tbr 1q11 apple inc. report
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Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company performance in professional services, networking and mobility, computing and hardware, and software on a quarterly basis, leveraging our data to create industry benchmarks and landscapes that provide a business perspective on leaders and laggards and their business plans. We are experts in the business of technology. Apple is driving revenue growth by becoming a phone company, targeting the rapidly growing smartphone market to supplement its PC business. iPhone sales accounted for 49.9% (or $12.3 billion) of Apple’s 1Q11 revenue, driven by global carrier expansion and increased distribution.TRANSCRIPT
TBR
TECHNOLOGY BUSINESS RESEARCH, INC.
Technology Business ResearchAccelerating Customer Success Through Business Research
TBR
TECHNOLOGY BUSINESS RESEARCH, INC.
Apple Inc.
COMPUTER BUSINESS QUARTERLYSM
Publish Date: May 11, 2011Authors: Ezra Gottheil ([email protected]), CBQ Senior AnalystEmily Searles, CBQ Research AnalystContent Editor: John Spooner, Director, Computers and Storage
First Calendar Quarter 2011Second Fiscal Quarter 2011 Ended Mar. 25, 2011
TBR OUTLOOK – POSITIVE TBR SCORE (0-10 SCALE)
6.60
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Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.3
Company Analysis3 TBR Position4 Executive Summary6 Strategy Overview8 Scenario Discussion11 Corporate SWOT Analysis12 Financial Model Strategy16 Go-to-Market & Product Strategies17 Alliance & Acquisition Strategies18 Geographic Overview19 Resource Management Strategy21 Organizational Structure
Company Data Models22 Income Statement 23 Balance Sheet24 Segment Revenue Model25 Unit Shipments & ASP Model26 Operating Expense Model27 Revenue by Customer Model28 PC Revenue Model29 Geographic Model30 Financial Strategy Graphs32 Resource Management Graphs 34 Future Outlook Graph35 Alliances Table 36 Product Portfolio Table39 About TBR
Contents
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Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.4
TBR Position
iPhone will remain the growth engine for Apple, driving revenue and corporate profit
(In $ Billions) Consensus Guidance ActualRevenue 23.4$ $22.0 - $24.8 24.7$ Operating Income N/A N/A 7.9$ EPS 5.37$ $4.85 - $5.98 6.40$
(In $ Billions) TBR Estimate Consensus GuidanceRevenue 24.0$ 23.8$ $20.9 - 26.6 Operating Income 7.1$ N/A N/AEPS N/A 5.25$ $4.15 - 6.08
APPLE 1Q11 PERFORMANCE VS. EXPECTATIONS
APPLE 2Q11 GUIDANCE AND EXPECTATIONS
TBR Assessment Corporate Strategic ObjectivesApple is driving revenue growth by becoming a phone company, targeting the rapidly growing smartphone market to supplement its PC business. iPhone sales accounted for 49.9% (or $12.3 billion) of Apple’s 1Q11 revenue, driven by global carrier expansion and increased distribution.
Dominate awareness with innovative products and aggressive marketing. Apple leverages its reputation for products and service to drive growth and margins.
iPhone revenue rose 126%, causing gross margin to rebound to a near-record 41.4%. The increased proportion of revenue from the iPhone, which TBR believes is Apple’s most profitable hardware product line, was the principal reason for the gross margin increase.
Maintain its premium market position in all product lines. Apple competes in the higher end of each market for PCs, handsets, tablets and media players.
TBR believes Apple is leveraging its new A5 dual-core processor, found in the iPad 2, to differentiate its high-performance tablet. The unique processor, which powers the iPad 2’s numerous upgrades, will promote premium pricing as the tablet market becomes saturated. TBR expects Apple to leverage its processor technology across all of its product lines.
Be a retail leader: Apple Stores are a strategic differentiator, driving sales and margins while strengthening customer relationships with consumers and very small businesses.
Apple is targeting very small businesses (VSBs) with its new Joint Venture program available through Apple Retail Stores. TBR believes the new program will allow Apple to gain greater control over its customers’ experiences by limiting third-party interaction.
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Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.5
TBR assessment of Apple’s two-year strategic outlook
Key TakeawaysFinancial: iPhone, iPad and Mac revenues will continue to provide strong revenue growth for Apple, with iPhone generating triple-digit growth in greater China.Go-to-market: TBR believes Apple’s growth of its retail presence, carriers expansion and the iPhone “white” upgrade will drive iPhone revenue in 2Q11.Resource: Apple will leverage its retail stores as a support network to drive adoption of Apple devices and maintain control over its customer experience.
Strategic Outlook• Apple will invest to maintain a supply of key
components, such as screens for its iPad. This ensures an adequate supply of iPads, while blocking competitors from obtaining components. As a result, RIM’s PlayBook was delayed due to component shortages, allowing Apple a greater lead in the enterprise tablet market.
• iOS and an increasing base of App Store client devices will provide a core around which Apple can build additional digital hub products and diversify its revenue stream.
• Despite high entry prices, Apple will continue to gain PC market share.
• Though Android will inevitably erode Apple’s market share in smartphones, the company will remain a major player in the rapidly growing market.
• Apple’s percentage of revenue from the Americas and EMEA will decrease as the iPhone and iPad expand the company’s presence in other markets.
Executive Summary
With accelerating iPad and iPhone growth, Apple will continue its multipronged strategy to drive sales globally
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Rapid revenue growth, due to the continued success of iPhone 4 andthe introduction of iPad 2, places Apple ahead of its peers
Rapid revenue growth driven by strong customer demand across Apple’s product portfolio enabled the company to come out ahead of CBQ peers in the financial, go-to-market and resource management metric categories in 1Q11.
Key ■ Represents an area where Apple is currently challenged versus peers ■ Represents an area where Apple is outperforming its peers
■ Represents an area where Apple is neither significantly outperforming nor underperforming its peers
Executive Summary
FINANCIAL METRICS TBR ScoreCompany
FigureAverage in Class
Standard Deviation/2
Revenue (in $ Mill ions) 8.06 $24,667 $12,081 $5,287Gross Margin 5.48 41.4% 37.1% 9.0%SG&A (% of revenue) 7.24 7.1% 17.5% 4.6%Sales & Marketing (% of revenue) 6.98 5.2% 13.9% 4.3%General & Admin (% of revenue) 7.05 1.9% 3.7% 0.9%R&D (% of revenue) 6.55 2.4% 7.2% 3.1%Total operating expenses (% of revenue) 7.40 9.5% 25.9% 6.8%Operating Margin 8.80 31.9% 11.6% 5.3%Net Margin 8.58 24.3% 8.0% 4.6%Revenue Growth YTY 10.00 82.7% 18.5% 11.8%Gross Profit YTY change 9.84 81.7% 23.4% 12.0%SG&A YTY change 1.62 44.5% 10.1% 10.2%Sales & Marketing YTY change 1.16 55.2% 12.3% 11.2%General & Admin YTY change 3.70 21.8% 4.3% 13.4%R&D YTY change 2.70 36.4% 12.5% 10.4%Total operating expenses YTY change 4.48 11.1% 6.8% 8.2%Operating income YTY change 4.70 97.9% 348.7% 841.4%Net Income YTY change 4.72 94.8% 747.8% 2326.6%
TOTAL AVERAGE TBR SCORE 6.45
RESOURCE MANAGEMENT METRICS TBR ScoreCompany
FigureAverage in Class
Standard Deviation/2
Days sales outstanding 7.98 21.2 46.5 8.5Turns on inventory 10.00 63.7 18.5 8.4Days inventory outstanding 7.47 5.7 36.6 12.5Fixed asset turnover 4.90 16.3 17.6 12.6Days cash outstanding 4.64 106.7 91.6 41.8Total asset turnover 4.77 1.1 1.1 0.2Debt/asset ratio 8.45 0.3 0.6 0.1Current ratio 5.88 1.9 1.6 0.4Return on assets 9.44 24.3% 8.1% 3.7%Return on equity 5.28 37.8% 30.6% 25.4%Headcount growth YTY 1.58 33.2% 6.3% 7.9%Annual revenue per employee 8.10 $1,837 $728 $357Annual G&A expense 5.67 $220 $261 $62Annual R&D expense per developer 3.55 $443 $304 $95
TOTAL AVERAGE TBR SCORE 7.01
GO-TO-MARKET METRICS TBR ScoreCompany
FigureAverage in Class
Standard Deviation/2
Annual revenue per salesperson* 4.70 $4,781 $5,994 $4,240Cost per revenue dollar 6.53 $0.03 0.08$ 0.03$ Cost per margin dollar 7.75 $0.07 0.22$ 0.06$ Channel expense as a % of S&M expense 5.02 21.2% 21.3% 9.0%Marketing expense as a % of S&M expense 2.86 46.0% 27.1% 8.9%Annual sales expense per sales employee* 6.15 $140 $270 $113Annual marketing expense per marketing employee* 6.92 $143 $287 $75
TOTAL AVERAGE TBR SCORE 5.63
1Q10 2Q10 3Q10 4Q10 1Q11
Financial Model Strategy: 6.51 6.34 6.17 6.45 6.93Go-to-Market & Services Strategies: 5.97 5.93 5.95 5.63 5.63Resource Management Strategy: 7.14 6.86 6.81 7.01 6.89TOTAL AVERAGE TBR SCORE: 6.53 6.37 6.28 6.39 6.60
TBR SCORING SUMMARY:
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Function Key Strategies TBR Assessment
OverallDrive rapid growth of a loyal customer base for premium products.
