Apple 10K Shows 70% Capital Expenditures Increase for 2010

| Apple Stock Watch

Apple is planning on a 70% increase in its capital expenditures spending (CapEx) for 2010, according to the company's 10-K filing. Caris & Company analyst Robert Cihra told clients in a research note obtained by The Mac Observer that this could suggest that Apple is working on, "strategic new infrastructure."

"Apple's recent 10K forecasts FY10 CapEx increasing a whopping ~70%Y/Y to US$1.9B from FY09's $1.1B," Mr. Cihra wrote. "And while we recognize this might just be typical Apple conservatism (e.g., FY09 capex originally seen +36% vs. ultimately reported +5%), we do believe Apply may be in motion on some strategic new infrastructure."

Mr. Cihra also noted that Apple told the SEC it was investing in, "product tooling and manufacturing process equipment." He believes that this could mean Apple might be planning to, "actually build certain products/components in-house."

Other tidbits from the research note include an estimate of 10 million iPhone sales for Apple during the December quarter, which puts the firm well ahead of Apple's guidance and other analyst estimates, but Mr. Cihra characterized that number as "doable." For calendar 2010, the analyst is modelling for 41 million iPhones sold.

Mr. Cihra also bumped his Mac sales for the quarter to 3.4 million, up from 3.2 million. "Moreover," he added, "while product rebuilds/timing actually came in line with our expectation/previews, Apple did not end up lowering price-points as we’d modeled, muting ASP erosion."

Some analysts had worried that Apple would be forced to significantly cut prices in the face of increasing competition from el-cheapo netbooks, a worry that has so far not been borne out.

Apple ended the day higher, closing at $189.31, a gain of $.81 (+0.43%), on moderate volume of 24.2 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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Comments

Bryan Chaffin

Apple has played it tight when it comes to CapEx since Steve Jobs came back. It’s been part of the company’s profitability model, and a big part of why Apple has been able to execute so much better than its competition for so long.

So, an increase like this could mean many things. As Mr. Cihra noted, Apple could be playing conservatively coy with its SEC filings - Think Playing It Safe.

But, even if the increase was exaggerated by a factor of two or three, it’s a big increase. So what is the company planning? I certainly don’t know, but I think that Apple watching in 2010 is going to be very, very interesting.

That said, I would guess that iTablet-related infrastructure could be a part of this (distributing Ebooks and such), and this new Apple TV subscription story would definitely require some money.

I’ve a feeling Sun Tzu would smirk at all this.

dhp

Didn’t Steve Jobs tell the Cupertino city council that Apple was buying a bunch of land for a new campus or something? Anything ever come of that?

jragosta

An Apple TV subscription service by itself would not show up as CapEx. If they had to install massive server farms, it might.

There are likely two real answers which don’t require resorting to speculation:

1. Apple has already committed to a massive server farm in NC (received significant tax credits for that one). The cost of that will be huge.

2. I believe Apple cut back on the number of new Apple Stores this year due to the economy. Some of the increase may be getting back to fast deployment of new stores.

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