So, a couple of days ago, Apple released its results for the latest fiscal quarter, Q3 of 2010. And, once again, the numbers were good.

They had profits of $3.25 Billion, on revenue of $15.7 Billion; this was their best quarter ever. Take a look at that again; their best *quarter* ever, not their “best non-holiday quarter ever.”

That is to say, Q310 had higher revenue than Q110, the quarter that includes the annual spend-a-thon known as Christmas. For the past few years, Apple’s revenue has shown distinct “spikes” for the holiday quarter of each fiscal year, driven primarily by iPod sales, which (as I have noted before) make great Christmas presents. But this year, things were different. It’s also interesting to note that the last time Q1 was not Apple’s best quarter was back in fiscal 2005. Back then, their revenue for the *entire year* was $13.9 Billion, and their quarterly revenue was on the order of $3 Billion… which is what they made as *profit* this past quarter. So it may be a trite statement, but things have changed for Apple over the past 5 years, and changed in a very good way. I think, as time goes on, we will still see the spikes of the holiday quarter, but the new revenue streams of iPhone and iPad will smooth out that line, just a tad.

Breaking the numbers down a bit, we note that iPod unit sales were down slightly, reinforcing a trend that has been going on for some time. iPhone sales were also down very slightly, while CPU sales were up. This was the first quarter that Apple was selling iPads, and they did well, selling 3.2 Million of them; we’ll have to see how those numbers change over the next couple of years.

Percentage wise, iPhone represented 33.97% of their revenue, while CPUs accounted for 28.02%. Surprisingly, iPad was worth 13.8%, quite a bit higher than iPod, coming in fourth with 9.84%. This was the fourth quarter in a row that iPhone revenue was greater than CPU revenue.

A while ago, a friend of mine theorized that Apple had become more of a music company than a computer company. The numbers didn’t bear that theory out, but they do seem to support the idea that Apple has become more of a phone company than a computer company. But, if you consider the iPhone as more of a handheld, personal computer that can do phone calls, maybe not. And the iPad is more of a computer than anything else. Indeed, it may be what computers will look like more and more as time goes on. So I still think we can consider Apple a computer company, first and foremost.

This most recent financial announcement also included the final “revision” of their fiscal 2009 numbers. Using their updated accounting procedures, Q3 of 09 had $1.397 Billion more revenue than what they originally reported, putting their annual revenue at $42.905 Billion, rather than $36.537 Billion. As I noted before, this would have placed Apple in 51st placed in the Fortune 500, rather than the 56th place they actually made. Still, it’s the best Apple has ever placed on that venerated list of US Companies.

A couple of other interesting points were made during their announcement. First, Apple is forecasting revenue for the fourth quarter to be around $18 Billion. Industry analysts said this is “conservative,” as is typical for Apple (they don’t like to brag). But if they do make that number, it would push their annual revenue for 2010 to around $62 Billion. That would be a increase of 46% from 2009, and would push them to the low 30’s on the Fortune 500 list.

The other interesting point was made by Tim Cook, who said that not everything is all rosy and nice. They are having a problem at Apple… mainly in that they cannot seem to meet the demand for iPhone 4 and iPad. They can’t build them fast enough, but they are working through that as best they can. You have to admit, it’s a “good” problem for a company to have.

Finally, I have to note that Apple’s market capitalization was $231 Billion this morning, making them the second most valuable company in the US. Over the past 5 years, Apple’s stock price has increased almost 500%. Which only makes the fact that I did not buy any stock that much harder to take.

I guess I’m just a sucker for numbers, statistics and analysis…

Anyway, no huge surprise at the top end of The List; Wal-Mart is once again #1, with a tad over $408 Billion in revenue. Exxon-Mobil is a bit of a distant second, with only $284 Billion… and believe me, I see the irony of using the term “only” to describe almost “three hundred billion dollars…”

There are 16 companies in the “$100 Billion Plus” club this year, with American International Group making some very impressive gains; moving from 245th spot on last year’s list to #16 this year; that’s an amazing 829% increase of gross revenue…

But, to be honest, I’m much more interested in seeing how my favourite company has done. And they did well; Apple placed in the 56th spot. That’s the best Apple has ever done, since their debut on the 1982 list, at 411th. It was also quite a jump from last year, when they placed 71st, and even a significant improvement from their previous record of 67th way back in 1993.

