37 million number probably isn't too inflated by sales of older models (at reduced prices); they ended the quarter with an iPhone backlog, meaning the only reason they didn't sell more was that they couldn't build enough

15.4 million iPads - by my count, that means they sold over 40 million iPads in CY 2011 and had sold 55 million iPads in the first 21 months

5.2 million Macs

All things considered, this may be the greatest earnings beat I've ever seen - companies this big and this established just don't beat like this. Oh, and they ended the quarter with $97.6 Billion worth of cash and cash equivalents on their books.

Verizon's earnings were released this morning and those results hinted at a big iPhone number, but I don't think they hinted at one this big. Verizon's margins were squeezed some by significant sales of iPhones (they reported that 4.3 million of the 7.7 million smartphones they activated in the quarter were iPhones). They even lost money for the quarter, though that was largely due to a pension issue rather than losses related to the initial sale of iPhones.

 

[Larry Gude]

All things considered, this may be the greatest earnings beat I've ever seen - companies this big and this established just don't beat like this. .

So, if it is 'too good to be true' what's going on? Is this a sugar high? A bubble?

 

[EmptyTimCup]

37 million iPhones - and the noteworthy thing (to me at least) is that the per unit revenue on iPhones was actually up from previous quarters,

several iPhone 4S owners I talked to, bought the 64 Gb Model because the 16 and 32 were sold out, and they did not want to wait .........


[thinking the 64 g has a higher margin]

 

[Tilted]

Exxon-Mobil reported earnings this morning: $9.4 Billion for the quarter. So, Apple not only made more money than Exxon-Mobil last quarter, it beat Exxon's earnings by 39%. Think about that. It now seems plausible that Apple could beat Exxon-Mobil for the entire year (either FY or CY 2012). It may not of course - and a lot will depend on what happens with oil prices - but the real possibility is there.

For more perspective, Apple paid more in income taxes last quarter than Google made in profits (before taxes). Apple made more last quarter than Exxon-Mobil and Google combined. Though (CY2011) 4th quarter earnings aren't in yet for all of the largest U.S. health insurance companies, I feel comfortable saying that Apple earned about 4 times as much in that quarter than the 5 largest such companies combined. And those 5 account for a very large share of the market - Apple almost surely made more than twice as much as all U.S. health insurance providers.

 

[Tilted]

So, if it is 'too good to be true' what's going on? Is this a sugar high? A bubble?

I don't think it's too good to be true, though it seems it is too good to be believed by some. I think there are real reasons - understandable, predictable, even sustainable (with regard to baseline performance, though surely not long-term with regard to growth) - for Apple's business success. I won't go into the reasons, but this is real performance - real business excellence, in terms of execution and in terms of vision. It's just one of those amazing stories that comes along sometimes, and one of the greatest business stories of modern times. It compares favorably with that of Microsoft. I'm curious to see how the Facebook story evolves, perhaps it will turn out to be just as amazing - but it has a way to go yet to get there. For now it's still a remarkable social phenomenon more so than an amazing business story.

Honestly, stock analysts as a group don't seem to have great big picture vision - they seem to get lost in the trees and miss the forest. I suppose that's not so surprising (or bad for them) considering that equity markets have become more short term trading markets than long term investment markets.

 

[Tilted]

several iPhone 4S owners I talked to, bought the 64 Gb Model because the 16 and 32 were sold out, and they did not want to wait .........


[thinking the 64 g has a higher margin]

I can believe that. All of the iPhones represent large margins for Apple. Its gross margin this last quarter was incredible (44.7%), driven in part by the leverage high volume in general exerted on fixed costs, but also largely by the high portion of that volume which represented iPhones.

That's part of the earnings success of Apple - it's managed to make its iPhones relatively inexpensive to the end customer while still realizing large margins on them. Much of the cost is hidden from the customer as being paid by the carriers. That 16GB 4GS that the customer is paying $200 for (with contract), the carriers are paying $600 or $650 for. That 64 GB that customers are paying $400 for, the carriers are paying $800 or $850 for. The carriers aren't subsidizing other smartphones to that degree, they don't have to. And the good news for iPhone customers is that those increased costs of business acquisition / maintenance are, effectively, spread out over the entire data customer base of the carriers - that is to say, they don't charge iPhone customers more for monthly service than they charge customers who buy other smartphones (which they don't have to subsidize to as great an extent). In effect, the people that buy other smartphones are subsidizing the people that buy iPhones. That's the marketing power that Apple has built up for itself by providing to customers products that they love, that transform their lives, for which those customers feel there is no substitute.

This is the reason that Apple, while having only single digit percentages of the mobile handset market, accounts for more than half of handset maker profits. I suspect it made more than 60% (perhaps 65%) of handset maker profits in this last quarter. Samsung sells just as many smart phones as Apple (more in the quarter before this last one, though likely a tad less in this last one), but it makes no where near as much money as Apple does - and it is a more diverse company with, e.g., a very strong (and profitable) semiconductor business (in which Apple, ironically, may be one of its biggest customers).

 

[Larry Gude]

I .

That's part of the earnings success of Apple - it's managed to make its iPhones relatively inexpensive to the end customer while still realizing large margins on them. Much of the cost is hidden from the customer as being paid by the carriers. That 16GB 4GS that the customer is paying $200 for (with contract), the carriers are paying $600 or $650 for. That 64 GB that customers are paying $400 for, the carriers are paying $800 or $850 for. .

So, let me get this straight; Apple gets paid a premium by the carriers? Every phone I buy, my carrier is paying $6-800 to Apple for the right to service it to me?

 

[Tilted]

So, let me get this straight; Apple gets paid a premium by the carriers? Every phone I buy, my carrier is paying $6-800 to Apple for the right to service it to me?

The carriers are paying $400 - $450 of the cost of the iPhone above what the customers (i.e. the ones getting a contract price) are paying. Verizon pays Apple something like $600 for that 16GB iPhone 4S that it sells to customers for $199. Other smart phones are carrier-subsidized in the same way, but not to as large a degree.

When a carrier tells the markets 'hey, we sold a #### load of iPhones this quarter', that means 'hey, you need to take your earnings estimates down because we aren't going to make as much money this quarter because of loses associated with the initial activation of iPhones.' When Verizon got the iPhone early last year, it was seen as (and likely was) good for Verizon long-term, but it meant somewhat reduced margins and less cash flow in the short term. Verizon actually lost money this past quarter - mostly due to accounting for a pension issue, but also to a small degree because of the iPhone 4S coming out and accounting for 55% of its smart phone sales in the quarter. Going forward, it expects margins to increase in part because the mix of smart phone sales will be more favorable to the bottom line (i.e. less iPhone dominated).


EDIT: Man, these skimlinks ads inside posts are annoying. I wish they at least somehow looked different than user-embedded links (e.g. to data sources) so that it was clear when a poster was providing a link for readers to get more information / confirmation. As it is, I think user-embedded links are going to get lost in the noise.