►Apple is leveraging the success of its iPhone and iPad products
to attract new customers to Mac and Apple TV through cross-selling opportunities.
Financial
Apple has tolerated margin declines in iPhone and iPad to increase its customer base, driving revenue and unit growth.
► Margins rebounded in 1Q11 due to the increase in iPhone
sales a percentage of total revenue. The iPhone accounted for 49.9% of Apple’s revenue, up from 39.1% in 4Q10.
Go to Market
• Apple uses its chain of retail stores to provide an attractive sales and service environment that increases customer identification with the company.
• Apple stays focused on the consumer market and allows consumers to pull its products into businesses.
►
Apple’s retail effort builds cross-sales, control over brand image, training, service and support, for which customers are willing to pay premium product prices.
Apple is successfully leveraging its retail stores to engage with new customers in China.
Apple’s product-oriented advertising, aimed at consumers, is also intended to appeal to VSBs to drive commercial growth. Apple is augmenting this relationship through the creation of “Joint Venture,” a customer service program aimed at assisting VSBs with their Apple devices.
Strategy Overview
Key: Working: Short-term impact expected on bottom / top line Not working: No major impact or differentiation expected
Apple’s iPhone and iPad propelled corporate revenue and increased brand recognition for Apple devices across all product lines
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Function Key Strategies TBR Assessment
Alliance & Acquisition Apple forms alliances and,
to a lesser degree, makes acquisitions to remain competitive, delivering comprehensive product ecosystems and serving customers.
►
Apple is forming partnerships to serve large enterprise customers of the iPhone and iPad.
Apple sought acquisitions and alliances in 1Q11 that augmented iTunes by boosting data available through iBooks and acquiring the iCloud.com domain, which TBR believes is a stepping stone for enhancing Apple’s cloud presence.
Operations & Global Delivery Model
Apple works with suppliers and ODMs to deliver products, including a comparatively large number of customized components. Its large volumes help drive favorable deals.
►
Apple’s tight control of SKUs helps the sales and branding process and enables immediate product availability with minimal inventory.
Outside the Americas and EMEA, Apple relies on providers for iPhone sales and the channel for computing products, but is expanding its retail network worldwide.
Resources & Investment Apple retains its earnings
and aims for capital preservation. The company has a reserve of $66 billion in cash and negotiable securities, which it says it is holding for strategic opportunities.
►
Apple’s management of its reserves is conservative; the company suffered minimal losses in the recent stock market decline, but is now earning low returns.
While Apple invests diligently in products, the scale of any such investment is tiny compared to its $66 billion cash and marketable security reserve.
Strategy Overview
Key: Working: Short-term impact expected on bottom / top line Not working: No major impact or differentiation expected
Apple leveraged alliances and acquisitions to bolster products
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Scenario Discussion: The smartphone market’s rapid growth is driving Apple’s revenue through iPhone sales
Scenario SWOT AssessmentStrength: iPhone 4 remains in high demand through carrier expansion in the U.S. and internationally.Weakness: CDMA network with Verizon limits U.S. costumers from international use.Opportunity: Apple will continue to attack the rapidly growing smartphone market for revenue growth.Threat: Customer anticipation of iPhone 5 will cause purchase delays in 2Q11.
• Apple is almost a phone company: TBR believes Apple is benefiting from holding a major share of the smartphone market that is both large and growing rapidly. For most customers, a phone is essential, exceeding the perceived need of a PC or tablet. Apple is capitalizing on the product inelasticity of smartphones (as compared to PCs) to drive revenue, which was $12.3 billion, or 49.9% of Apple’s total revenue compared to 39.1% in 4Q10. To expand its addressable iPhone market, Apple expanded iPhone carriers globally to Verizon, SK Telecom in Korea and Saudi Telecom in Saudi Arabia.
• Less expensive 3GS iPhones drove sales: iPhone sales were also aided by the "very popular" $49 iPhone 3GS. With a much lower purchase price, and the availability of limited data plans for half the monthly subscription rate of the original unlimited plan, the iPhone now enjoys the sales advantage of a lower price tier, while profits to Apple for these equally-subsidized units are almost as large as for the iPhone 4.
• Verizon propels iPhone growth: The role of the Verizon deal in iPhone growth is shown in Apple's 155% increase in U.S. iPhone revenue. As Verizon customers come off their current contracts, TBR expects Apple to enjoy rapid iPhone revenue growth for at least the next three quarters.
Scenario Discussion
Apple blurs the line between a PC and phone company, as the iPhone becomes a revenue powerhouse and drives corporate strategy
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Scenario Discussion: Consumer influence will bring the iPad into the business space, driving unit sales and revenue in 2011Scenario SWOT AssessmentStrength: Apple’s iPad has the majority share of the tablet market, with first mover advantage.Weakness: Lacks Flash web-browsing, 4G compatibility and mini-USB ports.Opportunity: Push B2B solutions for high-tech firms that require mobile efficiency.Threat: Android, WebOS, and Windows 7 tablets specifically targeting the business space.
• To combat the flood of tablet devices pouring into the market, TBR believes Apple will push hard into the commercial space, leveraging consumerization of IT and its well-developed App Store. The iPad holds the majority consumer market share, with Android devices making only a small impact in consumer tablet sales in 1Q11; however, we believe vendors will begin to release tablets targeting specific business verticals in 2H11, driving down Apple’s commercial market share. • TBR believes the effort to expand in business will drive
continued momentum for the iPad. Apple will leverage the introduction of business applications, seamless integration and consumer appeal to drive the iPad into the enterprise space. Additionally, “carry in” adoption has prompted software vendors to provide products that support iPad integration. Oracle released Business Intelligence software that supports both the iPad and iPhone.• iPad revenue decreased 38% sequentially, as unit sales dropped
from 7.3 million in 4Q10 to 4.7 million in 1Q11 due to the seasonality of the consumer tablet market and the transition to the iPad 2. Anticipation of the iPad 2 suppressed demand for the iPad 1, leading to what acting CEO Tim Cook called "staggering“ demand for iPad 2, which led to a shortage in supply. TBR believes the iPad still has enormous momentum and will help drive rapid Apple growth throughout 2011.
