tbr 4q10 apple inc. report
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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: Feb. 14, 2011Author: Ezra Gottheil (ezra.gottheil@tbri.com),CBQ Senior AnalystContent Editor: John Spooner, Director, Computers and Storage
Fourth Calendar Quarter 2010First Fiscal Quarter 2011 Ended Dec. 25, 2010
TBR OUTLOOK – POSITIVE TBR SCORE (0-10 SCALE)
6.39
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.3
Company Analysis3 Executive Summary10 Strategy Overview13 Corporate SWOT Analysis16 Financial Model Strategy20 Go-to-Market & Services Strategies23 Alliance & Acquisition Strategies24 Geographic Analysis25 Resource Management Strategy27 Organizational Structure28 Future Outlook
Company Data Models29 Income Statement 30 Balance Sheet31 Segment Revenue Model32 Unit Shipments & ASP Model33 Operating Expense Model34 Revenue by Customer Model35 PC Revenue Model36 Geographic Model37 Financial Strategy Graphs39 Resource Management Graphs 41 Future Outlook Graph42 Alliances Table 43 Product Portfolio Table46 About TBR
Contents
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.4
Executive Summary
Key Developments
Growth far, wide and going forward
Apple’s products, services, marketing, reputation and retail presence in the exploding smartphone and tablet market ensure continued rapid growth through 2012, and help drive market share growth for its PCs. The new devices have also broken through for Apple in emerging markets, driving Mac sales, as well.
iPhone, welcome to Verizon
• While iPhone sales have spiked over the last two quarters, so have sales of phones based on Google’s Android operating system, eroding Apple’s market share in the smartphone market. One reason for Android’s traction is Apple’s exclusive deal with AT&T, keeping iPhone out of more than half of the largest smartphone market in the world, the U.S. In signing a deal with Verizon, Apple has more than doubled its potential U.S. market, and much more than doubled the part of the U.S. market it has not already penetrated. TBR expects iPhone unit sales and revenues to lurch upward as many Verizon customers have their first opportunity for an iPhone.
• The company has been able to break out of exclusivity without reducing the approximately $400 subsidies carriers pay for iPhones. Confident that iPhones will continue to bring Apple more than $600 apiece, TBR believes that the company will continue to pack them full of attractive features.
Apple will stay strong while Jobs recovers
On Monday, Jan. 17, Apple reported CEO Steve Jobs was taking an indefinite medical leave. COO Tim Cook will be acting CEO, and TBR believes Apple will run smoothly in Jobs’ absence. Contrary to perception, Apple is now conservative and slow-moving, as is appropriate for a company enjoying a long string of successes; the iPhone and the iPad were clear Apple opportunities well ahead of their announcements. The company has strong top management, a solid culture and a clear strategy. Considering these circumstances, we believe Apple’s trajectory over the next three years will be similar whether or not Jobs is at the helm.
Apple’s dominance in smartphones and tablets ensures continued growth and high margins
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.5
Executive Summary
iPad and iPhone sales exploded in the holiday season, driving record revenue and profits prior to an expected 1Q11 boost from Verizon
TBR Position:Apple’s 4Q10 performance, with significant gains across all geographies and across all product lines except iPods, positions the company for continued rapid growth at high margins, despite CEO Steve Jobs’ illness.
• TBR believes Jobs’ absence, whether short-term or permanent, will not significantly affect Apple’s performance through 2012, and the company will continue to perform well going forward.
• The long-expected announcement of a Verizon iPhone will propel another surge in iPhone sales and will open up other CDMA carriers to Apple. The deal ensures continued high carrier subsidies without exclusivity, driving iPhone improvements.
• Apple revenue from Asia Pacific, excluding Japan, surged, showing that the iPhone and iPad are opening up emerging markets for Apple. Mac units also surged, demonstrating a halo effect.
• Mac annual unit growth and revenue growth were greater than 20% during a tough quarter for most PC vendors. The new MacBook Airs were popular, helping Apple’s PC ASPs bounce back sequentially. TBR believes Apple’s ASPs have hit bottom.
• The iPod touch helped iPods deliver 1% revenue growth despite declining unit sales.
Apple Corporate Strategies• Dominate awareness with innovative products and
aggressive marketing: Apple’s reputation for products and service drives growth and margins.
• Maintain a premium market position in all product lines: Apple competes in the higher end of each market for PCs, handsets, tablets and media players. The company’s prices slowly follow the market down, but retain their high-end positioning.
• Be a retail leader: Apple’s retail presence is far more than a sales channel; it is a strategic differentiator, driving sales and margins and strengthening strong relationships with long-term customers.
(In $ Billions) Consensus Guidance ActualRevenue 24.4$ $23.0 - $25.5 26.7$ Operating Income N/A N/A 7.8$ EPS 5.38$ $4.93 - $6.02 6.43$
(In $ Billions) TBR Estimate Consensus GuidanceRevenue 23.0$ 20.6$ 23.0$ Operating Income 6.5$ N/A N/AEPS N/A 4.43$ 4.80$
APPLE 4Q10 PERFORMANCE VS. EXPECTATIONS
APPLE 1Q11 GUIDANCE AND EXPECTATIONS
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.6
Executive Summary
Quarterly Segment Performance
Segment Key Changes & Drivers 4Q10Revenue
Growth Y/Y Keep on the Radar
iPhonesiPhone sales reached 16.2 million units, driven by growth in Asia and Europe.
$10.46 billion 87.7%
iPhone sales will increase and supply will be limited as Verizon customers drive demand.
MacsInnovative designs pushed Mac sales to 4.1 million units during the holiday quarter.
$5.43 billion 22.0%
TBR believes Apple’s digital hub of products will drive new user Mac sales, as OS X looks more like iOS.
iPodsThe iPod market continues to show maturity and saturation, with a 7.3% decline in unit shipments year-to-year.
$3.43 billion 1.0%
iPod touch and consumer refresh will continue to make the segment profitable, but with limited growth.
