rjphoto1: Other income and expenses refers to interest income and hedgings (listed in more detail in 10Ks), not to nonhardware. Comes to between 12 to 25 million. Interest on investments and cash has decreased quite a bit. Interest used to overpower hedging losses. No longer.
rdmill, I don't argue that this is the best use of Apple's earnings. It is just what Apple is doing. Imagine if Apple had used a portion of its cash to buy back stock in late 2008. They would have hit a home run with their cash. I do think that Apple doesn't want to do buybacks. Mr. Jobs believes in the company but I don't think he trusts the market to bid his company's stock higher. He doesn't want to part with his cash by giving dividends. On some level, I think he is afraid of weakening Apple's financial strength. He wants to ready for armageddon if it should arise. I do believe he contemplates a bold purchase of another company. However, I think he has been very successful creating his growth organically. I think he likes the idea of being able to buy whatever he wants; I just don't think he will do it. It will really have to electrify every sinew in him to go ahead and spend $20 billion on an acquisition. Rather, the cash is just another metric to show the colossal juggernaut Apple is. The curve and prediction started as a challenge to investors who were shunning Apple at $85. My challenge to them was: " will you buy Apple when its cash is at $120 billion and its market cap is $90 billion?" The challenge still stands. (By the way, think about the cash generation of Apple's investments once interest rates begin to climb, provided they position themselves well.)
Dear Doc Poly, These last 2 years the law has held up. Wonder what you would have said about Moore in 1966?
Dear Gautam0686, Jobs nixed the idea of using their bountiful cash on buy backs or dividends. He left open the possibility of a very big acquisition. Who knows? In a couple of years, he could use some of the cash to buy MSFT. (A case of retribution for Gates slights in the past?)
George, Apple's cash, short investments, and long term investments are often equated with cash. See below articles for confirmation. In addition, if you go to SEC documents, you will see their long term holdings are comprised of long term Treasuries and high grade corporates. They don't do "risk". They are crazily conservative in their holdings. Used to be Steve wouldn't even trust Treasuries longer than 3 years. Luckily, he's mellowed into longer term AAA and AA rateds. So lighten up. (I do hope you didn't lose too much shorting AAPL this month.) To summarize, the "Law" stands.
Business Week: Almost $40 Billion In Cash: What Is Apple Waiting For? (www.businessweek.com/t...) Reuter's: Feb 26, 2010 ... CUPERTINO, California (Reuters) - Steve Jobs defended Apple Inc's decision to maintain a $40 billion cash pile (reuters.com/article/id...) Apple's current stock valuation includes that $40B cash hoard (tuaw.com/.../on-apples...- dividends-or/)
Earnings: Analysts Miss Apple's Key Metric [View article]
KenC and dm1717: AAPL (along with all other smart phone carriers) has until Q1 2011 to adopt the new regulations. They can do so during any of the quarters from now until the start of next fiscal year. Since AAPL pushed for the change, it stands to reason that they will do so sooner than later.
Apple Is Still a Great Investment, Right? Not for Value Investors [View article]
You base your argument on FCF. I pointed out earlier that Apple has accelerating FCF. Your 15% FCF is fantasy and has no baring on Apple's last 4 years. You predicate your argument on faulty data. Why write an article that uses invalid numbers to justify a sell on Apple?
Apple's share price does not depend on sales growth. Rather, its price hinges on earnings. Nokia, for instance, increased its revenue from $34 billion to $58 billion over the last 3 years. Unfortunately, for Nokia, profit margins fell to 0.04%. Apple, in contrast, has not only grown revenue but driven net profit margins to 14.7% (and its iPhones which command greater margins have not yet been factored in). The author's thesis looks at only one variable (and not the key metric) to derive fair price.
Your argument that AAPL is too big to grow its market cap is way too late. When AAPL was trading at $182, the company was too large to justify the growth that their PE implied. The bear market took care of that. In October 2008, when the stock price dropped, I went positive on AAPL. The company is still quite a ways from those lofty market caps and still is undervalued. Per my article: seekingalpha.com/artic... " Think about it this way: When AAPL was trading at $182 it had a $156 billion dollar market cap but was slated to earn $5.22 for 2008. At that market cap, AAPL was the eight largest company in the world. Only Exon, EON, China Mobile, GE, Walmart, MSFT, and PG had market caps over $200 billion at the time.
In order to vault to a $200 billion dollar market cap, AAPL needed to demonstrate either big profits or growth in earnings. The $5.22 just didn't do it. By the law of mass, companies that become larger grow more slowly; hence, small companies can have startling growth while large firms begin to slow theirs. "
Unfortunately, it appeared to me that AAPL had a heavy load to lift if it was to increase its share price to a level of a $200 billion dollar company, $240 a share. At the time, it seemed AAPL had no where to go but down.
The bar just got lowered substantially. AAPL is now a $99 billion market cap company, no longer a member of that tiny club of behemoths. It's a stock that has room to run. "
How About a Piece of the Apple Pie? [View article]
"Another worry that plagues many investors is whether Apple's heyday is behind it; that the company's phenomenal cycle of innovation now is a thing of the past. Perhaps. No one, me included, can really confirm that possibility."
