Apple's Real Growth Rate in 2008: 49%! 27 comments
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Drumroll please... After recalculating the last two years of Apple's (AAPL) earnings to reflect the true revenue and earnings from iPhone sales (non-GAAP), I have found Apple's real growth rate to be absolutely stunning. For full year 2008, Apple's revenues totaled $39,038 billion compared with $28,339 billion during full year 2007. This represents 38% revenue growth year over year. Profit growth rates are even better. Net income for full year 2008 came in at $7,054 billion compared to $4,722 billion in 2007 resulting in 49% year over year earnings growth. Apple ended the year with $28.1 billion in cash compared to $18.4 billion in cash last year for an amazing cash growth rate in 2008 of 53%! For the quarter, Apple grew earnings at 16% and grew revenue at 9%.
The great Ronald Reagan once said that "there are no such things as limits to growth, because there are no limits to the human capacity for intelligence, imagination, and wonder." And so it is for Apple. The company that allows us to download music, movies, games and 15,000 other software applications right onto our computer, iPod or iPhone is deserving of some serious accolades in the midst of this recession. Many have criticized the company for not lowering prices enough-yesterday I read an article that asked why would anyone buy an Apple when you can get a cheaper Dell (DELL)? As a user of both, I laughed to myself as I tried to figure out how much more valuable my Mac was. The Mac runs both Windows and Leopard, peripheral devices work immediately upon connection, built in Wi-Fi automatically picks up the signal, in three years I've never had a virus, I've got a built in camera, and above all, the iLife software has expanded my digital reach in so many ways.
I know the way of intelligence leads many to criticize but every now and then we must see things as they really are. This company should be celebrated, the stock is severely undervalued because of the uncertainties surrounding Mr. Jobs' health and the economy but both of those are now in the past. Apple is showing that United States innovation can still lead the world and that not all growth is dead.
Disclosure: Long AAPL
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This article has 27 comments:
It also makes income from its software downloads.
If you look at Apple who has been in the phone business for just over a year, it was capable of making a phone for the first time that blew away its competitors who have been in the business for decades. Give them time and they will only improve an already great piece of hardware. Indeed it is already capable of improving itself every day with new software being developed for it for easy download. Dell does not have a computer that can match it and Motorola, Nokia and the rest are doing all they can to match Apples first phone. I'll invest in the company (Apple) that is diversified in different products and builds its own software, operating systems etc.
$39bn in sales? Phenomenal.
The Blackberry is a very reliable device (with no software issues), but I prefer the iPhone. It is a quantum leap ahead with all the cool features like the Apps store and has a real web browser. However, the iPhone still has numerous software bugs and it is taking time to replace the Blackberry as the PDA of choice for business applications.
In another post, a moron revealed he knows nothing about corporate finance. He went after Apple's deferred revenue accounting policy. He had no clue and got the analysis totally backward.
The name of the game in corporate finance is not to manage earnings. It is to maximize free cash flow, which can involve accounting policies that minimize and/or defer current tax costs.
With FASB and GAAP as complicated as they are today, it is often necessary to do some actual work to find out what real numbers really are.
To get to real numbers, you have to unwind currency and inflation effects. But, once you get to the real numbers (in constant dollars) you can see what is really going on.
Very few investors and analysts have the time or the expertise to do this.
business.theglobeandma...
switchtoamac.com/site/...
On Jan 23 09:58 AM 91elmer wrote:
> Note however that Macs are clearly seeing a growth slowdown as demonstrated
> in this piece
>
> switchtoamac.com/site/...
On Jan 23 08:15 AM longoil wrote:
> Expect Apple's biggest competitor Research in Motion to give Apple
> a
run
> for their money arising from the recent news stories regarding
Barack
> Obama's unwillingness to give up his Blackberry. What better
advertising
> can you get than a very popular president using your
product.
> Apparently, he is now permitted to use a specially modified
Blackberry
> that addresses all the previous security concerns (e.g.
removal
> of the GPS chip, super anti-virus detection software, etc.).
I like your bit about the value proposition you get by buying a Mac instead of a PC. It has always been thus; but the rapid pace of improvements in the Mac vs MS-Windows (Vista); and the fact you can now run that little annoying Windows-only accounting program on your Mac, full speed (thanks to Apple switching to Intel) means the road ahead for Apple looks fantastic.
In these times of recession, perhaps the health of a nation can truly be measured by the value it places on its innovators. And perhaps those who cannot see the real value of a company like Apple in the world should ask themselves what kind of a world it would be for all of us if companies like Apple didn't exist?