PeripheralsPeripherals increased 26.4% compared to the year-ago quarter, driven by Apple TV and iPad peripherals.
$593million 26.4%
TBR expects peripheral revenue will continue to grow through strong iPad sales and iPhone carrier expansion.
iPadsInternational expansion and holiday demand drove Apple iPad consumer sales, which totaled 7.33 million by the end of December.
$4.61billion n/a
TBR believes Apple iPad revenue will continue strong growth into 1Q11 as it begins distributing to 15 more countries for a total of 60.
Apple’s diversification across product categories ensures ongoing growth
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.7
The iPad and iPhone are rapidly increasing their presence in theeducation and professional arenas, but consumer growth is faster
Segment Key Changes & Drivers 4Q10Revenue
Growth Y/Y Keep on the Radar
Commercial
• Apple’s revenue growth from business and creative professional customers continued a trend of acceleration in 4Q10, reaching 64.3% during the quarter, compared to 70.5% total revenue growth.
• Apple reported at the close of 4Q10 that more than 80% of Fortune 100 companies were deploying and testing the iPad, compared to 65% in 3Q10.
$5.32billion 49.2%
• TBR expects the Mac App Store, which opened in January, to help drive Apple’s FY 2011 commercial revenue. The store is available in 90 countries and offers more than 1,000 apps around categories including education, design, productivity and utilities. Apple reported more than 1 million downloads for the first day that Mac App Store was online.
• TBR believes Apple will continue aligning resources and alliances to capitalize on the “consumerization of enterprise technology” driven by apps and mobile devices.
Consumer
• Mac consumer revenue rose 32.4% year-to-year, as compared to 7.2% Mac commercial revenue growth.
• While iPhone and iPad are driving rapid commercial revenue growth, they are driving consumer revenue growth faster.
$21.42 billion 76.8%
TBR estimates consumer revenue growth will continue to be driven by strong demand for the iPad and iPhone 4 during 1H11, with consumer iPad purchases outpacing commercial purchases indefinitely.
Executive Summary
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.8
Multiple successful products, broadening geographic coverage and increasing brand power drove explosive growth in 4Q10
TBR Assessment of Apple’s Performance
The synergies of Apple’s
multiproduct digital hub
strategy helped drive broad-
based growth across product
lines and regions
Revenue growth in every product line produced a record quarterThe power of the Apple brand was visible in 4Q10. Each product’s success helped drive sales of Apple’s other products. Apple did more than set records in 4Q10; it demolished earlier high marks. Revenue of $26.7 billion was 31.5% higher than 3Q10, the largest prior quarter, and the $7.8 billion operating profit was 43.7% greater than 3Q10, also the company’s best earlier quarter. The company set records across every line of business except iPods. iPhones, iPads, Peripherals, desktops, notebooks, iTunes and software and services all had record quarters. Decreasing component costs helped drive profit growthComponent prices began to fall in 3Q10 and fell further and faster in 4Q10. Memory prices fell rapidly, and all Apple products are memory-intensive. Apple’s gross margin improved 160 basis points from 3Q10 to 4Q10, despite an increasing proportion of iPhone 4s in Apple’s product mix. To drive growth Apple added features to the iPhone 4 that made it have lower gross margins than its predecessor, making it a more attractive product and causing corporate gross margins to be 240 basis points lower in 4Q10 than in 4Q09. At 38.5% in 4Q10, Apple’s new, lower gross margin is still very high for a hardware company.The iPhone helped Apple expand its geographic footprintApple also set new revenue records for each of its five geographic regions, including retail. The greatest gain was in Asia-Pacific, with $5.0 billion revenue, 82.5% more than 3Q10, the largest earlier quarter for the region. iPhone led the charge in Asia-Pacific, but Apple also sold a record number of Macs in the region, demonstrating the “halo effect,” by which the success of one Apple product drives sales of other products. Greater China, including China, Hong Kong, and Taiwan, produced $2.6 billion in revenue, four times greater than 4Q09 revenue.
Executive Summary
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.9
Revenues• Revenue grew 70.5% year-to-year to $26.7 billion. Sales
were driven by strong iPhone, Mac and iPad demand.• Mac, Software, Services and Peripherals revenue
increased 22.7% to $6.8 billion.• iPod, iPad and iTunes revenue rose 107.8% to
$9.5 billion.• iPhone revenue grew 87.7% to $10.5 billion.• Apple sold 4.1 million Macs, 16.2 million iPhones and 7.3
million iPads.
Expenses• In 4Q10, SG&A expense increased 47.2% while R&D
expense rose 44.5%.• Due to the company’s expanding retail presence, total
headcount reached 51,000 employees.
Margins• Gross margin dropped to 38.5%, declining 240 basis
points from 40.9% in 4Q09 due to higher iPhone 4 and iPad COGS. Gross profit of $10.9 billion increased 60.6% year-to-year.
• Operating margin declined to 29.3% compared to 30.1% in 4Q09, while operating profit increased to $7.8 billion.
Apple sets new records for revenue and operating profit, while gross margins increase sequentially despite iPhone 4’s higher COGS
$4,725 $7,827 $398
$575 $1,288
$1,896 $6,411
$10,298
$0$2,000$4,000$6,000$8,000
$10,000$12,000$14,000$16,000$18,000$20,000$22,000
4Q09 4Q10
in $
Mill
ions
APPLE OPERATING METRICS
Gross Income
SG&A
R&D
Operating Income
SOURCE: TBR AND APPLE
TBR
Executive Summary
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.10
Apple’s rapid revenue growth and strong inventory management drive high CBQ scores despite increases in operating costs
Rapid revenue growth and 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 4Q10.