Scenario Discussion
iPad 2’s large consumer base and well-developed applications will drive “carry in” adoption among businesses
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Scenario Discussion: Apple will use China as a test bed for emerging market strategy and further global expansion
Scenario SWOT AssessmentStrength: Customer support in the retail space, coupled with brand recognition, is driving iPhone sales in greater China.Weakness: Past years of revenue stagnation in Asia-Pacific.Opportunity: Apple will use its China model to pursue growth in other emerging markets.Threat: Humanitarian issues at Foxconn in China could damage Apple’s brand recognition, which is a large driver of sales.
• Apple will duplicate success to drive growth: Apple‘s iPhone is driving revenue growth and Mac sales in greater China, as consumers expand their ownership of Apple products after being introduced to the iPhone. TBR believes Apple's across-the-board growth is more than just a "halo effect," or a strong brand. Apple has established, for its customers, a different set of expectations about service and support, especially where the company reaches its customers through its retail system. TBR expects Apple will leverage the iPhone and iPad as entry-level consumer products, coupled with customer support to launch its growth in other emerging markets.
• Greater China is Apple’s fastest-growing iPhone market: With Apple’s success in China, TBR believes the company will expand aggressively into other emerging markets. After years of stagnation in emerging markets, Apple has, over the last four years, used its iPhone and iPad to rapidly generate revenue in the Asia-Pacific region, especially in "greater China," which includes China, Hong Kong and Taiwan. iPhone revenue from greater China rose 250% year-to-year in 1Q11 with total revenue increasing to "just under $5 billion," which is almost one-fifth of its business. The strategy’s success is reflected by the 76% increase in Mac unit sales in Asia-Pacific, where Macs did not do well in the past because of high entry prices. In the earnings call, acting CEO Cook said China is a test bed for Apple’s emerging market strategy.
Scenario Discussion
Apple’s iPhone is a success in China and is knocking on the door of emerging markets
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Corporate SWOT AnalysisStrengths• iPhone 4 remains in high demand through carrier
expansion in the U.S. and internationally• Apple’s iPad has the majority share of the tablet
market, with first mover advantage• Customer support in the retail space, coupled with
brand recognition, is driving iPhone sales in greater China
Opportunities• Apple will continue to attack the rapidly growing
smartphone market for revenue growth• Push B2B solutions for high-tech firms that require
mobile efficiency• Apple will use its China model to pursue growth in
other emerging markets• Start a new business in mobile and Internet
payments (4Q10 report)
Weaknesses• CDMA network with Verizon limits U.S. customers
from international use• iPad lacks Flash web-browsing, 4G compatibility and
mini-USB ports• Past years of revenue stagnation in Asia-Pacific• Prices for entry-level Macs are far higher than
competitors’ entry prices (1Q09 report)
Threats• Customer anticipation of iPhone 5 will cause
purchase delays in 2Q11• Android, WebOS, and Windows 7 tablets that
specifically targeting the business space• Humanitarian issues at Foxconn in China could
damage Apple’s brand recognition, which is a large driver of sales
Corporate SWOT Analysis
Apple is leveraging customer support and brand image to expand globally and outpace Android device adoption
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Record-breaking sales of iPhones and Macs drives substantial year-to-year revenue growthRevenue Performance and Strategies
1Q11 Revenue: $24.7 billion, 82.7% YTY
• 1Q11 was record-breaking for Apple in terms of first quarter revenues, led by iPhone sales, which reached 18.6 million units, a 113.1% year-to-year growth.
• Mac revenues were strong, with sales rising 27.8% YTY despite the lack of growth in the PC market overall.
• The iTunes Store also had a record-breaking quarter, pulling in nearly $1.4 billion in revenue from sales of music, video, iOS apps and e-books. Demand for iPads exceeded production capacity and also boosted revenues in 1Q11.
Revenue and Growth Outlook
• We expect a small drop in revenues from $24.7 billion in 1Q11 to $24 billion in 2Q11 due to seasonality.
• TBR anticipates Apple will gain revenue from the enterprise sector, as more companies adopt iPhone and iPad technology and develop business-specific apps.
• Revenue generated from Mac sales is expected to remain strong, especially highly portable models such as MacBook Air, which continue to grow significantly in emerging markets.
Financial Model Strategy
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APPLE TWO-YEAR REVENUE AND GROWTH
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SOURCE: TBR AND APPLE
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$6,306 $11,652
$4,302
$6,569 $2,891
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SOURCE: TBR AND APPLE
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Apple’s iPhone contributed a higher percentage of revenue, leadingto improved gross margins
Cost & Margin Performance and Strategies
1Q11 Operating Expense: $2.3 billion
Cost of Services, Gross profit
• Gross margin for 1Q11 was 41.4%, an increase of 290 basis points from the previous quarter which is attributed to strong sales of iPhones combined with lower-than- expected costs.
• TBR predicts gross margin will be 39.2% of revenue in 2Q11.
SG&A
• Apple’s SG&A expense dropped from nearly $1.89 billion in 4Q10 to $1.76 billion in 1Q11, a 7.0% sequential decline.
• We estimate SG&A expense will rise 2.1% from 1Q11 to $1.8 billion in 2Q11.
Operating Margin and Outlook
• Operating margin was an all-time high, at nearly $7.9 billion and representing 31.9% of revenue, up from 29.3% in the previous quarter.
• TBR expects operating margin to decrease slightly in 2Q11 to 29.2%.
Financial Model Strategy
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APPLE PROFITABILITY AND GROWTH
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SOURCE: TBR AND APPLE
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Financial Model Strategy
Segment Revenue Performance and Strategies
Segment Financials
iPhoneiPhone sales reached 18.6 million units, driven by carrier expansion in the U.S., Asia and the Middle East.
MacStrong sales in Asia and the popularity of MacBook Air and MacBook Pro pushed Mac sales to 3.8 million units.
iPadApple sold 4.7 million iPads due to international expansion and the introduction of the iPad 2.
iPodDespite the iPod touch, the iPod continues to show maturity and saturation with a 17.2% year-to-year decline in unit shipments to 9 million units.
PeripheralsPeripherals revenue increased 22.9% year-to-year to $580 million, driven by iPhone and iPad accessories.
While the iPhone contributed to the retraction of iPod revenue, product maturity will continue to limit iPod growth
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APPLE PERCENT REVENUE BY SEGMENT
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SOURCE: TBR AND APPLE
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$4,866 $5,441 $6,009 $6,809 $6,299
$3,188 $4,925 $5,512 $9,464 $6,070
$5,445 $5,334 $8,822 $10,468 $12,298
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iPhone iPod, iPad & iTunes PCs, SW, Svcs, & Peripherals
SOURCE: TBR AND APPLE
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Financial Model Strategy
Segment Revenue Performance and Strategies
Segment Financials
Consumer
• Consumer revenue was $19.5 billion in 1Q11, compared to $10.4 billion in 1Q10. Consumer revenue nearly doubled over the past four quarters due to the success of the iPhone 4 and the iPad.
• Mac consumer revenue rose 38.8% year-to-year, due to strong sales of MacBook Air, especially in greater China.
Commercial
• Apple’s revenue growth from business and creative professional customers continued a trend of acceleration, reaching $1.8 billion in 1Q11, up from 1.4 billion in 1Q10.
• Consumerization of IT is driving the iPhone and iPad into enterprise, albeit at a slower rate than consumer adoption.
While consumer sales dominated Apple’s revenue, enterprise adoptionof its devices will position the company for strong commercial growth
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New Product Development: Apple unveiled the iPad 2 in early March, touting a thinner, lighter design with an enhanced set of features powered by its A5 processorKey TakeawaysApple’s distinctive A5 processor will differentiate the iPad in the tablet market.iPad 2 hosts a variety of upgrades, contributing to market share expansion.Apple’s supply chain remained intact after the devastating earthquake in Japan.
