Blackfriars: Looking Behind the Apple Money Machine
Blackfriars: Looking Behind the Apple Money Machine
by , 12:25 PM EDT, October 24th, 2007
Apple's fourth quarter earnings report revealed that European currency exchange rates, U.S. taxes on foreign earnings as well as software and peripheral sales are fueling the Apple money machine. Its assets are growing at a rate of 92 percent per year, according to Carl Howe of Blackfriars Communications.
A key exchange occurred between Katy Huberty of Morgan Stanley and Apple's two executives during the Q&A session, according to Mr. Howe. She asked about foreign earnings in light of the fact that the dollar is weakening. Peter Oppenheimer pointed out that "generally for most U.S. companies, growth in foreign earnings is a benefit to your taxes, your U.S. tax rate."
The implication is that as Apple's iPhone sales in Europe develop with prices at 40 to 60 percent higher than in the U.S. Apple's financial situation will continue to improve.
Mr. Howe also pointed to a seldom discussed component of Apple's earnings, software and peripherals. Those sales are also swelling and currently account for US$2.75B in annual revenue. "Given that total iPhone sales are so far less than a quarter of that total, it's a category that perhaps deserves a bit more notice," Mr. Howe advised.
Finally, Mr. Howe suggested that Apple's balance sheet should be tracked more carefully to reveal the full extent of Apple's success. "At the end of June, Apple's assets were valued at $21.6 billion, with $13.8 billion in cash and short-term investments," Mr. Howe noted. "As of the end of September, those numbers had swelled to $25.3 billion in assets with $15.4 billion in cash. Said another way, Apple is growing its assets at a rate of just under 6% a month. That's an annual growth rate of 92% a year. And with a cash machine like that, it's no wonder the stock price continues to go up."
Observer Comments
This does make me wonder what will Apple do will all this cash and how does it protect it's iPod and iTunes business?
Record and Movie companies will look at this will fear and anger, thinking Apple is cashing in on their backs. I've read the reports that Microsoft pays Universal a piece of every Zune sold. I've also read reports that Record labels asking for the same from Apple.
Reports like this will only make the already tenuous relationship worse. As they are going to want more than they desire, the record labels I mean.
As for the cash on hand, and what Apple does with it. I don't remember any companies Apple has bought in the last 5 years of any size. So they don't typical grow their business by acquisitions.
So what do you think they will do with this money?
Apple does do SOME acquisitions. They purchased the iPod UI from a smaller company (if I remember correctly), Coverflow was purchased from another company, Logic as well. I am sure some more of this will go on as Apple finds worthwhile investments. I however want to see the lion's share going to R&D and recruiting of engineers. Continue to bring the best possible products to market and not only employ but RETAIN the sharpest minds.
Comments are currently closed. Please email the author instead.
Recent Headlines - Updated July 9th
- Thu, 4:29 PM
- News - SEC Investigating Jobs Health Disclosures
- 3:50 PM
- Ted Landau's User Friendly Blog - User Interface Blues
- 3:42 PM
- Reports - Chrome OS Complicates Apple & Google Boards of Directors
- 1:08 PM
- Deal Brothers - Life ‘09 Software Drops to $59.99 Delivered
- 11:06 AM
- News - TechRestore Posts Stop-motion iPhone 3GS Breakdown
- 10:17 AM
- Hot Forum Topic - Parallels versus Fusion: Reader Favorites
- 9:32 AM
- Product News - LaCie Unveils LaCinema Rugged HD Multimedia Hard Drive
- 8:54 AM
- Product News - CheckUp 2.5 Adds Snow Leopard, New Mac Support
- 8:37 AM
- News - Latest Microsoft Ad Hits at MacBook Price Again
- 8:06 AM
- TMO Appearances - TMO’s Jeff Gamet Dives into Social Media at CoMUG
- 7:30 AM
- The Back Page - Looking Ahead at the App Store’s Future
- Wed, 6:48 PM
- Games - Pipe Mania Puzzle Game Released for Mac, iPhone
The Mac Observer Reader Specials
- Download Typestyler, still the Ultimate Styling Tool for Internet, Print and Video Graphics. Works great in Classic with a Native OS X Version on the way. Free Tryout: www.typestyler.com
OWC: Big Drives, High Performance - Not High Prices! SATA 3.5" up to 1.5TB. Notebook up to 500GB. FW up to 6.0TB. 1.0TB Drive Models from as low as $97.99 www.MacSales.com
If you're using a Mac, then you've gotta check out Full Tilt Poker for Mac. This Full Tilt Poker bonus code does the unthinkable, it actually rewards!
RamJet Memory: MacBook and MacBook Pro 4GB kits for $57.99! Mac Pro 4GB Kits $99.99! iMac and Mac mini 4GB Kits for $57.99! 1TB SATA Hard Drives for $109.99! Click hereFor the latest Apple products use Ciao, a price comparison website, to find laptops like MacBook Air. Then find the best prices on MP3 players and use our comparison tool to evaluate mobile phones like the Apple iPhone.
Laptop Hardware Provided by TechRestore - Overnight Mac & iPod Repairs.


