Analysts have to count things in order to measure value. It sounds easy but it can be tricky. As I pointed out with PCs vs. iPads, if you count an iPad as a PC you can get into a lot of trouble with your clients. But if you don’t you end up directing them away from confronting an existential threat. Only very rarely is a market report published in contradiction to widely held sustaining beliefs. More often than not analysts bow to the source of their paychecks and in so doing show their rear end to the truth.
This comes up again now with respect to how to count tablets. Consider that there is little difference in architecture, software or design between an iPhone and an iPad. They run the same OS, use the same microprocessors and have similar communication methods, inputs and sensors. However they are considered completely different products and counted as part of separate markets. The only physical attribute that differs is the screen size. So we have to conclude that the size of the screen is a huge determinant factor in deciding whether a product is a tablet but not a smartphone (or music player).
But what about tablets themselves? Their screen sizes vary widely. A 10″ screen is certainly a tablet device, but a 4″ screen certainly isn’t. Where is the boundary exactly?
Last quarter the iPad had unit growth of 166% with revenue growth of 146%. The iPad is selling more than twice the (also rapidly growing) Mac. The two product lines are shown below:
Apple’s Cash and Marketable Securities has been the focus of attention for many year now. It has now reached $81.6 billion equivalent to a value of $86.8 per diluted share. Currently each share is worth about $393 making the enterprise value $306/share or 11 times last twelve month’s earnings.
The division of liquid cash and cash equivalent asset types is shown in the following chart.
The company added $5.4 billion to its cash reserves during the quarter and now keeps two thirds of that outside the US. Long-term securities (bonds mainly) are now
In Apple: For What It’s Worth Jeff Matthews asks a question “about the most disturbing pattern coming out of Apple’s earning release: the measly 1% year/year revenue increase at Apple’s retail stores”.
He notes that prior to the drop, Apple stores were growing at 36%. Such a huge drop quarter on quarter seems suspicious and he thinks something is happening.
Something is happening.
To find out what, let’s start with the revenue from Retail that Apple reports
The concern is with that low growth between calendar Q3 last year and this year. That is being contrasted with the growth in the previous quarter (Q2) of 36%.
In his recent posts Horace took a look at Apple’s fixed assets and their development over the recent years. He also tested the hypotheses that Apple is making investments into machinery & equipment on which iOS devices are produced by overlaying iOS volumes with preceding changes in property, plant and equipment (PP&E).
The question that has arisen is: Are Apple’s investments in PP&E extraordinary?
To answer, I have compiled the capital expenditures (CapEx) for our previously established peer group .
But first we need to clarify what CapEx include and not include. CapEx includes investment into property, plants, equipment, office furniture, larger IT hardware and in some cases patents; CapEx do not include investment into long-term marketable securities or other long-term financial instruments, acquisitions or capitalized R&D. Furthermore, CapEx are gross values and are not net of any sold equipment . CapEx are largely depending on a company’s business model and strategy. For example if you are a manufacturer you need equipment to operate, if you are a software company or a retailer, your business will not be capital intensive.
As the second calendar quarter of 2011 is the latest quarter for which all companies have reported figures, we will take a look at last twelve months’ (LTM) figures from Q2/2011 backwards. The following stacked bar chart shows the combined CapEx of our peer group:
The combined capital expenditures of our peer group for the