• TBR believes Apple’s unique and somewhat mysterious A5 processor for the iPad 2 will allow the company to maintain premium pricing. As the tablet market quickly becomes saturated with commodity tablets and manufacturers race to compete on price, TBR believes Apple will leverage the A5’s exclusive technology to maintain high margins.
• The dual-core A5 processor design contributes to the host of new features on the iPad 2 that will boost Apple’s market share and premium brand recognition. The iPad 2 has increased processing power without compromising battery life, which still stands at up to 10 hours, as well as faster web browsing.
• Apple licenses ARM architecture to build its own processor; however, only about 50% of the A5 processor exhibits typical ARM architecture, with the remaining 50% completely unique to Apple.
• After its March 25 launch, demand for the iPad 2 quickly exceeded supply, leaving customers to endure a two- to three-week wait for the device. Despite high demand, TBR believes Apple’s supply chain will only be marginally affected throughout 2011 by the earthquake in Japan.
Go-to-Market & Product Strategies
SOURCE: APPLE
iPad 2’s A5 processor packs a secret recipe for gaining market share and maintaining premium pricing
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TBR expects Apple will look to alliances and acquisitions expand outside the consumer hardware space, into cloud and business specific services.• Apple is targeting VSBs with its new Joint Venture
program available through Apple Retail Stores. TBR believes the new program will allow Apple to gain greater control over its customers’ experiences by limiting third-party interaction.
• Apple formed an alliance with Random House in 1Q11 to deliver more content to iPad and iPhone users and continue expansion of its App Store. In early March, Apple announced an alliance with Random House Inc. which will add 17,000 “iBooks” to the iBookstore, which enables consumers to download titles to iPhones and iPads. The alliance with all six major trade publishers will allow Apple to distribute over 200,000 books.
• Apple’s alliance with OnForce will change the way Apple handles its non-warranty customer support calls. Previously handled by the Apple Consultant Network (ACN), a group of Apple certified consultants, the task will now be handed of to OnForce, allowing Apple tighter control over the quality of customer support. TBR believes the consistency of quality support will improve through this structural change, but will leave a wake of disgruntled Apple “ambassadors.”
Alliance & Acquisition Strategies
Internal Development• Apple formed “Joint
Venture” to target service and support the needs of VSBs.
Alliances• Random House Inc. alliance
will accelerate Apple’s iBooks availability.
• OnForce alliance will support non-warranty customer calls.
Acquisitions• iCloud.com domain
acquisition will be used for iTunes cloud-storage.
Alliances and acquisitions accelerate Apple’s efforts to expand in new markets, product areas and geographies, positioning the company for growth.
Map of alliance, acquisition and development synergies
Apple is positioning for future growth with cloud and VSBs to expand into new markets
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Americas EMEA APAC and Japan
Key Strategies
The Americas comprised 38% of Apple’s revenue, up from 34% in 4Q10. Growth was primarily driven by iPhone sales doubling YTY in the Americas. The entry into Verizon Wireless in the U.S. was a positive growth driver.
EMEA saw positive growth in iPhone and Mac sales in 1Q11. Increased Mac sales may be the result of a halo effect related to the higher iPhone/iPad adoption.
Overall, Mac sales in APAC were up 76% YTY. China contributed nearly $5 billion to Apple’s revenues, up about four times YTY. In Japan, Apple has engaged in considerable negotiations to prevent supply disruptions caused by the March earthquake.
Geographic Overview
Continued iPhone and iPad global expansion – particularly in emerging markets – will provide 2Q11 revenue growth
TBR Conclusions• TBR believes Apple will bolster the sales of
its portable products on a global basis – especially iPhones, iPads and MacBooks.
• We believe Apple’s growth in China will lead to the pursuit of further expansion in emerging markets.
$6,306 $11,652
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Resource Management Strategy
Resource Management Strategy• As a byproduct of the massive earthquake in
Japan, a shortage and price hike in components for electronics is imminent. Apple is tapping its large cash reserves to secure an adequate supply of iPad and iPhone components from Japanese manufacturers to prevent shortages for its consumers. TBR believes this will negatively affect profit margins to a slight degree, but will be necessary to meet demand.
• Senior Vice President of Mac Software Engineering Bertrand Serlet has left Apple. Serlet will be replaced by Craig Federighi, Apple’s VP of Mac software engineering. Apple has not indicated if Federighi will be a long-term replacement.
Apple Capital InvestmentsApple’s North Carolina datacenter will likely host the company’s next venture into the cloud market. TBR believes Apple will use the datacenter to host a web-based video service that could rival Netflix. The video service would also drive sales of Apple products.
Apple production remains secure following the Japan earthquake, with no foreseen disruption in the supply chain through 2011
APPLE EFFICIENCY METRICS (IN $'000'S)1Q10 1Q11
Revenue per Employee $1,427 $1,837
S&M Employee Expense per head $154 $140
R&D Employee Expense per head $385 $443
G&A Expense per G&A head $244 $220
Revenue per Salesperson $4,130 $4,781
TBR
0%
30%
60%
90%
0%
10%
20%
30%
40%
50%
1Q10 2Q10 3Q10 4Q10 1Q11
Reve
nue
Grow
th
Mar
gins
APPLE PROFITABILITY AND GROWTH
Gross Margin Operating Margin
Net Margin Revenue Growth Year-to-Year
SOURCE: TBR AND APPLE
TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.21
Headcount StrategiesHeadcount drivers and changes• Sales & Marketing – Apple’s Sales & Marketing
headcounts continue to grow as a result of its new focused expansion into emerging markets.
• General & Administrative – Apple’s G&A employee base rose year-to-year to support business growth.
• Research & Development – Expansion in product lines and model upgrades, such as the anticipated 2011 release of the iPhone 5, caused Apple to increase R&D headcount 26.8% year-to-year.
• Service & Support – Apple’s Service & Support segment increased year-to-year as Apple leverages its direct sales approach to gain new customers and penetrate the very small business market.
• Retail – Apple continued investing in its retail headcount ahead of other business functions in 1Q11 to support retail in the U.S. and China.
Keep on the radarLow-Cost Regions – We expect Apple to grow its retail headcount as the company continues to invest in retail stores.