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
FINANCIAL METRICS TBR ScoreCompany
FigureAverage in Class
Standard Deviation/2
Revenue (in $ Mill ions) 8.06 $26,741 $12,081 $4,796Gross Margin 5.25 38.5% 36.4% 8.6%SG&A (% of revenue) 7.38 7.1% 18.1% 4.6%Sales & Marketing (% of revenue) 7.08 5.3% 14.2% 4.3%General & Admin (% of revenue) 7.46 1.8% 3.9% 0.9%R&D (% of revenue) 6.68 2.2% 7.4% 3.1%Total operating expenses (% of revenue) 7.61 9.2% 26.6% 6.7%Operating Margin 7.82 29.3% 10.9% 6.5%Net Margin 7.55 22.5% 7.7% 5.8%Revenue Growth YTY 10.00 70.5% 20.4% 9.8%Gross Profit YTY change 6.86 60.6% 31.5% 15.6%SG&A YTY change 0.43 47.2% 7.0% 8.8%Sales & Marketing YTY change 0.28 57.9% 8.4% 10.5%General & Admin YTY change 3.24 22.4% 3.1% 11.0%R&D YTY change 1.47 44.5% 9.5% 9.9%Total operating expenses YTY change 4.03 14.2% 6.0% 8.5%Operating income YTY change 4.63 65.7% 332.8% 725.5%Net Income YTY change 4.74 77.7% 599.1% 1973.3%
TOTAL AVERAGE TBR SCORE 6.45
RESOURCE MANAGEMENT METRICS TBR ScoreCompany
FigureAverage in Class
Standard Deviation/2
Days sales outstanding 8.20 20.3 47.1 8.4Turns on inventory 10.00 67.9 17.4 7.6Days inventory outstanding 7.80 5.4 36.6 11.2Fixed asset turnover 5.36 20.1 16.1 11.1Days cash outstanding 4.95 90.8 88.8 36.9Total asset turnover 5.71 1.3 1.1 0.2Debt/asset ratio 8.49 0.3 0.6 0.1Current ratio 5.81 1.8 1.6 0.3Return on assets 9.94 23.5% 6.2% 3.5%Return on equity 4.93 36.0% 40.1% 63.0%Headcount growth YTY 0.87 34.2% 4.1% 7.3%Annual revenue per employee 8.23 $1,716 $670 $324Annual G&A expense 5.51 $228 $259 $62Annual R&D expense per developer 3.53 $435 $296 $95
TOTAL AVERAGE TBR SCORE 7.01
GO-TO-MARKET METRICS TBR ScoreCompany
FigureAverage in Class
Standard Deviation/2
Annual revenue per salesperson* 4.67 $4,597 $5,994 $4,240Cost per revenue dollar 6.77 $0.03 $0.09 $0.03Cost per margin dollar 7.94 $0.07 $0.24 $0.06Channel expense as a % of S&M expense 5.20 18.3% 19.8% 7.5%Marketing expense as a % of S&M expense 2.16 51.1% 26.3% 8.7%Annual sales expense per sales employee* 6.23 $143 $280 $111Annual marketing expense per marketing employee* 6.87 $143 $282 $75
TOTAL AVERAGE TBR SCORE*in $ thousands
5.63
4Q09 1Q10 2Q10 3Q10 4Q10
Financial Model Strategy: 7.07 6.51 6.34 6.17 6.45Go-to-Market & Services Strategies: 5.96 5.97 5.93 5.95 5.63Resource Management Strategy: 7.45 7.14 6.86 6.81 7.01TOTAL AVERAGE TBR SCORE: 6.89 6.53 6.37 6.28 6.39
TBR SCORING SUMMARY: CALENDAR QUARTER RESULTS
Executive Summary
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.11
Function Key Strategies TBR Assessment
Overall
Drive rapid growth of a loyal customer base for premium products with a broad range of personal computing devices.
►
iOS 4.0 and an increasing base of App store client devices will provide a core around which Apple can build additional digital hub products, diversifying its revenue stream. While Macs have their own OS, Apple is driving greater success by making them look and feel more like iPads.
Financial
Apple is engineering margin declines in iPhone and iPad to increase its customer base, driving revenue and unit growth.
►
Apple’s margins remain very high. The company’s operating margin will not fall below 20% again unless there is another major recession. Margins increased in 4Q10 because of improved component prices, but Apple aims to sacrifice margins to some extent to drive growth.
Go to Market
• Apple uses its ever-expanding 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.
►
• The new iOS features in OS-X are intended to increase cross-selling from iOS devices to Macs.
• The retail effort builds sales, cross-sales and customer identification and delivers real value in training, service and support, for which customers are willing to pay premium product prices.
• Apple’s product-oriented advertising, aimed at consumers, is also intended to appeal to very small businesses (VSBs) to drive commercial growth.
Strategy Overview
Apple’s iOS devices, iPhone and iPad propel growth across all product lines
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.12
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.
• TBR believes Apple seeks tuck-in acquisitions to bring in technology and technologists that strengthen its core product portfolio.
• Apple avoids large acquisitions that would disturb its culture.
Operations & Global Delivery Model
Apple works with suppliers and ODMs to deliver products, including a comparatively large number of custom and customized components. Its large volumes help drive favorable deals.
►
• Apple’s tight control of SKUs helps the sales and branding process and enables immediate availability with minimal inventory.
• Outside the Americas and EMEA, Apple relies on providers for iPhone sales and the channel for other 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 almost $60 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 $59.7 billion cash and marketable security reserve.
Apple favors alliances over acquisitions to help protect its cultureStrategy Overview
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.13
With four product lines at different stages of maturity, Apple profits from strong brand and ecosystem synergies
TBR Assessment of Apple’s Strategy
iPad is at the explosive early
stage of growth, iPhone sales are
still growing rapidly, Macs are
still gaining share, and the iPod touch is keeping iPods relevant; each line helps drive
sales of the others, and
together, Apple is expanding into markets where it was challenged
in the past
• Apple’s multiproduct strategy produced a winning quarter in 4Q10. Unlike most of its competitors, Apple considers itself to be a technology-based device company, not a PC company. In 4Q10, with four major product lines (Macs, iPhones, iPads and iPods) and one minor but now successful line (Apple TV), Apple is growing rapidly because it has successful entries at different stages of product maturity.