R&D has increased from $782 million to $1.1 billion year over year ending 9/08, a 41% increase. Last quarter's R&D rose from $246 million to $315 million (Q1 08 to Q1 09). Apple has made fantastic use of its R&D. The higher budgets indicate that Apple is not done innovating.
It looks like part of prediction 3 has come true. Steve Jobs has confirmed that his weight loss is due to a loss of nutrients (a common result after pancreatic surgery).
My Apple Estimates for Q1 2011 [View article]
Other income and expenses refers to interest income and hedgings (listed in more detail in 10Ks), not to nonhardware. Comes to between 12 to 25 million. Interest on investments and cash has decreased quite a bit. Interest used to overpower hedging losses. No longer.
Apple's Bank Gets Bigger [View article]
I don't argue that this is the best use of Apple's earnings. It is just what Apple is doing.
Imagine if Apple had used a portion of its cash to buy back stock in late 2008. They would have hit a home run with their cash.
I do think that Apple doesn't want to do buybacks. Mr. Jobs believes in the company but I don't think he trusts the market to bid his company's stock higher.
He doesn't want to part with his cash by giving dividends. On some level, I think he is afraid of weakening Apple's financial strength. He wants to ready for armageddon if it should arise.
I do believe he contemplates a bold purchase of another company. However, I think he has been very successful creating his growth organically. I think he likes the idea of being able to buy whatever he wants; I just don't think he will do it. It will really have to electrify every sinew in him to go ahead and spend $20 billion on an acquisition.
Rather, the cash is just another metric to show the colossal juggernaut Apple is. The curve and prediction started as a challenge to investors who were shunning Apple at $85. My challenge to them was: " will you buy Apple when its cash is at $120 billion and its market cap is $90 billion?"
The challenge still stands.
(By the way, think about the cash generation of Apple's investments once interest rates begin to climb, provided they position themselves well.)
Apple Can't Fix iPhone Reception, Will Start Telling Truth About Signal Strength [View article]
Apple's Cash Trajectory [View article]
These last 2 years the law has held up. Wonder what you would have said about Moore in 1966?
Dear Gautam0686,
Jobs nixed the idea of using their bountiful cash on buy backs or dividends. He left open the possibility of a very big acquisition. Who knows? In a couple of years, he could use some of the cash to buy MSFT. (A case of retribution for Gates slights in the past?)
Apple's Cash Trajectory [View article]
Apple's cash, short investments, and long term investments are often equated with cash. See below articles for confirmation. In addition, if you go to SEC documents, you will see their long term holdings are comprised of long term Treasuries and high grade corporates. They don't do "risk". They are crazily conservative in their holdings. Used to be Steve wouldn't even trust Treasuries longer than 3 years. Luckily, he's mellowed into longer term AAA and AA rateds.
So lighten up. (I do hope you didn't lose too much shorting AAPL this month.) To summarize, the "Law" stands.
Business Week: Almost $40 Billion In Cash: What Is Apple Waiting For? (www.businessweek.com/t...)
Reuter's: Feb 26, 2010 ... CUPERTINO, California (Reuters) - Steve Jobs defended Apple Inc's decision to maintain a $40 billion cash pile
(reuters.com/article/id...)
Apple's current stock valuation includes that $40B cash hoard (tuaw.com/.../on-apples...- dividends-or/)
Earnings: Analysts Miss Apple's Key Metric [View article]
It's All About Apple's R&D [View article]
Apple Is Still a Great Investment, Right? Not for Value Investors [View article]
Apple Is Still a Great Investment, Right? Not for Value Investors [View article]
Apple: Buy, Sell or Hold? [View article]
Apple's Non-GAAP Earnings Are the Real Story [View article]
Is Apple Stuck in a Trading Range? [View article]
" Think about it this way: When AAPL was trading at $182 it had a $156 billion dollar market cap but was slated to earn $5.22 for 2008. At that market cap, AAPL was the eight largest company in the world. Only Exon, EON, China Mobile, GE, Walmart, MSFT, and PG had market caps over $200 billion at the time.
In order to vault to a $200 billion dollar market cap, AAPL needed to demonstrate either big profits or growth in earnings. The $5.22 just didn't do it. By the law of mass, companies that become larger grow more slowly; hence, small companies can have startling growth while large firms begin to slow theirs. "
Unfortunately, it appeared to me that AAPL had a heavy load to lift if it was to increase its share price to a level of a $200 billion dollar company, $240 a share. At the time, it seemed AAPL had no where to go but down.
The bar just got lowered substantially. AAPL is now a $99 billion market cap company, no longer a member of that tiny club of behemoths. It's a stock that has room to run. "
What's in Apple's Wallet? Cash [View article]
crazylegs: Please see my previous article for rising cash positions.
seekingalpha.com/artic...
How About a Piece of the Apple Pie? [View article]
R&D has increased from $782 million to $1.1 billion year over year ending 9/08, a 41% increase. Last quarter's R&D rose from $246 million to $315 million (Q1 08 to Q1 09).
Apple has made fantastic use of its R&D. The higher budgets indicate that Apple is not done innovating.
Five Apple Predictions for 2009 [View article]