Resource Management Strategy
Apple’s headcount continued to grow in 1Q11 due to increases in customer support, product development and retail expansion
19,000 28,500
8,120
9,300 4,100
5,200
2,550
2,900
1,830
2,025
1,750
1,950
650
725
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
1Q10 1Q11
Head
coun
t
APPLE HEADCOUNTManufacturing and Other
Marketing
Sales
General and Administrative
Research and Development
Service and Support
Retail
SOURCE: TBR AND APPLE
TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.22
Steve JobsCEO
Philip W. Schiller Senior Vice President
Worldwide Product Marketing
Timothy D. CookActing CEO
Chief Operating Officer
Jonathan Ive Senior Vice President Industrial Design
Bruce Sewell Senior Vice Presidentand General Counsel
Peter Oppenheimer Senior Vice Presidentand Chief Financial Officer
Ron Johnson Senior Vice President Retail
Craig FederighiSenior Vice President Software Engineering
Bob MansfieldSenior Vice PresidentMac Hardware Engineering
Scott ForstallSenior Vice PresidentiPhone Software
Sina TamaddonSenior Vice President
Applications
Organizational Structure
Apple, Inc. Organizational Chart
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.23
Appendix – Income StatementAPPLE, INC.Consolidated Statement of Income(in $ Thousands)
CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11FISCAL QUARTER 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 3Q11Net Sales $13,499,000 $15,700,000 $20,343,000 $26,741,000 $24,667,000 $24,000,000
Cost of Sales 7,874,000 9,564,000 12,832,000 16,443,000 14,449,000 14,600,000
Gross Profit 5,625,000 6,136,000 7,511,000 10,298,000 10,218,000 9,400,000
SG&A 1,220,000 1,438,000 1,571,000 1,896,000 1,763,000 1,800,000
R&D 426,000 464,000 494,000 575,000 581,000 600,000
Operating Income 3,979,000 4,234,000 5,446,000 7,827,000 7,874,000 7,000,000
Other Income (Expense) 50,000 58,000 14,000 136,000 26,000 70,000
EBITD 4,029,000 4,292,000 5,460,000 7,963,000 7,900,000 7,070,000
Income Taxes 955,000 1,039,000 1,153,000 1,959,000 1,913,000 1,775,000
Net Income $3,074,000 $3,253,000 $4,307,000 $6,004,000 $5,987,000 $5,295,000AS A PERCENTAGE OF REVENUENet Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Sales 58.3% 60.9% 63.1% 61.5% 58.6% 60.8%
Gross Margin 41.7% 39.1% 36.9% 38.5% 41.4% 39.2%
SG&A 9.0% 9.2% 7.7% 7.1% 7.1% 7.5%
R&D 3.2% 3.0% 2.4% 2.2% 2.4% 2.5%
Operating Margin 29.5% 27.0% 26.8% 29.3% 31.9% 29.2%
Gain from Sale of Investment 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other Income (Expense) 0.4% 0.4% 0.1% 0.5% 0.1% 0.3%
EBITD 29.8% 27.3% 26.8% 29.8% 32.0% 29.5%
Income Taxes 7.1% 6.6% 5.7% 7.3% 7.8% 7.4%
Net Margin 22.8% 20.7% 21.2% 22.5% 24.3% 22.1%YEAR-TO-YEAR CHANGENet Sales 48.6% 61.3% 66.7% 70.5% 82.7% 52.9%
Cost of Goods Sold 44.3% 66.3% 80.7% 77.3% 83.5% 52.7%
Gross Profit 55.1% 54.1% 47.1% 60.6% 81.7% 53.2%
SG&A 23.9% 42.4% 47.8% 47.2% 44.5% 25.2%
R&D and Engineering 33.5% 36.1% 38.0% 44.5% 36.4% 29.3%
Operating Income 71.3% 60.9% 47.8% 65.7% 97.9% 65.3%
Other, Net -20.6% -3.3% -68.9% 312.1% -48.0% 20.7%
EBITD 68.9% 59.4% 46.4% 67.4% 96.1% 64.7%
Income Taxes 24.7% 20.3% -3.7% 42.0% 100.3% 70.8%
Net Income 89.8% 78.0% 70.1% 77.7% 94.8% 62.8%SEQUENTIAL CHANGENet Sales -13.9% 16.3% 29.6% 31.5% -7.8% -2.7%
Cost of Goods Sold -15.1% 21.5% 34.2% 28.1% -12.1% 1.0%
Gross Profit -12.3% 9.1% 22.4% 37.1% -0.8% -8.0%
SG&A -5.3% 17.9% 9.2% 20.7% -7.0% 2.1%
R&D 7.0% 8.9% 6.5% 16.4% 1.0% 3.3%
Operating Income -15.8% 6.4% 28.6% 43.7% 0.6% -11.1%
Other, Net 51.5% 16.0% -75.9% 871.4% -80.9% 169.2%
EBITD -15.3% 6.5% 27.2% 45.8% -0.8% -10.5%
Income Taxes -30.8% 8.8% 11.0% 69.9% -2.3% -7.2%
Net Income -9.0% 5.8% 32.4% 39.4% -0.3% -11.6%
SOURCE: TBR AND APPLE
TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.2424
Appendix – Balance SheetAPPLE, INC.Consolidated Balance Sheets (in $ Thousands)
CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11FISCAL QUARTER 2Q10 3Q10 4Q10 1Q11 2Q11ASSETSCurrent Assets
Cash & Short-term Investments 23,155,000$ 24,288,000$ 25,620,000$ 26,977,000$ 29,234,000$
Accounts Receivable 2,886,000 3,447,000 5,510,000 6,027,000 5,798,000
Inventory 638,000 942,000 1,051,000 885,000 930,000
Deferred Tax Assets 1,142,000 1,216,000 1,636,000 1,724,000 1,683,000
Other Current Assets 4,515,000 6,140,000 7,861,000 8,314,000 9,352,000
Total Current Assets 32,336,000 36,033,000 41,678,000 43,927,000 46,997,000
Long-term marketable securities 18,549,000 21,551,000 25,391,000 32,730,000 36,533,000
Property, Plant, Equip. (Net of Dep.) 3,504,000 3,990,000 4,768,000 5,868,000 6,241,000
Other, Net 2,668,000 3,151,000 3,346,000 4,217,000 5,133,000
Total Assets 57,057,000$ 64,725,000$ 75,183,000$ 86,742,000$ 94,904,000$
LIABILITIES AND EQUITYCurrent Liabilities
Accounts Payable 5,666,000 8,469,000 12,015,000 14,301,000 13,714,000
Accrued Expenses 4,021,000 4,452,000 5,723,000 5,953,000 7,022,000
Total Current Liabilities 12,229,000 15,612,000 20,722,000 23,795,000 24,327,000
Other non-current liabilities 4,539,000 4,981,000 5,531,000 7,065,000 7,870,000
Total Liabilities 17,709,000 21,614,000 27,392,000 32,076,000 33,427,000
Stockholders' Equity
Common Stock & PIC 9,553,000 10,133,000 10,668,000 11,502,000 12,326,000
Retained Earnings 29,670,000 32,870,000 37,169,000 43,050,000 49,025,000
Other 125,000 108,000 (46,000) 114,000 126,000
Total Stockholders' Equity 39,348,000 43,111,000 47,791,000 54,666,000 61,477,000
Total Liabilities & Equity 57,057,000$ 64,725,000$ 75,183,000$ 86,742,000$ 94,904,000$
FINANCIAL RATIOSCost of Sales 2.64 2.31 2.01 1.85 1.93
Days Sales Outstanding 19.24 19.76 24.38 20.28 21.15
Turns on Inventory 51.89 48.43 51.51 67.95 63.69
Days Inventory Outstanding 7.03 7.54 7.09 5.37 5.73
Fixed Asset Turnover 16.32 16.76 18.58 20.11 16.30