• iPads are at the explosive product introduction stage, where year-to-year growth rates are literally infinite.
• iPhones are enjoying successive quarters of high double-digit growth, growth that will undoubtedly slow as the sales in the year-ago comparison quarters increase.
• The success of the newer products, plus Apple’s retail network, keep Mac growth in the lower double digits despite a slow PC market and iPad cannibalization.
• iPods are in slow decline as a result of cannibalization by iPhones and market saturation, but Apple’s brand strength has managed to keep sales strong. As iPod touches take over the iPod line, TBR believes it is appropriate to treat iPads and iPods as one product line (the iPod touch and the iPad are very similar in use and technology), growing rapidly, but not infinitely fast.
• TBR believes CEO Steve Jobs chose a multiproduct strategy when he rejoined the company in 1996 because PCs were no longer the rapidly-growing innovative business for which he and the company were best suited. The strategy’s benefits were the potential for rapid growth, larger overall scale, and sales and marketing synergies through brand and channel. The strategy has been successful for a decade, culminating in 4Q10 with breakout performance.
Strategy Overview
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.14
Apple could expand into payment systems by leveraging iTunes and its mobile platform
Opportunities• Use iTunes software to become dominant
consumer content manager (3Q09 report)• Use the Mac mini with Snow Leopard
Server to drive sales in VSBs (3Q09 report)• Introduce publisher subscriptions on the
iPad (3Q10 report)• Start a new business in mobile and Internet
payments (4Q10 report)
Weaknesses• Apple’s limited presence in the PC markets of
emerging economies (4Q08 report)• Prices for entry-level Macs are far higher than
competitors’ entry prices (1Q09 report)
Strengths• Strong product differentiation drives higher
margins (4Q08 report)• Apple bridges the gap between technophiles
and technophobes (4Q09 report).• Strong brand awareness and marketing allows
Apple to release successful products (1Q10 report).
• First-mover advantage with the release of the iPad (2Q10 report)
Threats• Design flaw with the iPhone 4 antenna
(2Q10 report)• Rising competition within the smartphone
market, such as Android (3Q10 report)• Apple continues losing share of the
smartphone and tablet markets to Google Android (4Q10 report)
SWOT Analysis
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.15
Payment processing presents a significant opportunity for new growthSWOT Analysis
Opportunity: Start a new business in mobile and Internet payments
Forthcoming NFC technology,
coupled with Apple’s strength
in the mobile arena, position
the company for diversified
revenue in the form of mobile
payments
• TBR believes Apple has the opportunity to create a mobile and Internet payment system that will generate a new profitable revenue stream not tied to ongoing device sales. We believe the company will leverage a combination of mobile payments technology and iTunes payment accounts to become a major provider of payments services.
• TBR believes Apple will embed Near-Field Communications (NFC) technology into its next-generation iPhones and iPads, a technology used outside the U.S. to communicate payment card information and make payments without scanning or swiping cards. The company has posted job openings for engineers with NFC expertise.
• NFC alone will give Apple’s devices more capabilities, and credit card companies are likely to capitalize on consumers’ desires for convenience by deploying the complementary technologies at points of sale. TBR believes Apple has the opportunity, however, to do more than simply provide the capability to payment services providers; it can become a payment service provider itself.
• Apple processes a large number of payments through iTunes. When the payments are small, however, credit card processing fees can overwhelm Apple’s 30% share of iTunes revenue. Apple benefits when customers group their purchases together, or when they use iTunes gift cards. In January 2011, Apple offered discounts on popular albums to customers who used gift cards, and TBR expects similar offers in the future.
• By setting up prepaid accounts – essentially the same thing as a gift card – Apple will be able to process small payments profitably, providing a micropayment service that the company could use to attract more content providers to its platform. Apple could then expand its service outside iTunes, to other Internet vendors, and, on its NFC platform, to bricks-and-mortar vendors. This would provide Apple with a large and growing profitable business not tied to the sales of individual devices.
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.16
Smartphone competitors, led by Google’s Android OS, are nibbling at Apple’s mobile market share
SWOT Analysis
Threat: Apple continues losing share of the smartphone and tablet markets to Google Android
As the smartphone market develops,
Apple is beginning to lose market share to
Android. The smartphone market is growing rapidly,
allowing the company’s
smartphone revenues to continue to increase while its
share decreases
Smartphones based on Google Android outsold the iPhone in 4Q10, as smartphones sales soared, fueled by multiple models, vendors and providers. Despite in-roads in share, Apple will remain a leader as a premium smartphone vendor in the mobile arena, maintaining significant market share and growth going forward.• Apple leveraged its breakthrough iPhone product and loyal customer base to begin
with nearly the entire consumer smartphone market. A plethora of attractive devices have emerged to rival the iPhone, and Apple has already taken large portions of its available market in some countries. As such, the company is inevitably losing share, most significantly to chief rival Google Android. Regardless, Apple maintains rapid growth in iPhone revenue, unit share and profitability, and we expect the company to maintain market share in excess of 30%.
• TBR believes the AT&T exclusivity cost Apple share in the U.S. With Apple releasing an iPhone for Verizon Wireless in 1Q11, TBR expects iPhone sales in the U.S. market will increase with carrier expansion, spiking Apple’s market share to 40%.
• As customer adoption of smartphones continues accelerating, we expect the prices of basic data plans to come down, making smartphones the typical mobile phone for consumers. Less expensive smartphones will become attractive complements to lower-priced plans. Apple will tolerate some erosion of its market share to maintain its premium status, but will lower entry prices as necessary to maintain its position as a major vendor.
