Sales from its handset business climbed 20 percent to $2 billion last quarter, helping to narrow its loss to $43 million from $216 million a year earlier. The division had an operating profit, excluding some charges, of $3 million. Motorola said it shipped 3.8 million smartphones last quarter.
via Motorola Profit Tops Estimates on Rising Sales of Droid Phones – Bloomberg.
Motorola shipped a total of 9.1 million phones. This is down 33% from the year-ago quarter’s 13.6 million units but up 10% sequentially from 8.3 million last quarter.
I’ll summarize the top tier vendors’ unit volumes, sales value, price and profitability in a few days.
In the previous article discussing the growth scorecard, I left open the question of how Apple’s growth is reflected in its share price.
The approach to answering this question is to show how the share price correlates to that growth. The challenge for analysts has been that the company switched from subscription to current accounting for the iPhone (the largest component in its income statement). As they re-stated income and thus earnings, any historic review of P/E or other multiples of Earnings have to also be re-computed.
So this is what I’ve done:
Every quarter I try to score growth by top, bottom and product lines. As unforeseen growth is the only driver creating shareholder value, it’s of paramount importance to measuring a company’s performance.
For Apple, the analysis is fairly straight-forward. There are relatively few product lines (seven including the iPad). I measure y/y sales growth and try to form a picture that is easy on the eyes and mind.
The method I’m using now is color coding growth for each line according to the legend to the left.
The table that follows shows each product plus the Net Sales and Earnings lines according to this color coding. I also added an average column for reference.
TOKYO (Reuters) – Shares of Sony Corp rose nearly 3 percent on Tuesday as traders cited media reports speculating that the Japanese electronics maker could be a potential acquisition target of Apple Inc.
via Sony shares up on speculation of Apple interest – Yahoo! Finance.
There’s a sucker born every minute. That phrase, (erroneously) attributed to a major benefactor of my Alma Mater, continues to ring true today.
Although Steve Jobs once admired Sony, the company today contains nothing of value to Apple. A disruptor is unlikely to buy the company he just disrupted. Would Sony have bought Westinghouse? Would WalMart have bought Sears? Would Microsoft have bought IBM in the 1990′s?
When considering an acquisition the chances are that the asset being purchased is going to ask a premium price. So the buyer has to answer this question: what is it about the asset that makes it worth more than the market price?
There are three (and only three) sources of value that a buyer can buy:
- The resources (intellectual, physical, contracts, channels or employees)
- The processes (the algorithm of how those resources are put to use)
- The business model (the way the assets and processes and applied to create profits).
A company like Sony has some resources but its processes and business model are obsolete. Should Apple pay a premium for Sony’s assets? I don’t see a reason why.
After the last earnings report, many noted that Apple’s gross margins dipped. Turley Muller noted in a letter to PED that the cause was probably the aggressive ramp in iPhone 4 production which broke new records at 14.1 million units.
That may be. My estimate of iPhone margin shows it dropping to about 49% from the more usual 55% (sometimes even higher). We’ll never know exactly how much, but sometimes margins drop. RIM and Nokia are punished for drops in the GM percent so why shouldn’t Apple?
However, there are some other factors to consider: the overall margin is currently historically very high. As the high-margin iPhone makes up more of the total product mix, the overall margin should be growing. And it is. The chart below shows the trend since 2005. GM was in the high 20′s five years ago.
Note however the other margin: operating margin. After taking the fixed costs into consideration (which we saw to be shrinking as a percent of sales), Apple’s bottom line profitability has been rising slightly more rapidly than the GM. It has plateaued recently but not dipped significantly.
Also note that there have been dips in the past from which GM expansion resumed. One such dip was at the launch of the first iPhone in 2007, though we can’t be sure that was attributed to the iPhone itself or to other factors like that most cited by management: components costs.
However, the bottom line profitability is only part of the picture. It would be instructive to look at which product contribute how much. You won’t see this analysis often because the gross margin by product is not published by Apple and it takes quite a bit of guesswork to get there.
I maintain product-level gross margins and compute the overall GM bottom-up. The product-by-product line profitability is based on several assumptions which I won’t detail here, but those assumptions lead to the following contribution chart: