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Apple’s Unprecedented Earnings Call: Where Is The Money Going?

Mac Carlile |
July 21, 2011 | 8:23 a.m. PDT

Staff Writer

Tuesday, Jul. 19, Apple heralded its third quarter performance report with an earnings call. Apple CFO Peter Oppenheimer joined several other key officers to deliver the good news to its shareholders: Apple had its best quarter ever. 

Last September, Apple passed Microsoft to become the second largest company in the United States. Since then, Apple has grown at an outstanding pace. Year over year, the company brought in 84 percent more revenue and 125 percent more profit. 

“We are extremely pleased with our performance which drove quarterly cash flow from operations of $11.1 billion, an increase of 131 percent year-over-year,” said Oppenheimer.

The unusually high rate of growth was made possible by the company’s latest offerings in several markets. The iPod was the only product division that declined in sales from last year, likely because most everyone who wanted to buy an iPod already had. Beyond the iPod, every other product in the lineup enjoyed stellar sales. iMac sales were phenomenal, outpacing last year’s iMac sales by 14 percent. But for the first time in history, Apple sold more iPads than iMacs. 

In the smartphone space, product refresh cycles have become increasingly shortened-- now measured in weeks instead of seasons.  The iPhone, however, has not seen a real update in over a year. Sure it got a new paint job and became available in a CDMA version, but inside, the phone’s components are aging. Despite it all, Apple, incredibly, shipped 142 percent more iPhones this quarter than last quarter, when the phone debuted to hoards of early adopters. 

Apple’s entry into new foreign markets paid off for the company as well. As technology costs decrease and wages increase in these areas, many people are viewing Apple devices less as luxury products and more as consumer goods.

“iPhone sales momentum in the Asia-Pacific region was particularly robust with sales almost quadrupling year-over-year.” said Oppenheimer. 

Apple doubled in size, but the marginal increase in stock price indicates that shareholders doubt that such impressive growth can be continued. While stock prices soared (AAPL spiked to above $395 per share immediately following the conference call), they do not accurately reflect just how much the company grew.  

However, there is more to the story than just growth. The important piece of information investors should retain from this earnings call is the mountain of cash on which Apple is sitting. At its disposal, the company has over $70 billion of reserves and assets.

Analysts and investors have already speculated on how Apple should use this money. Some shareholders insist Apple buy back stock in the form of a dividend. Others would like to see Apple invest in some of its innovative patents it has secured, like completely wireless charging for devices. Still others insist that Apple should continue to make small, strategic acquisitions to ensure talent and supply chain systems remain loyal. 

Apple just launched a new version of its flagship operating system, OS X Lion, but will continue to face pressure from Microsoft’s upcoming Windows 8 and Google’s Chrome Operating system. If Apple chooses not to invest its nest egg in assets that will help grow the company, it could lose much of its marketshare to competitors. 

Share what you think Apple should do with its mountain of cash in the comments below. 

Reach Mac Carlile here 



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