The record placing on the list was obviously due to their record breaking revenue in 2009; $36,537 Million… Thirty Six and a half Billion dollars…

Hrm… wait a minute… according to my records (yes, I know; me having “records” of Apple’s financial results is more than a little geeky), Apple’s revenue last year was $41,508 Million… but the Fortune 500 list clearly says $36,537 Million. That’s a difference of $4,971 Million. Not exactly chump change. Where did it come from? I highly doubt Steve Jobs found it in the couch cushions one day…

Oh, of course; as I mentioned in a previous blog post (on 26 Jan), Apple has been revising how they account for iPhone revenue. That made for an “extra” $900 Million in Q2, $1,693 Million in Q1, and a whopping $2,309 Million in Q4… and we still don’t have the revised numbers for Q3; those won’t be released until early July.

So, if we take in to account their revised revenue (at least for the three quarters we know about), where would they have been on the Fortune 500 list? Well, it looks like they’d be a very comfortable 51st place (just behind #50 Pepsico, who had $43,232 Million of revenue).

And, if Apple’s revised Q3 numbers are high enough, they might even edge out that acclaimed purveyor of sugared water to claim 50th spot… at least “theoretically,” since the official Fortune 500 List uses their previously announced “official” revenue claims, rather than the ones that result from their revised accounting. And to be honest, that only makes sense. But… it’s nice to think about. I had theorized that Apple could break into the Top 50 of this year’s List; even though they did not, officially, it’s cool that they might, even if only theoretically.

Of course, when the Q3 numbers are released, I’ll be sure to let everyone know how it turned out… that’s just the numbers and statistics obsessed geek kind of guy I am.

Cheers!

Too cool. More detail here:

Now, in that blog post on Apple fiscal results, I showed data compiled over the last several years. This data comes from the Data Sums that Apple posts with their results; I have been downloading these files and putting the numbers into a big honking spreadsheet to make some pretty cool (if I say so myself) graphs for analysis. So the first cool thing about this quarter’s release was the note attached to the data sum:

In September 2009, the Financial Accounting Standards Board amended the accounting principles related to revenue recognition for arrangements with multiple deliverables and arrangements that include software elements. Apple adopted the new accounting principles on a retrospective basis during the first quarter of 2010. The new accounting principles significantly change how Apple accounts for certain revenue arrangements that include both hardware and software elements. The impact of the new accounting principles is reflected for all periods above. For additional information refer to the “Explanatory Note” in Apple’s Amendment No. 1 to the Annual Report on Form 10-K for the year ended September 26, 2009.

Now… that is interesting, and I’ll tell you why. The Data Sum that Apple releases each quarter contains not only the data for the quarter being reported, but also for the immediately previous quarter and for the year ago quarter, so you can compare how Apple is doing now to how they were doing in the past. And, as the note quoted above mentions, the changes in accounting principles were applied to the older results that are included in the Q1 2010 Data Sum. And the differences are pretty amazing.

Although the note does not specify, it is obvious, when you look at the numbers, that the impact from the new accounting principles is in the revenue Apple reported related to iPhone. Check it out:

iPhone revenue, based on these new numbers, was more than twice what was originally reported under the old accounting principles. Gross revenue for the year was $4 Billion higher than originally reported, based only on the differences from those two quarters. When Apple releases the new numbers for Q2 and Q3 09, the overall increase in total annual revenue will probably be pretty amazing.

Beyond the total revenue aspect, there are a couple of other cool factoids from the Q1 10 results:

First, for both this quarter and the (new) previous quarter, iPhone revenue was greater than CPU revenue. Which kind of takes the wind out of my sails; in the blog post linked to above, I argued that Apple was still, primarily, a computer company and it was computers, not iPods, that drove Apple’s revenue machine. That no longer seems to be the case. You could argue, I guess, that the iPhone is, in many ways, a handheld computer, but the fact that Apple themselves report iPhone revenue as separate from CPU revenue kind of makes the point. And the new device to be announced by Apple tomorrow may just add even more fuel to that fire.

The second cool factoid is that the total revenue for Q4 09 is now higher than for Q1 09. Remember how I said that Q1 revenue is always high, due to Christmas sales? That trend has been very evident in Apple’s results for the past five or six years, with a plausible explanation being iPods making such great Christmas gifts, and it showed in the “sawtooth” graphs I showed in my Charting Apple post. Well, at first glance, it appears that iPhone sales (which I postulated earlier might be stealing iPod sales) are causing Apple’s quarterly revenue to be more even, less influenced by Christmas sales. I am sure iPhones also make great Christmas presents, but the revenue from iPhone is less affected by the Christmas rush. Don’t forget, Apple gets a cut of the revenue from carriers. I don’t think we can make a firm conclusion at this point, based on just a couple of quarters; we’ll have to see what the “new” results for Q2 and Q3 09 are, and (naturally) the results from the rest of fiscal 2010. But rest assured, I will be blogging about them when they come out.