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.17
Global expansion and increased penetration in the commercial market via the iPhone and iPad lay the foundation for new growth for Apple• Mac revenue, including Software, Services and Peripherals, reached $6.81 billion in 4Q10, an increase of 22.7%
from 4Q09 driven by strong customer adoption of the MacBook Air. A trend of falling blended computer ASPs began tapering off during 4Q10, with Apple reporting year-to-year growth of -0.8% for the quarter compared to –3.8% in 3Q10 and –6.3% in 4Q09.
• In 4Q10, iPhone sales grew 85.8% year-to-year to 16.2 million units on the back of expansion to 185 carriers in 90 countries. TBR expects iPhone demand to remain strong in 1Q11, shipping an estimated 15 million units, boosted by the introduction of the Verizon iPhone in February and increased enterprise adoption of the device.
• Apple shipped 7.3 million iPads in 4Q10, up from 4.2 million units shipped in 4Q09, as the device became available on the Verizon Wireless network in October, and Apple launched the device in additional countries.
The iPhone role Product Line Performance iPhone Futures
• The iPhone contribution to Apple revenue was 39.1% in 4Q10 and will increase in 1H12 as a result of the Verizon iPhone and probable expansion in the China market.
• TBR estimates the iPhone’s contribution to Apple’s operating profit to have been 63.1% in 4Q10. While iPhone margins have been trimmed, they remain the highest of any major product line.
• While iPhone growth has been consistent, Apple has almost finished filling out its portfolio of worldwide carriers, and TBR believes growth will be slower and less consistent as the market matures.
• We think iPhone will maintain its position as Apple’s dominant revenue and profit driver through 2012.
Financial Model Strategy
$0
$5
$10
$15
$20
$25
$30
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Est.1Q11
Reve
nue
in $
Mill
ions
APPLE REVENUE BY PRODUCT LINE
iPhone iPods, iPads & iTunes Macs, etc.
SOURCE: TBR AND APPLE
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.18
Improved notebook demand driven by a refreshed product line boosts continued strong iPad and iPhone 4 performance to drive growth
Revenue Performance Revenue & Growth Drivers4Q10 Revenue: $26.7 billion, 70.5% YTY
• Total revenue reached $26.7 billion in 4Q10, outpacing Apple’s highest quarterly revenue performance of $20.3 billion, posted in 3Q10. A refreshed notebook product line augmented seasonally increased consumer spend and continued rapid customer adoption of iPhone 4 and iPad to drive strong corporate performance.
• iPods, iPads and iTunes led Apple’s business segments in revenue growth during 4Q10, maintaining triple-digit performance. iPhones remained a significant corporate growth driver, rising 87.7% year-to-year.
Revenue and Growth Outlook
• TBR expects Apple to post revenue of $23.0 billion in 1Q11, implying corporate growth in excess of 70% for a second consecutive quarter.
• TBR anticipates MacBook unit shipment growth will rise 290 basis points year-to-year to 31.4% in 1Q11, as Apple leverages new product offerings to overcome seasonally weak demand.
• iPhone as a percentage of total revenue is expected to rise to 50.9% of revenue in 1Q11, compared to 39.1% in 4Q10 and 40.3% in 1Q10, maintaining a strong lead over Macs for the third consecutive quarter.
Financial Model Strategy
0%10%20%30%40%50%60%70%80%90%
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Est.1Q11
Reve
nue
Gro
wth
Yea
r-to
-yea
r
Reve
nue
($ m
illio
ns)
APPLE TWO-YEAR REVENUE AND GROWTH
Revenue Y/Y Growth Rate
SOURCE: TBR AND APPLE
TBR
32.0%48.6%
61.3% 66.7%70.5% 70.4%
0.0%0.0% 0.0%
0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%
$0$20,000$40,000$60,000$80,000
$100,000$120,000
4Q09 1Q10 2Q10 3Q10 4Q10 Est.1Q11
CY10 CY11Est.
CY12Est.
In $
Mill
ions
APPLE'S NET REVENUE, GROWTH AND PROJECTIONS
Net Revenue Revenue Growth Year-to-Year
Net
Rev
enue
Gro
wth
Yea
r-to
-yea
r
NOTE: Annual revenue and projections are for calendar 2010, 2011 and 2012, respectively.SOURCE: APPLE AND TBR
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.19
Strong demand for the iPad and iPhone 4, combined with improved MacBook and iPod Touch performance, drove Apple’s 4Q10 growth
Segment Performance Cost Structure & Margin PerformanceSegment Financials
Macs, Peripherals, Software and Services
• 4Q10 marked the sixth consecutive quarter of double-digit Mac unit shipment growth, increasing 23.0% year-to-year on the back of strong demand for the MacBook Air and Pro lines, as well as for Mac Pro desktops.
• TBR expects Mac revenue to grow 13.0% year-to-year in 1Q11.
iPods, iPads and iTunes
• iPod, iPad and iTunes revenue rose 107.8% year-to-year in 4Q10, up by 640 basis points year-to-year to 35.4% of total revenue on the back of strong customer adoption of the iPad and increasing demand for the iPod Touch.
• The iPad remained a significant source of new revenue for Apple, accelerating unit and revenue sequential growth over its third full quarter on the market.
iPhones
• iPhone unit sales were up by 85.8% in 4Q10, driven by global iPhone 4 carrier expansion.
• TBR anticipates iPhone revenue will increase 71.4% year-to-year in 1Q11, driven by the availability of the device on the Verizon network.
Financial Model Strategy
0%
20%
40%
60%
80%
0%
10%
20%
30%
40%
50%
4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11
Reve
nue
Gro
wth
Mar
gins
APPLE PROFITABILITY AND GROWTH
Gross Margin Operating Margin Net Margin Revenue Growth Year-to-Year
SOURCE: TBR AND APPLE
TBR
$5,550 $4,866 $5,441 $6,009 $6,809 $5,400
$4,555 $3,188 $4,925 $5,512 $9,464 $5,900
$5,578 $5,445 $5,334 $8,822 $10,468 $11,700
0%
20%
40%
60%
80%
100%
4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11Perc
ent
of T
otal
Rev
enue
APPLE SEGMENT CONTRIBUTIONS
iPhone iPod, iPad & iTunes PCs, SW, Svcs, & Peripherals
SOURCE: TBR AND APPLE
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.20
A companywide focus on reducing COGS and operational expenses positions Apple for sustainable margin growth
Profit Performance Segment Drivers
4Q10 Operating Expense: $2.5 billion
COGS, Gross profit
• Apple reported gross margin of 38.5% in 4Q10, up 160 basis points sequentially and 250 basis from company guidance due to improved commodity prices, as well as strong corporate revenue and growth.