Knock Apple by all means - but be careful what you wish for...
Thanks for pointing out the "real" growth rates. Apple is truly the best positioned consumer tech company and it's stock certainly undervalued. The one problem I have with your commentary is with "This company should be celebrated, the stock is severely undervalued because of the uncertainties surrounding Mr. Jobs' health and the economy but both of those are now in the past." Do you think effect of Jobs' leaving the company permanently is now "baked into" the current price? And secondly, why are the economy's problems now "in the past"? I see no reason why this world recession may not continue to worsen for a year or more. Apple's growth has slowed considerably and that trend may accelerate. The size of the future deferred revenues will certainly help as new sales fall off, but a bad economy is in the future not only the past.
why are so many blind to deferred earnings accounting
methods of Apple, Even those analysts who know, it just flies by. It seems
fairly obvious that if Apple didn't account that way, by classic valuation methods,
the stock would be trading much much higher. Either way, the cash is in.
hmm...US enterprise must pay huge taxes to government(I'm french) or is that internal costs,investments...
even if apple's market capitalization shrunk(almost US$ 80 billions now)in 2008 I believe apple will achieve the US$ trillion dollar valuation,not in 2012 but let's put it on the very long term.
I applaud Jason for looking at Apple's real growth. Do people know how many companies in the world make $7B in one year? Not many.
Before Apple made it much easier to calculate their deferred revenues, I wrote a piece back in April, and another last quarter on much of the same. You can read the two Opinion pieces at MacDailyNews.com, if this sort of analysis interests you.
Here:
macdailynews.com/index.../
That was about analysts not understanding Apple's deferred revenues, from back in April.
macdailynews.com/index.../
And, that was from October, looking at how big Apple's true revenues and profits were relative to the top-20 companies in the world.
This is something that I blogged about in 'How do you like them Apples? Apple's Earnings Rock!':
thenetworkgarden.com/w...
Includes links to other articles evaluation Apple's products, business and strategy. Check it out if interested.
Mark
Unlike other companies that manipulate their books and accounting to show better than what is really happening, Apple accounting procedures do the opposite. If we really do the math, we can see they are in even better shape as they don't report all of the revenue from their sales due to ongoing expenses with the iphone.
In addition, when other CEO's of other companies are taking tens of millions of dollars in salaries and severance packages even when their companies are doing poorly, you have to give credit to Steve Jobs and Apple for doing the opposite. Steve, makes 1 dollar a year and the company is doing great.
Sure he makes a fortune in stock options, but that is an incentive to make sure the company does well and profits. What incentive do these other CEO's have when the worst they can see is being fired with a 25 million dollar severance package?
With so much manipulation out there with other companies, i for one am comfortable knowing that there won't be any accounting scandals and surprises coming from Apple. They have 28 billion in the bank, are diversified through a series of hardware products as well as numerous software products. The fact that they can still show growth in an economy which is the worst most have ever seen in their lifetime, is phenomenal.
I know i can trust Apple with the fact of reporting the right numbers, producing innovative quality products, which the masses desire.
Since i have switch my office over to be 100% mac, i have saved more money, time and headaches. Every time i turn it on, it works, virus free. Every time i plug something into it, it just works. I never waste time downloading and installing drivers and trying to remove viruses or paying tech's to come in and fix something. I pay the extra few bucks for Mac now because i know i will save thousands of dollars and a lot of time later on.
On Jan 23 04:32 PM Mark Sigal wrote:
> My simple net out is who looks better than Apple on a long-term basis
> in terms of differentiated products, diversified revenue sources,
> depth of product pipeline, quality/depth of management team, operating
> margins, profits, cashflow, cash reserves and absence of debt?<br/>
>
> This is something that I blogged about in 'How do you like them Apples?
> Apple's Earnings Rock!':
>
> thenetworkgarden.com/w...
>
>
> Includes links to other articles evaluation Apple's products, business
> and strategy. Check it out if interested.
>
> Mark
On Jan 23 08:15 AM longoil wrote:
> Expect Apple's biggest competitor Research in Motion to give Apple
> a run for their money arising from the recent news stories regarding
> Barack Obama's unwillingness to give up his Blackberry. What better
> advertising can you get than a very popular president using your
> product. Apparently, he is now permitted to use a specially modified
> Blackberry that addresses all the previous security concerns (e.g.
> removal of the GPS chip, super anti-virus detection software, etc.).
Jason is trying to justify his AAPL purchases and prevent the stock price from collapse when Jobs finally quits the company. I have heard this talk before, while the price crashed from $180 to $105.