The other bit of neat info, not really from these fiscal results, is that Apple’s “cash on hand” and “short term investments” are around $40 Billion… which is more than enough cash to buy every single share of Dell. Not that this is actually “new” information; it’s been that way for a while; I’ve posted about it before. But it’s one of those things that is worth repeating. But who’d want to buy a washed up computer company like Dell anyway?

I wouldn’t call myself a diehard Metallica fan. I’ve been aware of their music for some time, but never really listened in detail. My girlfriend, on the other hand… she’s a huge fan. When we first started dating, she told me, in no uncertain terms, that if Metallica were ever to come anywhere close to Ottawa for a concert, we were going; that’s it, that’s all. Toronto, Montreal, New York, anywhere.

Luckily, they came to Ottawa.

Because she’s a Metallica Club Fan member, we were able to score good seats, mostly because members were able to purchase seats a week or so ahead of anyone else. Even then, I was seated at the computer at 09:55, waiting until the password would be revealed at 10:00 so I could hit “buy” as quickly as possible. So we ended up with front row seats.

Then she goes and enters the contest to win a backstage pass to meet the band… and she actually wins. One ticket only; I was SOL.

But the coolest thing was, I brought my camera along to the show.

I’m pretty proud of this camera; a Panasonic DM-FZ18; 8 Mega Pixels and 18x Optical zoom. It’s pretty sweet.

I ended up taking 480 pictures during the show (just of Metallica; no pics of the opening acts. Volbeat was pretty good, but Lamb of God kinda sucked, in my opinion… but I digress).

480 pics. That’s the equivalent of 20 rolls of film (for those of you that remember film…) At some points, I was taking 4 or 5 pictures per minute.

Now, about 160 of the pics turned out pretty good. For example:

That works out to a ratio of 1:3 for good pics vs. pics taken. Not bad, but that’s what digital photography is all about. Since you don’t have to pay for film, nor do you have to load and reload (Metallica reference there) the film itself, Digital lends itself to snapping as many pics as you can, and working out later which ones are keepers. The rest you can just delete.

I put the good pics on my Flickr page. Feel free to check them out, and let me know what you think of them.

Cheers!

The genesis of it was a discussion I had with my good friend, Mr. Squid. I believe he responded to an Apple-related post on my old blog site, wondering if Apple could still be considered a computer company, or if they were making more money from iPods than from computers.

Because I had been tracking Apple’s Financial results for a while, I was able to give him information that confirmed, while there were times when Apple made more money from iPods than from computers, in general, computers were still the key to their business. Sure, they are more of a “consumer electronics” company, but CPUs are still what drives them.

In the meantime, I’ve done some additional research and pulled out some more numbers, especially some of their older financial results. But before I was able to make this blog entry, I wanted to wait until I had all the data for all of 2009.

Well, as of this past Monday, Apple has released their results for the fourth quarter of 2009. And impressive results they were, indeed. Other companies seem to be suffering from the recession; losing money or having “disappointing” results. But Apple did well. Not just well, but very well. I echo Mr. Gruber’s reaction: Yowza.

So, armed with all this data, what do we do? Well, as we all know, “these points of data make a beautiful line.”  So let’s make some graphs! After the cut, I have posted a bunch of the graphs in question. With them all, you may click to embiggen… although I tried to make them big enough to read as is. Enjoy!

OK, this first chart shows the last 28 years of Apple’s gross revenue and profits/losses. I’ve also annotated some key events that occurred over that time frame. You can break the graph down into three sections:

For the first 14 years shown, from 1982 to 1995, things were pretty rosy for Apple. They made a profit every year and, with only a couple of exceptions, they increased revenue each year.

But, from 1995 to 2001, things were different. Over this period, again with a couple of exceptions, their revenue decreased each year. And they posted a total of three losses; $800 Million in 1996, $1 Billion in 1997 and (a relatively piddling) $25 Million in 2001. Yes, Steve Jobs had returned, and yes, the iMac was helping them turn around… but Apple was obviously a large ship that took time to steer.

The final section, from 2001 to the present, is the most dramatic. Once again, each year has been profitable, and this time, there are no exceptions; revenue has been up each and every year. In 2005 they blew past their previous best year, the high point from 10 years previous in 1995, and the new high point (the most recent results from 2009): $36 Billion of revenue in a single year.