• TBR expects gross margin to increase on a sequential basis to 38.7% in 1Q11 as component prices continue to soften.
SG&A
• SG&A expense grew 47.2% year-to-year to $1.9 billion, but was down as a percentage of revenue by 90 basis points.
• TBR anticipates SG&A expense growth will taper off slightly in 1Q11 to 45.9% year-to-year.
Operating Margin and Outlook
• Apple’s operating margin reached 29.3% in 4Q10, up from 26.8% in 3Q10, as operating profit growth accelerated to 65.7% YTY.
• TBR estimates Apple will sustain operating profit growth in excess of 60% YTY in 1Q11.
Financial Model Strategy
0%
25%
50%
75%
100%
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Est.1Q11
Gro
wth
APPLE HEADCOUNT GROWTH VS. FINANCIAL PERFORMANCE
Employee Growth YTY Revenue Growth YTY Op. Profit Growth YTY
SOURCE: TBR AND APPLE
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.21
Apple leverages the iPod touch to drive growth of iOS installed base and introduce younger users to the Apple product line
Apple sold roughly 10 million units of the newly updated iPod Touch in 4Q10. TBR believes the product drives penetration of other iOS devices to position Apple for increased revenue and unit shipments, and is especially effective in branding young users, who constitute a major part of the iPod touch market.
• In September, Apple rolled out the new iPod touch HD with FaceTime, featuring a front-facing camera with capabilities for HD video recording, editing and uploading to YouTube via Wi-Fi. According to Steve Jobs, the Touch is the most popular iPod and the world’s No. 1 portable game player.
• TBR views the iPod touch as a youth product, geared toward younger demographics. The device offers customers the same messaging, video chatting with FaceTime and Skype, and gaming capabilities as the iPhone without requiring customers to purchase an expensive data plan. As such, we believe the device is a strong entry-level product. It can hook customers on iOS, providing Apple with cross-selling and upselling opportunities across its product portfolio.
SOURCE: APPLE
Go-to-Market & Services Strategies
• The touch has many of the components of the iPhone 4, but brings Apple far less revenue. With subsidies, the iPhone’s ASP was $629, while the least expensive iPod touch sells for $229. TBR believes the touch is one of Apple’s lowest-margin products.
• Despite its low margin, the iPod touch remains strategically important to Apple. Increasing touch sales offset declining sales of other iPod models, helping Apple achieve a modest 1.0% annual gain in iPod revenues. The touch also helps drive iTunes revenue; however, iTunes, has a very low operating margin.
• Most important is the touch’s role as an entry product into Apple’s iOS family. Approximately 60 million iPod touches have been purchased, out of 160 million iOS devices. Apple is using iOS to drive its growth, and the touch is a major contributor.
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.22
Apple’s retail presence provides strong carry-in service and support for very small businesses
Go-to-Market & Services Strategies
TBR position on Apple SMB strategy• Apple starts with its position in the consumer space
to build its presence in VSBs, where users make purchasing decisions, just as consumers do.
• Retail stores, as local service and support centers, help drive VSB growth.
• As VSBs grow, and as familiarity with and acceptance of Apple products in business increases, Apple’s role in larger small businesses grows.
• iPhones, and now iPads, are helping drive Apple’s presence in businesses of all sizes.
Apple SMB Strategies• Deliver products that require less training and
support than non-Apple products; ensure that products are interoperable with non-Apple products.
• Provide better support and service solutions for individuals and VSBs than competitors, including leveraging retail network for walk-in service and support.
• Document business users and uses in case studies on the Apple website.
• TBR expects that as more applications that appeal to businesses are introduced, the iPhone and iPad will become increasingly popular in the commercial market; however, growth will not outpace consumer growth.
• We estimate Apple’s SMB revenue increased 67.2% –rapid growth for the SMB segment – but was outpaced by the company’s overall revenue growth of 70.5%.
SMB Product and Channel Strategies• Within the constraints of fully optimizing its
products for consumers, Apple includes business-friendly capabilities, mostly around security interoperability in mixed networks.
• Apple supports VAR and retail channels if they do not conflict with Apple retail. VARs help the company serve the creative professional market.
• The Snow Leopard Server on the Mac mini is a strong VSB product.
APPLE SMB Revenue (In $ Millions)4Q09 4Q10 YtY ∆
Revenue 1,134$ 1,896$ 67.2%
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.23
Go-to-Market & Services Strategies
• Apple’s new Apple TV is a success, unlike its predecessor. Apple sold more than 1 million units of the second-generation, cloud-based Apple TV in 4Q10, the product’s first quarter on the market. While its lower price, smaller size and iOS operating system contributed to sales, TBR believes the Apple TV won in the market because it seamlessly connects iPads, iPhones and iPod touches with home theatre video and audio output devices.
• Using AirPlay – a technology Apple developed with and licensed from a company named BridgeCo – users can view video and listen to music hosted on their iOS devices through equipment connected to Apple TV. TBR believes Apple will soon provide AirPlay capabilities for Macs.
• The advantage of working with an outside vendor like BridgeCo is that AirPlay can more easily be included in other companies’ devices. Audio companies Denon, iHome, JBL and Bowers and Wilkens have announced AirPlay-enabled products. TBR believes Apple is aiming AirPlay to be a standard available across all devices, instead of a differentiator. Apple will try to differentiate with its devices, like Apple TV.