Days Cash Outstanding 154.38 139.23 113.35 90.79 106.66
Total Asset Turnover 0.97 1.03 1.16 1.32 1.09
Debt/Asset Ratio 0.23 0.26 0.29 0.29 0.27
Current Ratio 2.64 2.31 2.01 1.85 1.93
Return on Assets 21.5% 21.9% 22.3% 23.5% 24.3%
Return on Equity 31.9% 32.7% 33.8% 36.0% 37.8%
Employees 38,000 42,250 46,600 51,000 50,600
Revenue/Employee $1,426,522 $1,496,926 $1,582,651 $1,715,671 $1,836,724
SOURCE: TBR AND APPLE
TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.25
Appendix – Segment Revenue
CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11FISCAL QUARTER 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 3Q11Total Revenue 13,499,000$ 15,700,000$ 20,343,000$ 26,741,000$ 24,667,000$ 24,000,000$
Gross Profit 5,625,000$ 6,136,000$ 7,511,000$ 10,298,000$ 10,218,000$ 9,400,000$
Gross Margin 41.7% 39.1% 36.9% 38.5% 41.4% 39.2%
REVENUE BY PRODUCTNotebook 2,228,000$ 3,098,000$ 3,194,000$ 3,699,000$ 3,535,000$ 3,600,000$
MacBook Air & Pro 1,530,000$ 2,125,000$ 2,117,000$ 3,175,000$ 2,900,000$ 2,950,000$
MacBook 698,000$ 973,000$ 1,077,000$ 524,000$ 635,000$ 625,000$
Desktop 1,532,000$ 1,301,000$ 1,676,000$ 1,731,000$ 1,441,000$ 1,375,000$
Mac Pro 162,000$ 153,000$ 248,000$ 291,000$ 281,000$ 275,000$
iMac/Mac mini 1,300,000$ 1,075,000$ 1,350,000$ 1,400,000$ 1,150,000$ 1,100,000$
Total Computer 3,760,000$ 4,399,000$ 4,870,000$ 5,430,000$ 4,976,000$ 4,975,000$
Peripherals 472,000$ 396,000$ 477,000$ 593,000$ 580,000$ 495,000$
iPod 1,861,000$ 1,545,000$ 1,477,000$ 3,425,000$ 1,600,000$ 1,400,000$
iPhone 5,445,000$ 5,334,000$ 8,822,000$ 10,468,000$ 12,298,000$ 11,880,000$
Software and Services 634,000$ 646,000$ 662,000$ 786,000$ 743,000$ 750,000$
iTunes Revenue 1,327,000$ 1,214,000$ 1,243,000$ 1,431,000$ 1,634,000$ 1,500,000$
PRODUCT MIX (PERCENTAGE OF TOTAL REVENUE)Notebook 16.5% 19.7% 15.7% 13.8% 14.3% 15.0%
MacBook Air & Pro 11.3% 13.5% 10.4% 11.9% 11.8% 12.3%
MacBook 5.2% 6.2% 5.3% 2.0% 2.6% 2.6%
Desktop 11.3% 8.3% 8.2% 6.5% 5.8% 5.7%
Mac Pro 1.2% 1.0% 1.2% 1.1% 1.1% 1.1%
iMac/Mac mini 9.6% 6.8% 6.6% 5.2% 4.7% 4.6%
Total Computer 27.9% 28.0% 23.9% 20.3% 20.2% 20.7%
Peripherals 3.5% 2.5% 2.3% 2.2% 2.4% 2.1%
iPod 13.8% 9.8% 7.3% 12.8% 6.5% 5.8%
iPhone 40.3% 34.0% 43.4% 39.1% 49.9% 49.5%
Total Hardware Revenue 85.5% 88.2% 90.6% 91.7% 90.4% 90.6%
Software and Services 4.7% 4.1% 3.3% 2.9% 3.0% 3.1%
iTunes Revenue 9.8% 7.7% 6.1% 5.4% 6.6% 6.3%
Total Non HW Revenue 14.5% 11.8% 9.4% 8.3% 9.6% 9.4%
YEAR-TO-YEAR REVENUE GROWTHNotebook 17.0% 39.5% 10.5% 34.1% 58.7% 16.2%
MacBook Air & Pro 104.0% 25.0% -4.9% 47.7% 89.5% 38.8%
MacBook -39.5% 87.1% 61.7% -13.8% -9.0% -35.8%
Desktop 45.1% 14.7% 53.9% 2.3% -5.9% 5.7%
Mac Pro -49.5% -45.2% -14.2% 44.1% 73.5% 79.7%
iMac/Mac mini 91.2% 34.4% 82.4% -1.8% -11.5% 2.3%
Total Computer 27.0% 31.2% 22.4% 22.0% 32.3% 13.1%
Peripherals 32.2% 16.5% 22.0% 26.4% 22.9% 25.0%
iPod 11.8% 3.6% -5.5% 1.0% -14.0% -9.4%
iPhone 124.4% 74.3% 91.5% 87.7% 125.9% 122.7%
Total Hardware Revenue 55.7% 67.8% 74.9% 76.6% 93.2% 57.2%
Software and Services 1.3% 21.9% 2.0% 24.6% 17.2% 16.1%
iTunes Revenue 26.5% 26.7% 22.1% 22.9% 23.1% 23.6%
Total Non HW Revenue 17.1% 25.0% 14.3% 23.5% 21.2% 21.0%
SOURCE: TBR ESTIMATES AND APPLE
APPLE REVENUE MODEL TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.26
Appendix – Units and ASPs
CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11FISCAL QUARTER 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 3Q11UNIT SHIPMENTSNotebook 1,796,000 2,468,000 2,643,000 2,907,000 2,751,000 2,800,000
MacBook Air & Pro 1,137,000 1,556,000 1,582,000 2,395,000 2,330,000 2,380,000
MacBook 659,000 912,000 1,061,000 512,000 421,000 420,000
Desktop 1,147,000 1,004,000 1,242,000 1,227,000 1,009,000 1,005,000
Mac Pro 50,700 48,500 77,600 85,000 72,000 70,900
iMac/Mac mini 1,083,300 942,000 1,150,000 1,135,000 935,000 910,000
Total Computer 2,943,000 3,472,000 3,885,000 4,134,000 3,760,000 3,805,000
iPod 10,885,000 9,406,000 9,051,000 19,446,000 9,017,000 8,500,000
iPhone 8,752,000 8,398,000 14,102,000 16,235,000 18,647,000 18,100,000YEAR-TO-YEAR UNIT GROWTHNotebook 28.5% 40.7% 16.6% 36.6% 53.2% 13.5%
MacBook Air & Pro 250.9% 23.9% -3.1% 53.7% 104.9% 53.0%
MacBook -38.6% 83.1% 67.4% -10.2% -36.1% -53.9%
Desktop 40.2% 18.3% 57.8% -0.6% -12.0% 0.1%
Mac Pro -56.5% -50.8% -24.4% 55.1% 42.0% 46.2%
iMac/Mac mini 56.8% 27.3% 70.9% -2.7% -13.7% -3.4%
Total Computer 32.8% 33.4% 27.3% 23.0% 27.8% 9.6%
iPod -1.2% -7.9% -11.1% -7.3% -17.2% -9.6%
iPhone 130.7% 61.3% 91.4% 85.8% 113.1% 115.5%AVERAGE SELLING PRICENotebook 1,241$ 1,255$ 1,208$ 1,272$ 1,285$ 1,286$
MacBook Air & Pro 1,346$ 1,366$ 1,338$ 1,326$ 1,245$ 1,239$
MacBook 1,059$ 1,067$ 1,015$ 1,023$ 1,508$ 1,488$
Desktop 1,336$ 1,296$ 1,349$ 1,411$ 1,428$ 1,368$
Mac Pro 3,195$ 3,155$ 3,196$ 3,424$ 3,903$ 3,879$
iMac/Mac mini 1,200$ 1,141$ 1,174$ 1,233$ 1,230$ 1,209$
Blended Computer ASP 1,278$ 1,267$ 1,254$ 1,313$ 1,323$ 1,307$
iPod 171$ 164$ 163$ 176$ 177$ 165$ Y/Y GROWTH - AVERAGE SELLING PRICENotebook -8.9% -0.8% -5.3% -1.8% 3.6% 2.4%
Desktop 3.5% -3.0% -2.5% 2.9% 6.9% 5.6%
Blended Computer ASP -4.4% -1.7% -3.8% -0.8% 3.6% 3.2%
iPod 13.1% 12.5% 6.3% 8.9% 3.8% 0.3%
SOURCE: TBR ESTIMATES AND APPLE
APPLE'S UNIT SHIPMENTS AND ASPs TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.27
Appendix – Operating Expense
CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11FISCAL QUARTER 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 3Q11Total Revenue 13,499,000$ 15,700,000$ 20,343,000$ 26,741,000$ 24,667,000$ 24,000,000$
SG&A Expense 1,220,000$ 1,438,000$ 1,571,000$ 1,896,000$ 1,763,000$ 1,800,000$
Sales & Marketing Expense 830,000$ 1,028,000$ 1,136,000$ 1,421,000$ 1,288,000$ 1,320,000$
General & Administrative Expense 390,000$ 410,000$ 435,000$ 475,000$ 475,000$ 480,000$
