For those who follow my blog closely, they'll recognise the picture; I've used it before and thought it would be very apt for this post too.
After yesterday's announcement of Q4 results, the web is full of buzz surrounding Apple and its giant achievements for this year - and rightfully so
In this post I'll show the financial path Apple has traveled in the last 5 years, and why I think their glory ride to be over.
First, the stats. Based on all quarters for this year, I've put together a preliminary annual report for Apple 2010 - that is just all quarterly figures added, so the real financial annual report will show different figures; however, I consider it close enough.
Update 23rd October 0:08 AM CET: Updated the stats to also contain 2004, so they're inline with my other comparison figures across this blog. Sorry, and thank youBelow that are the revenue and operating profit for 2004-2010
Right. Please pause for a deep breath. I'm not an Apple fanboy, hardly so, but these figures are *impressive* to say the least. 5 Times more revenue and 10 times more profit than 5 years ago? People would give an arm and a leg for that - and more. To make matters "worse", I'll add employee count: 36,800 for 2009, making for an average operating profit per employee of $375,000
Finally, with an operating margin more than double what it was in 2005, where are the limits for Apple?
In order to answer that question, we must simply compare Apple to other Apples that preceded Apple. To do that, we should know what Apple does. What does Apple do?
- Apple sells unique hardware: iMac, MacBook, iPod, iPhone, iPad
Oh wait, they are very innovative, right? Wrong. On average, Apple spends 3% of revenue on R&D - that's even less than SAP, IBM, Oracle or even HP - making Apple the least innovative company on paper
There. That's quite sobering, isn't it? Apple sells hardware and is the least innovative company around. [pause to think about that statement]
Of course there will be arguments about this: no, Apple sells a unique experience, it's The Brand, they give you a Visionary Augmented Reality, and whatnot. I admit that they make a lot more wizardry stuff out of their R&D bucks than any of the other companies mentioned above, but still: Apple gives you the biggest lock-in on hardware and software in the history of mankind. Period. Wintel? They wish they'd gotten this far!
Back to the questionnaire: Apple has just proven to be a pure hardware company, so we can compare it to others like it. What are the biggest and best hardware companies around? On to the Fortune 500...
To my mind come Cisco, Texas Instruments, and Intel. Cisco and Intel made almost the same revenue in 2009 even, Texas Instruments a third of that. Cisco has an operating margin of 17%, Texas Instruments does 14%, and Intel is down to 12%
Begs the question: how come Apple has gotten this far? Beating Cisco on operating margin? For comparison's sake, Cisco had an operating margin of 23% back in 2005, when they still monopo-lied (love that word!) the market.
Let's not forget however that Apple is the first consumer-hardware, and that we're in a real consumer market these days - who knows when and where it will end?
I'm not saying it should end - heck Apple is to the world what the world was to Microsoft Windows: an endless innovator filling the gaps. No one cares that Apple is Steve's private playground as Apple's great ideas get copied outside his reach, and find their way to others via open systems such as Android, or Windows even (nothing new there).
But, if I look at the differences between the iPhone 3 and iPhone 4, I wonder whether Apple is great or even good at anything else than innovation
Apple fought its way out from the pits to the stars. Now they're there, what to do?