• The new Apple TV allows rental of online video content, like its predecessor, but TBR believes the key to its success is integration of home devices. Users want the ability to consume their content when and where they like, and they want to take advantage of the capabilities of their home theater systems. Device integration and content management was one of the trends TBR saw at the International Consumer Electronics Show in 2011, and AirPlay makes Apple one of the leaders of this trend.
• Apple TV faces its most significant competition in the form of Google TV. The only add-on box available for Google TV, offered by Logitech, costs $399. Another potential threat to the Apple TV is Intel WiDi technology, which enables users to set up an adapter on their TV and wirelessly stream content from a PC to a TV.
• Another contender in the Internet-connected TV space is video game consoles, as many key platforms, including Microsoft’s Xbox 360, allow for Internet access and streaming of the likes of Netflix, while allowing users to play games. However, users can access the same games on Apple TV as they can on their mobile iOS devices, and as the iPod Touch has emerged as a significant contender in handheld gaming, we do not believe gaming consoles pose a true threat to Apple in the broad consumer market, and the company will stay out of high-performance gaming.
Elegant home device integration drives the new Apple TV to success
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.24
Apple partnered to increase its channel presence and capitalize on the high-growth market of mobile advertising in APAC in 4Q10
Alliance & Acquisition Strategies
TBR Assessment of Alliance Strategy
As a key corporate
growth strategy, Apple partnered with
a strategic focus on the
APAC region in 4Q10,
positioning to grow in the channel and capitalize on
mobile advertising
Foxconn becomes the first retailer authorized to directly sell Apple products in APAC, positioning Apple for a stronger presence in the region and accelerated growth• In January, Apple granted its main ODM, Foxconn, approval as an Apple-licensed retailer in APAC.
Foxconn will expand its base of 34 stores in the APAC region to 500, all of which will sell Apple products, augmenting the 20 stores Apple plans to open in China during FY11. Apple’s proprietary stores will remain the basis of the company’s APAC operations; however, Apple will leverage Foxconn’s channel network and strong brand recognition to gain a stronger foothold and drive sales in the region.
• Apple’s APAC revenue grew in excess of 100% for the fifth sequential quarter in 4Q10, reaching $6.4 billion. Apple is expected to maintain double-digit year-to-year APAC unit shipment growth in 1H11, positioning the company for higher market share and continued triple-digit revenue growth in the region. We believe Apple is positioning to cement (and even accelerate) this growth with an expanded retail presence in the region.
Apple formed an alliance with Dentsu Group in 4Q10 to roll out iAd in Japan and position for accelerated revenue growth• In November, Apple partnered with the Dentsu Group to bring the iAd mobile advertising network to
Japan. Under the agreement, Dentsu will handle advertisement sales in the country, as well as services including creative production and media planning, while Apple will host, target and deliver the ads to iPhone and iPod Touch users.
• Apple launched iAd in July in the U.S. to success; as of November, the company reportedly doubled the number of brands on the network compared to its inception. With the new alliance, TBR believes the company is working to couple Dentsu’s strong global traction in the advertising industry, particularly in Japan, with iAd to capitalize on the large, growing market of mobile iOS device users in Japan. According to Dentsu, mobile advertising is the country’s fastest-growing platform.
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.25
Continued iPhone and iPad global expansion – particularly in emerging markets – provide for revenue growth
Geo Key Changes & Drivers Revenue Y/YGrowth Keep on the Radar
U.S./ Americas
Apple’s Americas segment fell to 45% of overall revenue in 4Q10 from 49% in the year-ago quarter. Growth was strong, as the company leveraged a strong retail presence to combat the maturity of key devices in the U.S. market.
$12.0 billion 56.8%
TBR believes Apple will continue to push iPad and iPhone sales to drive growth in the Americas, and will continue to expand its retail coverage.
EMEAApple leveraged iAd expansion to Europe and increased demand for the iPhone and iPad to overcome market contraction and maintain double-digit EMEA growth.
$7.9 billion 49.2%
We believe economic recovery and resulting increased consumer spending will enable Apple to sustain strong growth in EMEA through 1H11.
APAC
The APAC region increased to 25% of Apple corporate revenue, from 22% in 3Q10 and 17% in 4Q09. This comes on the back of a fifth consecutive quarter of triple-digit revenue growth, driven by the availability of the iPhone 4 in China and strong regional demand for MacBook Air and MacBook Pro.
$6.8 billion 150.7%
Apple reported its four retail stores in China posted the greatest revenue of its global chain in 4Q10; TBR expects Apple to remain focused on the country as a key growth priority in FY11.
EmergingMarkets
TBR believes the Mac App store, which is already available in 90 countries, will continue expanding and driving supplementary product sales. Apple expanded the iPad to an additional 20 countries during 4Q10, reaching a total of 46.
Apple planned to expand the iPad to 15 additional countries during January.
Geographic Analysis
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.26
Resource Management Strategy
Apple struggles to meet demand for iPhone 4 as it expands to new carriers and increases its backlog
Apple Efficiency and Revenue Apple revenue per salesperson maintained positive growth from the year-ago quarter; retail stores experienced a record quarter, achieving $3.85 billion, compared to $1.97 billion in 4Q09.
APPLE EFFICIENCY METRICS (IN $'000'S)4Q09 4Q10
Revenue per Employee $1,369 $1,716
S&M Employee Expense per head $154 $143
R&D Employee Expense per head $365 $435
G&A Expense per G&A head $246 $228
Revenue per Salesperson $4,026 $4,597
TBR
Leadership ChangesIn November, Apple appointed Dr. Ronald D. Sugar, former chairman of the board and CEO of Northrop Grumman Corporation, as the chair of the Audit and Finance Committee of its board of directors. TBR believes Sugar’s strong background in engineering and executive-level management will prove an asset in technological innovation for Apple.