Now, the data in the first chart was gleaned from past results and placings of Apple on the venerable Fortune 500 list. So I am throwing in a graph that shows those results over the same 28 year period. I have “flipped” the graph so that the better the result, i.e., the higher up the list they are, the higher the line is. As you can see, the results are similar to the graph of their overall gross revenue… which is not surprising, as Fortune 500 position is determined by that statistic. The fact that their Fortune 500 peak was in 1993 rather than 1995 is probably attributable to how other companies on the list did in those years.

Apple debuted on the list at 411th. Their best result was in 1993, at 67th, while their 9 year resurgence put them at 71st in 2008. Obviously, their 2009 results have yet to be analyzed and placed on the next list; that should come out sometime in the Spring of 2010. I am confident that they will have increased their placing from 2008, and also confident that they will post a new best result, beating that of 1993. The interesting question is, will they make it into the vaunted “top 50″ category? Given their performance relative to some other companies who seem to be harder hit by the recession, I’d be willing to bet “yes” on that point.

So, enough of the historical perspective. How about the initial question; from what sector of its business does Apple derive most of its income? To answer that, let’s look at the last 9 years in a bit more detail:

This graph shows Apple’s annual revenue for the past 9 years, broken down by sector. Just as a note, prior to 2001, their revenue was essentially composed of “CPUs and Miscellaneous.” But, as you can see for the most part, Apple’s primary source of revenue remains CPU sales. 2006 was the exception; in that year, iPod revenue just barely eclipsed CPU revenue. But the interesting part of this graph is the right hand end. As you can see, from 2008 to 2009, annual iPod revenue is down for the first time since its introduction, as is CPU revenue. The culprit would appear to be, from this graph anyway, the iPhone. I think it is logical to assume that iPhone sales are stealing iPod sales. Since the iPhone is also an iPod, it is probably a safe bet to say that folks are upgrading / replacing their older iPods with iPhones. I would not be comfortable, however, making any conclusions about iPhone sales stealing from CPU sales, even given that the iPhone can be considered, for some intents and purposes, a handheld computer. The decline in CPU revenue may be more related to the economy than anything else. But, since overall revenue was up, we can conclude that Apple has successfully diversified its revenue sources, becoming better able to weather a recession in the process.

The data for this graph comes from Apple’s own quarterly data sums, and we should note also that Apple has been accounting for iPhone revenue using GAAP methods, that is, over the expected life of the product. They are apparently reconsidering that policy, so it will be interesting to see how that affects this graph in the future.

So, let’s drill down even further, and look at the last 9 years on a quarter-by-quarter basis:

Now this graph has a very interesting and beautiful line. That “sawtooth” line in iPod revenue, driving the same pattern into the overall gross revenue; what causes that? Well, when you think about it, it’s obvious. The peak occurs in the first quarter of each of the past 5 fiscal years. First fiscal quarter matches to the last three months of the previous calendar year. October, November, December. The Holiday quarter. iPods make great Christmas presents, don’t they?

Looking closely, the spike does appear, albeit not as dramatically, in CPU revenue, but not, at least thus far, in iPhone revenue. It will be interesting to see what happens this Christmas, and how that is reflected in the first fiscal quarter of 2010. As you can see, it took iPod a couple of years to start showing that Christmas spike.

Note also that the annual decrease in CPU revenue from 2008 to 2009 seems to be rooted almost entirely in the second quarter of FY 2009.

OK, money is all well and good, but what about units sold? OK: two graphs in a row, to get this moving along:

Annual results, and:

On a quarter-by-quarter basis.

Again we can see the “first time ever” annual decrease in iPods sold, and the sawtooth pattern in there, as expected, on the quarterly graph. And even though Apple is selling more iPods and iPhones than CPUs, the part of these graphs that I think is significant is the steady increase in CPU sales. It may seem a slow increase on this graph, but if we pull out only CPU sales:

It is much more dramatic and interesting. Note that the second quarter drop in CPU sales seems to be a relatively common pattern. Now, given that the answer to the initial question is “yes, Apple is still, primarily, a computer selling company,” the fact that their CPU sales are showing this kind of increase year over year is very comforting. They sold more than 10 Million CPUs in 2009, 3 Million in the last quarter alone. Time will tell if they can keep that momentum going, but given the gorgeous hardware they announced yesterday, I think it’s a safe bet to say “yes they can.”

Yes, I realize my Blog has become a “cobweb” site… I’ve been busy. But I am working on a new entry, one that I’ve actually been working on for almost two years… so stay tuned.

Cheers!

NTSC TV Test Pattern