Capital expenditure

  • Posted: 26 July 2012 05:31 AM

    Reading the 10-K, I notice Apple have continued to sharply increase their capital expenditure in machinery and equipment. The expenditure this quarter is up an astonishing 45% compared to Q3 2011. Apple’s management must be predicting that demand for the new iPhone will be ‘off the charts’, to use one of their favourite expressions.

    The question is how much of this high expenditure on new machinery and equipment during the past few quarters is for the production of the new iPhone and the usual upgrade of iPods and Macs and how much for new product lines, such as the strongly rumoured iPad mini and Apple TV?

         
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    Posted: 11 August 2012 01:15 PM #1

    There’s no question.  This is the most bullish tangible number in the whole report.

    This portends hardware capacity, retail stores, retail staff, advertising.  (cough: I’m not at accountant.  Just speaking of trends).

    Already ramping:  manufacturing capacity of Apple hardware partners
    Already ramping:  advertising (Mac Genius ads and its replacement ad)
    Already ramping:  OS updates.  (10.8, iOS 6 beta)
    Already ramping:  Apple server farms

         
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    Posted: 11 August 2012 02:05 PM #2

    Horace’s estimates:

    This yields an iOS output of approximately between 65 and 80 million units in the current quarter and 100 to 125 million in the fourth calendar quarter. The sum of the low ends of this estimate is 165 million units.

    My current forecast is 53 million units in CQ3 and 110 million units in CQ4 which, together, add up 163 million. Close enough.

    http://www.asymco.com/2012/07/31/estimating-third-and-fourth-quarter-ios-shipments/

         
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    Posted: 11 August 2012 03:44 PM #3

    65 M iOS devices in Q4 (JulyAugSept 2012) -- Horace estimate
    45
    -55 M iOS conventional wisdom mixed with my WAG

    110 M iOS devices in Q1 
    (OctNovDec) -- Horace's 
    87 M, perhaps 100 M 

    Capital Expenditure

    Wikipedia


    For tax purposes, CAPEX is a cost which cannot be deducted in the year in which it is paid or incurred and must be capitalized. The general rule is that if the acquired property’s useful life is longer than the taxable year, then the cost must be capitalized. The capital expenditure costs are then amortized or depreciated over the life of the asset in question. Further to the above, CAPEX creates or adds basis to the asset or property, which once adjusted, will determine tax liability in the event of sale or transfer. In the US, Internal Revenue Code ??263 and 263A deal extensively with capitalization requirements and exceptions.[2]

    Included in capital expenditures are amounts spent on:
    acquiring fixed, and in some cases, intangible assets
    repairing an existing asset so as to improve its useful life
    upgrading an existing asset if its results in a superior fixture
    preparing an asset to be used in business
    restoring property or adapting it to a new or different use
    starting or acquiring a new business

         
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    Posted: 11 August 2012 03:51 PM #4

    It seems to me that my normal increase in iPad, iPhone, iPod touch and the hobby of miscellaneous TV cannot be match the increase in Capital Expenditures.

    Therefore, we are likely either talking about at least one of these

    1. new iPad nano
    2. Apple television
    3. server farms
    4. colossal iPhone and iPad sales in the holiday quarter.

    Question: a fifth option ?

    5. imminent purchases of some company

         
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    Posted: 11 August 2012 10:47 PM #5

    Tetrachloride - 11 August 2012 06:51 PM

    It seems to me that my normal increase in iPad, iPhone, iPod touch and the hobby of miscellaneous TV cannot be match the increase in Capital Expenditures.

    Therefore, we are likely either talking about at least one of these

    1. new iPad nano
    2. Apple television
    3. server farms
    4. colossal iPhone and iPad sales in the holiday quarter.

    Question: a fifth option ?

    5. imminent purchases of some company

    I think it is the mother of all rollouts for the new iPhone, plus the iPad nano plus the itv.


    Get ready for a holiday quarter that boggles the mind, followed by a March quarter highlighted by all of the above and a Lunar New Year launch on China Mobile…

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    Posted: 12 August 2012 03:07 AM #6

    Would be nice if China’s MIIT authority would speed up their testing/approval process.  The iPhone 4S took until December to be approved.  At the same time, it took about a month from then for iPhone 4S to be available in China. 

    Seems to me like there’s a little room for Apple to move up the iPhone launch in China, if logistics and regulatory approvals allow.  Honestly, if not for MIIT and maybe production ramp there’s little (read: no LOL) reason why China shouldn’t be a first-stage launch country.

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    Posted: 12 August 2012 11:54 AM #7

    Mav - 12 August 2012 06:07 AM

    Would be nice if China’s MIIT authority would speed up their testing/approval process.  The iPhone 4S took until December to be approved.  At the same time, it took about a month from then for iPhone 4S to be available in China. 

    Seems to me like there’s a little room for Apple to move up the iPhone launch in China, if logistics and regulatory approvals allow.  Honestly, if not for MIIT and maybe production ramp there’s little (read: no LOL) reason why China shouldn’t be a first-stage launch country.

    They can always submit the device earlier, I’m sure with the 6th generation they have a good idea how long it takes.  The key is launching before Chinese New Year, which is Feb 10th this year.  I would hope they also have things worked out with China Mobile as this handset should support TD SCDMA , TD LTE.