Analyst: Apple Will Be Bigger than IBM, HP in Two Years

| Reports

Apple is going to be a bigger company than IBM next year, and it will grow enough to be bigger than HP a year after that, according to George Colony, the founder of Forrester Research. In an interview with Bloomberg, Mr. Colony said that Apple’s mobile empire could fuel growth of 50% per year for the next two years, and said that, “they’re going to be a $200 billion revenue company.”

Longtime Apple watches will already know that Apple is the largest tech company in the world by market capitalization, which makes Apple a $317.8 billion company. Indeed, this makes Apple the second most valuable company of any classification, behind only #1 Exxon Mobil.

HP and IBM , however, both do more in sales (much of Apple’s stock price/market cap is fueled by the company’s potential, not its realized sales). IBM turned in $99.9 billion in sales in 2010, while HP turned in sales of $126 billion. Apple’s sales in 2010 were $63.5 billion, representing 52% growth over 2009.

Mr. Colony believes that Apple is going to continue growing at a rapid pace, and already the company’s off to a good start with $26.74 billion in revenue during the December quarter, the company’s first fiscal quarter. The Forrester founder said that Apple will turn in sales of $100.3 billion for the full fiscal year, representing 54% growth over 2010.

In MY day….

Fueling all this growth is Apple’s app ecosystem, which Mr. Colony sees as a virtuous circle that propels new sales of Apple’s mobile devices (iPhone, iPod touch, iPad), which in turn fuels growth of the app ecosystem.

He also said that this represents a sea change of sorts, and one that de-emphasizes the traditional Web. To that end, he said that companies like Google that are “too Web-centric,” adding that being too Web-centric is going to lead to trouble for those companies that can’t change.

Steve Jobs

On a cautionary note, Mr. Colony said that Steve Jobs has been a big part of Apple’s product cycle. He believes Apple’s product pipeline has already been developed enough to provide new products for three-to-four years after Mr. Jobs leaves.

That’s a speculative thought, however, as no one knows when Mr. Jobs might leave as the CEO battles health issues. Implicit in the comment on Apple’s product pipeline is that Mr. Jobs would leave his company in the near future.

Be that as it may, and whenever Mr. Jobs steps down from Apple, Mr. Colony said that his departure will make for a tough transition for Apple.

“Remember, every two years they have to fill [its fleet of Apple Stores] with new stuff,” he said. “Without Steve Jobs as the CEO, I think it will be much harder for them to do that. That would be a massive, massive hit to the valuation.”

Apple shares closed higher Thursday, ending the day at $344.97, up $5.78 (+1.70%), on moderate volume of 14.4 million shares trading hands.

*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.  

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6 Comments Leave Your Own

Vladimir Joseph Stephan Orlovsky

2 years, is a long time…in wireless word.
Many things can (and will) happen.

And ..do Not forget China,
if they jump on wireless market hard…
many things will change very fast.

pjs_boston

Apple’s valuation is based upon its profits, not its total sales.  Based upon profits, Apple is already bigger than IBM and HP.

sewdog

HP and IBM , however, both do more in sales (much of Apple?s stock price/market cap is fueled by the company?s potential, not its realized sales). IBM turned in $99.9 billion in sales in 2010, while HP turned in sales of $126 billion. Apple?s sales in 2010 were $63.5 billion, representing 52% growth over 2009.

Point of clarification with regard to this paragraph because this is a persistent misstatement that I see all the time.  Apple’s p/e is, according to CNBC, lower than its peers.  Implying that Apple’s market cap is based on “potential” because people are paying up for expected future growth is dead wrong. If Apple had a 50 p/e I might believe you, but since the p/e is actually much lower than either its historical earnings growth rate AND its expected future earnings growth rate, your assertion is off the mark. Apple makes a higher profit margin on each dollar of sales than either HP or IBM, allowing the company to report higher earnings on lower sales.  Investors pay for earnings, not sales.  Top line growth (sales) is important, but it’s the bottom line (earnings) that matters in the end.  The “Apple is overpriced because its market cap is so high” argument is completely specious.  Apple’s market cap is what it is because it will earn $22 per share this year and people who own the 900,000,000+ shares outstanding are willing to pay 13X for each dollar of earnings (minus the $65 per share in cash that the company is carrying.)

Tim Poe

Apple may be growing big but we don?t see the large number of jobs for Americans. Apple like many other corporations creates millions of jobs overseas for foreigners. Apple is not helping the economy because local governments and school districts are laying-off a large number of employees because the economy is not generation enough money.  But despite all the bad news some sites are announcing jobs. One such site is http://www.digitalundivide.com/youtube-search-for-jobs-and-view-how-to-find-employment-video-clips

wab95

Apple makes a higher profit margin on each dollar of sales than either HP or IBM, allowing the company to report higher earnings on lower sales.? Investors pay for earnings, not sales.?

Sewdog is correct, as I understand this, and is speaking the language of the marketplace. I have had similar discussions with my stockbroker (who originally questioned my judgement in purchasing Apple stock years back, but who now thinks I was prescient). Apple enjoys a higher profit margin than any other tech company, and insoafar as I am aware, no one comes close. This gives the lie to the speculation that the company is over-valued.

wab95

Apple may be growing big but we don?t see the large number of jobs for Americans. Apple like many other corporations creates millions of jobs overseas for foreigners. Apple is not helping the economy because local governments and school districts are laying-off a large number of employees because the economy is not generation enough money

Tim, your assessment, though common, is incomplete to the point of being non-constructive and unhelpful. Our economy is not simply global, but becoming progressively more interdependent by the day. Your argument is tantamount to saying, ‘Bones need calcium. My dinner did not help my bones at all, because I didn’t eat chalk’. The nutrients in your dinner, though not solely calcium, if balanced, will put calcium into your bones as well as provide for the wellbeing of your body en toto.

The growth of other economies, fed by the intellectual engine of companies like Apple (not the only one by far), like their stagnation or contracture (witness the angst around Japan’s economy post-earthquake/tsunami/nuclear reactor breach), affects all economies directly and indirectly.

One of the reasons for the lack-lustre response by traditional US allies to the US’s claim that China undervalues its currency (tacitly admitted by the Chinese, but an argument reflected right back by them to the US) is that economic growth in China and India indirectly contributes to economic growth worldwide, and is a bulwark against global recession (which would have been far worse in the past three years were it not for that growth). The US, the UK and Europe need the growth of those Asian, Latin American (and hopefully soon) African economies.

Afterall, if they grow, they create business and investment opportunities for US, UK and European companies, which can and does lead to job opportunities for those American workers to whom you refer.

The issue of employment of American workers, however, is more complex, but may well have more to do with a paucity of educational and training investment in the nascent American workforce (read ‘children’s education and vocational training’) than where Apple or any other company hires its manual labour force.

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