Research and Development 426,000$ 464,000$ 494,000$ 575,000$ 581,000$ 600,000$ SALES & MARKETING EXPENSE BREAKOUTSales Expense 500,000$ 550,000$ 625,000$ 695,000$ 695,000$ 675,000$
Sales Salary and Commissions 326,000$ 369,440$ 400,000$ 435,000$ 422,500$ 409,801$
Partner and Channel Spending 174,000$ 180,560$ 225,000$ 260,000$ 272,500$ 265,199$
Marketing Spending 330,000$ 478,000$ 511,000$ 726,000$ 593,000$ 645,000$
Marketing Salary/expenses 62,413$ 64,350$ 66,288$ 68,225$ 70,163$ 72,100$
Advertising & Programs 267,588$ 413,650$ 444,713$ 657,775$ 522,838$ 708,097$
Total Sales & Marketing Expense 830,000$ 1,028,000$ 1,136,000$ 1,421,000$ 1,288,000$ 1,320,000$ SPENDING AS A PERCENTAGE OF REVENUETotal SG&A Expense 9.0% 9.2% 7.7% 7.1% 7.1% 7.5%
Sales & Marketing Expense 6.1% 6.5% 5.6% 5.3% 5.2% 5.5%
Sales Expense 3.7% 3.5% 3.1% 2.6% 2.8% 2.8%
Partner and Channel Spending 1.3% 1.2% 1.1% 1.0% 1.1% 1.1%
Marketing Spending 2.4% 3.0% 2.5% 2.7% 2.4% 2.7%
Advertising 2.0% 2.6% 2.2% 2.5% 2.1% 3.0%
General & Administrative 2.9% 2.6% 2.1% 1.8% 1.9% 2.0%
Research and Development 3.2% 3.0% 2.4% 2.2% 2.4% 2.5%YEAR-TO-YEAR GROWTHTotal SG&A Expense 23.9% 42.4% 47.8% 47.2% 44.5% 25.2%
Sales & Marketing Expense 29.0% 53.8% 60.3% 58.4% 55.2% 28.4%
General & Administrative 14.1% 20.1% 22.8% 21.5% 21.8% 17.1%
Research and Development 33.5% 36.1% 38.0% 44.5% 36.4% 29.3%CORPORATEWIDE HEADCOUNT
Non-Retail 19,000 19,850 20,100 21,000 22,100 22,450
Sales 1,830 1,880 1,920 2,000 2,025 2,050
Marketing 1,750 1,800 1,850 1,900 1,950 2,000
General and Administrative 2,550 2,600 2,630 2,700 2,900 2,900
Research and Development 4,100 4,300 4,600 5,000 5,200 5,250
Service and Support 8,120 8,600 8,400 8,700 9,300 9,500
Manufacturing, Distribution, and Other 650 670 700 700 725 750
Retail 19,000 22,400 26,500 30,000 28,500 28,500
Total Employees 38,000 42,250 46,600 51,000 50,600 50,950
SOURCE: APPLE AND TBR ESTIMATES
APPLE OPEX MODEL (IN $ THOUSANDS EXCEPT HEADCOUNT) TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.28
Appendix – Revenue by Customer Segment
CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11REVENUE (IN $ THOUSANDS)Total $13,499,000 $15,700,000 $20,343,000 $26,741,000 $24,667,000 $24,000,000
Consumer 10,389,100$ 12,025,470$ 15,683,980$ 21,324,445$ 19,473,115$ 18,900,725$
Education 1,461,840$ 1,783,185$ 2,131,010$ 2,327,465$ 2,213,445$ 2,165,525$
Education: K-12 473,180$ 620,550$ 707,260$ 677,155$ 574,295$ 554,375$
Education: University 988,660$ 1,162,635$ 1,423,750$ 1,650,310$ 1,639,150$ 1,611,150$
Professional 1,648,060$ 1,891,345$ 2,528,010$ 3,089,090$ 2,980,440$ 2,908,750$
Creative Professional 864,430$ 908,710$ 1,138,055$ 1,323,110$ 1,264,340$ 1,226,150$
Business 783,630$ 982,635$ 1,389,955$ 1,765,980$ 1,716,100$ 1,682,600$
Total 13,499,000$ 15,700,000$ 20,343,000$ 26,741,000$ 24,667,000$ 23,975,000$
PERCENTAGE OF TOTAL REVENUEConsumer 77.0% 76.6% 77.1% 79.7% 78.9% 78.8%
Education 10.8% 11.4% 10.5% 8.7% 9.0% 9.0%
Education: K-12 3.5% 4.0% 3.5% 2.5% 2.3% 2.3%
Education: University 7.3% 7.4% 7.0% 6.2% 6.6% 6.7%
Professional 12.2% 12.0% 12.4% 11.6% 12.1% 12.1%
Creative Professional 6.4% 5.8% 5.6% 4.9% 5.1% 5.1%
Business 5.8% 6.3% 6.8% 6.6% 7.0% 7.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 99.9%Note: Includes revenue from all sources and product groups.SOURCE: TBR ESTIMATES
APPLE REVENUE BY CUSTOMER SEGMENT TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.29
Appendix – PC Revenue
CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11REVENUE (IN $ THOUSANDS)Total $13,499,000 $15,700,000 $20,343,000 $26,741,000 $24,667,000 $24,000,000PC Revenue $3,760,000 $4,399,000 $4,870,000 $5,430,000 $4,976,000 $4,975,000
Consumer $2,296,450 $2,625,560 $2,879,330 $3,470,395 $3,187,905 $3,179,125
Education $811,130 $1,056,765 $1,169,530 $1,079,605 $1,016,245 $1,010,125
Education: K-12 $307,280 $464,250 $536,410 $470,305 $375,845 $367,625
Education: University $503,850 $592,515 $633,120 $609,300 $640,400 $642,500
Professional $652,420 $716,675 $821,140 $880,000 $771,850 $760,750
Creative Professional $477,760 $478,690 $571,005 $574,720 $554,620 $542,500
Business $174,660 $237,985 $250,135 $305,280 $217,230 $218,250
Total $3,760,000 $4,399,000 $4,870,000 $5,430,000 $4,976,000 $4,950,000PERCENTAGE OF PC REVENUEConsumer 61.1% 59.7% 59.1% 63.9% 64.1% 63.9%
Education 21.6% 24.0% 24.0% 19.9% 20.4% 20.3%
Education: K-12 8.2% 10.6% 11.0% 8.7% 7.6% 7.4%
Education: University 13.4% 13.5% 13.0% 11.2% 12.9% 12.9%
Professional 17.4% 16.3% 16.9% 16.2% 15.5% 15.3%
Creative Professional 12.7% 10.9% 11.7% 10.6% 11.1% 10.9%
Business 4.6% 5.4% 5.1% 5.6% 4.4% 4.4%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 99.5%PC PERCENTAGE OF TOTAL REVENUEConsumer 17.0% 16.7% 14.2% 13.0% 12.9% 13.2%
Education 6.0% 6.7% 5.7% 4.0% 4.1% 4.2%
Education: K-12 2.3% 3.0% 2.6% 1.8% 1.5% 1.5%
Education: University 3.7% 3.8% 3.1% 2.3% 2.6% 2.7%
Professional 4.8% 4.6% 4.0% 3.3% 3.1% 3.2%
Creative Professional 3.5% 3.0% 2.8% 2.1% 2.2% 2.3%
Business 1.3% 1.5% 1.2% 1.1% 0.9% 0.9%
Total 27.9% 28.0% 23.9% 20.3% 20.2% 20.6%YEAR-TO-YEAR GROWTHConsumer 36.0% 32.9% 29.4% 32.4% 38.8% 21.1%
Education 20.7% 30.8% 12.7% 1.9% 25.3% -4.4%
Education: K-12 13.0% 45.4% 24.7% 5.1% 22.3% -20.8%
Education: University 25.9% 21.2% 4.1% -0.4% 27.1% 8.4%
Professional 8.8% 25.5% 14.5% 14.4% 18.3% 6.1%
Creative Professional 5.9% 25.9% 25.1% 13.4% 16.1% 13.3%
Business 17.7% 24.9% -4.0% 16.4% 24.4% -8.3%
Total 27.0% 31.2% 22.4% 22.0% 32.3% 12.5%
SOURCE: TBR ESTIMATES
APPLE PC REVENUE BY CUSTOMER SEGMENT TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.30
Appendix – Geography
CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11FISCAL QUARTER 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 3Q11UNIT SHIPMENTSAmericas 971,000 1,358,000 1,460,000 1,360,000 1,217,000 1,290,000
EMEA 899,000 914,000 978,000 1,245,000 995,000 1,000,000
Japan 129,000 129,000 118,000 162,000 155,000 140,000
Asia Pacific 338,000 394,000 455,000 516,000 596,000 625,000
Retail 606,000 677,000 874,000 851,000 797,000 800,000
Total 2,943,000 3,472,000 3,885,000 4,134,000 3,760,000 3,855,000
APPLE REVENUE BY GEOGRAPHY (IN $ THOUSANDS)Americas 4,993,000$ 6,227,000$ 7,186,000$ 9,218,000$ 9,323,000$ 9,120,000$
EMEA 4,050,000$ 4,160,000$ 5,458,000$ 7,256,000$ 6,027,000$ 6,000,000$
Japan 887,000$ 910,000$ 1,401,000$ 1,433,000$ 1,383,000$ 1,200,000$
Asia Pacific 1,886,000$ 1,825,000$ 2,732,000$ 4,987,000$ 4,743,000$ 4,560,000$
Retail 1,683,000$ 2,578,000$ 3,566,000$ 3,847,000$ 3,191,000$ 3,120,000$
Total 13,499,000$ 15,700,000$ 20,343,000$ 26,741,000$ 24,667,000$ 24,000,000$
PERCENTAGE OF TOTAL REVENUEAmericas 37% 40% 35% 34% 38% 38%
EMEA 30% 26% 27% 27% 24% 25%
Japan 7% 6% 7% 5% 6% 5%
Asia Pacific 14% 12% 13% 19% 19% 19%
Retail 12% 16% 18% 14% 13% 13%
Total 100% 100% 100% 100% 100% 100%
YEAR-TO-YEAR CHANGE IN REVENUEAmericas 27% 39% 37% 51% 87% 46%
EMEA 63% 66% 69% 44% 49% 44%
Japan 51% 63% 121% 83% 56% 32%
Asia Pacific 172% 160% 157% 175% 151% 150%
Retail 22% 73% 75% 95% 90% 21%
Total 49% 61% 67% 71% 83% 53%
SOURCE: TBR ESTIMATES AND APPLE
APPLE REVENUE AND SHIPMENTS BY GEOGRAPHY TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.31
Appendix – Financial Strategy Graphs
2,9433,472
3,885 4,134 3,760 3,805
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
0
1,000
2,000
3,000
4,000
5,000
1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11In
$ T
hous
ands
MAC UNIT GROWTH YEAR-TO-YEAR
Units Shipped Growth in Unit Shipments
SOURCE: TBR AND APPLE
TBR
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.32
Appendix – Financial Strategy Graphs
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.33
Appendix – Resource Management Graphs
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.34
Appendix – Resource Management Graphs
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.35
Appendix – Apple Future Outlook Graph
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.36
Apple AlliancesCompany Details
Random House, Inc. Random House, Inc. has made its full catalog of 17,000 e-books available on Apple’s iBookstore.
Intel Apple transitioned to Intel microprocessors in 2006. Intel provides significant technical assistance to Apple.
NVIDIA Provides chipset with integral GPU for notebooks
Hon Hai Hon Hai manufactures Apple’s iPods and iPhones.
HBO Premium HBO TV shows are available through iTunes.
Major movie studios Movies are available for download rental the same day as DVD availability.
AT&T AT&T is a wireless operator for iPhones in the United States.
Verizon Verizon is a wireless operator for iPhones in the United States.
Best Buy Apple Mac “store-within-store” sections are becoming available in an increasing number of Best Buy locations.
Disney Apple offers exclusive Disney content through iTunes.
Fox Entertainment Group Apple and FEG make hit Fox television programs available for purchase.
Appendix – Apple Retail Partnerships
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.37
Apple’s Product Portfolio: Notebooks
Price and Functionality
MacBook - 13 inchConsumer/Education;
starting price:$999 for 2.4 GHz
MacBook Pro 13-inchCreative pro, video editing and desktop
publishing notebook;starting price:
$1,199 for 2.3 GHz$1,499 for 2.7 GHz
Full
size
Entr
y-le
vel
Thin
-ligh
tMacBook Pro
Creative pro, video editing and desktop publishing notebook;
starting price:$1,799 for 15-inch 2.0 GHz
$2,199 for 15-inch 2.66 GHz $2,499 for 17-inch 2.2 GHz
MacBook AirUltra-light notebook for travel;
starting price:$999 for 11-inch 1.4 GHz
$1,299 for 13-inch 1.86 GHz
Mod
el L
ineu
pAppendix – Apple Product Lineup
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.38
Mod
el L
ineu
p
Price and Functionality
Mac miniValue consumer desktop;
starting price:$699 for 2.4 GHz : 320 GB
$999 for 2.66 GHz : 500 GB
iMacAll-in-one consumer and professional desktop;
starting price:$1,199-$1,499 for 21.5-inch 3.06 GHz - 3.2GHz
$1,699 for 27-inch 3.2 GHz$1,999 for 27-inch 2.8 GHz Quad-Core
Perf
orm
ance
Entr
yVa
lue/
Mai
nstr
eam
Mac XserveRack-mounted file & print/web server;
starting price:$2,999 for Quad-Core
Mac ProHigh-end desktop for creative professionals,
video editing and desktop publishing;starting price:
$2,499 for Quad-Core$3,499 for 8-Core
$4,999 for 12-Core
Appendix – Apple Product Lineup
Apple’s Product Portfolio: Desktops and Servers
TBR
Apple 1Q11 | Computer Business Quarterly ©2011 Technology Business Research, Inc.39
Mod
el L
ineu
p
Price and Functionality
Flas
hH
igh-
Capa
city
Web
/App
Pla
tfor
m
iPod Shuffle Aimed at flash market; starting price:
$49 for 2 GB
iPod NanoFlash music and video player;
starting price:$149 for 8 GB
$179 for 16 GB
iPod ClassicHigh-capacity music and video player;
starting price:$249 for 160 GB
iPod TouchPortable web/app platform;
starting price:$229 for 8 GB
$299 for 32 GB$399 for 64 GB
iPhone 4Smartphone & web/app
platform;starting price (after subsidy):
$199 for 16 GB$299 for 32 GB
iPhone 3GSSmartphone and web/app platform;
starting price (after subsidy):$49 for 8 GB
iPadPortable web/app tablet;
starting price:$499 for 16 GB$599 for 32 GB$699 for 64 GB
iPad 3GPortable web/app tablet;
starting price:$629 for 16 GB$729 for 32 GB$829 for 64 GB
Apple TVOnline movie and TV show
rentals and streaming of online and PC content;starting price:
$99
Appendix – Apple Product Lineup
Apple’s Product Portfolio: iPad, iPods and iPhones
TBR
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