Apple Capital InvestmentsApple announced long-term supply agreements with three vendors in 4Q10, and there have been press reports of Apple investing in LCD factories with both Toshiba and Sharp. With explosive growth in demand for iPads and iPhones, Apple struggled in 4Q10 to meet demand. While iPad supplies were adequate, allowing Apple to make them available in 46 countries in 4Q10 and to add 15 more in 1Q11, there was a “significant backlog” in iPhones, according to COO Tim Cook. The Verizon deal will generate additional strain.
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.27
Apple aggressively grew headcount in 4Q10 – particularly in retail and R&D – to drive growth
Function Key Changes & Drivers HeadcountY/Y
Growth
Keep on the Radar
Sales & Marketing
Apple’s marketing team, which accounts for nearly half of its total Sales & Marketing employee base, is a key asset in driving sales.
3,900 10.5%Sales & Marketing headcount is expected to continue growing through 1H11.
General & Admin.
Apple’s G&A employee base accounts for 7.6% of total headcount, down from 9.3% in 4Q09 and 8.1% in 3Q10, as the company strives to increase business process efficiency.
3,400 7.3%TBR anticipates a slight downtick to Apple’s G&A headcount growth in 1Q11.
Research & Development
R&D maintains steady growth, as Apple consistently refreshes product lines.
5,000 22.0%TBR expects Apple to maintain double-digit R&D headcount growth in 1Q11 to drive aggressive portfolio upgrades.
Service & Support
Apple’s Service & Support segment accounts for 17.1% of overall headcount and sustained growth in 4Q10.
8,700 7.1%In 1Q11, Service & Support headcount will remain stagnant sequentially, a seasonal pattern.
Retail
Apple continued investing in its retail headcount ahead of other business functions in 4Q10 to support reported retail revenue growth of 95% for the quarter.
30,000 53.8%
TBR expects Apple to grow its retail headcount 47.4% in 1Q11 as Apple continues investing in retail stores to drive cross-portfolio unit shipment growth.
Resource Management Strategy
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.28
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
Bertrand Serlet Senior Vice President Software Engineering
Bob MansfieldSenior Vice PresidentMac Hardware Engineering
Scott ForstallSenior Vice PresidentiPhone Software
Sina TamaddonSenior Vice President
Applications
Apple, Inc. Organizational ChartOrganizational Structure
Apple’s Recent AppointmentsDr. Ronald D. Sugar was appointed chair of the Audit and Finance Committee in December. Sugar was formerly the chairman and CEO at Northrop Grumman Corp.
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.29
With accelerating iPad growth and rapid iPhone growth, Apple will continue its multiproduct strategyTBR Outlook
Company Strategy
iOS and an increasing base of App Store client devices will provide a core around which Apple can build additional digital hub products, diversifying its revenue stream, as evidenced by the 3Q10 release of the second-generation Apple TV.
Resource Management
Apple will continue investing in the research and development of new products and expansion of its retail footprint globally to maintain strong sales and revenue growth.
CompetitorsDespite high entry prices, Apple will continue to gain PC market share. While Android will inevitably erode Apple’s market share in smartphones, the company will remain a major player in the rapidly growing market.
Geo 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.
Financial iPhone, iPod, iPad and Mac revenues will continue providing a three-legged stream of strong revenue growth for Apple, with overall operating margins remaining relatively flat in 1Q11.
Go to MarketTBR believes Apple’s continued expansion of its retail presence, coupled with carrier and network expansion of the iPhone, will be significant in driving 4Q10 sales into 2011. We also expect the company to maintain focus on consumers while it grows commercial revenue.
Future Outlook
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.30
Appendix – Income StatementAPPLE, INC.Consolidated Statement of Income(in $ Thousands)
CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10FISCAL QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11Net Sales $15,683,000 $13,499,000 $15,700,000 $20,343,000 $26,741,000
Cost of Sales 9,272,000 7,874,000 9,564,000 12,832,000 16,443,000
Gross Profit 6,411,000 5,625,000 6,136,000 7,511,000 10,298,000
SG&A 1,288,000 1,220,000 1,438,000 1,571,000 1,896,000
R&D 398,000 426,000 464,000 494,000 575,000
Operating Income 4,725,000 3,979,000 4,234,000 5,446,000 7,827,000
Other Income (Expense) 33,000 50,000 58,000 14,000 136,000
EBITD 4,758,000 4,029,000 4,292,000 5,460,000 7,963,000
Income Taxes 1,380,000 955,000 1,039,000 1,153,000 1,959,000
Net Income $3,378,000 $3,074,000 $3,253,000 $4,307,000 $6,004,000
AS A PERCENTAGE OF REVENUENet Sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Sales 59.1% 58.3% 60.9% 63.1% 61.5%
Gross Margin 40.9% 41.7% 39.1% 36.9% 38.5%
SG&A 8.2% 9.0% 9.2% 7.7% 7.1%
R&D 2.5% 3.2% 3.0% 2.4% 2.2%
Operating Margin 30.1% 29.5% 27.0% 26.8% 29.3%
Gain from Sale of Investment 0.0% 0.0% 0.0% 0.0% 0.0%
Other Income (Expense) 0.2% 0.4% 0.4% 0.1% 0.5%
EBITD 30.3% 29.8% 27.3% 26.8% 29.8%
Income Taxes 8.8% 7.1% 6.6% 5.7% 7.3%
Net Margin 21.5% 22.8% 20.7% 21.2% 22.5%YEAR-TO-YEAR CHANGENet Sales 32.0% 48.6% 61.3% 66.7% 70.5%
Cost of Goods Sold 25.8% 44.3% 66.3% 80.7% 77.3%
Gross Profit 42.2% 55.1% 54.1% 47.1% 60.6%
SG&A 18.1% 23.9% 42.4% 47.8% 47.2%
R&D and Engineering 26.3% 33.5% 36.1% 38.0% 44.5%
Operating Income 52.4% 71.3% 60.9% 47.8% 65.7%
Other, Net -79.1% -20.6% -3.3% -68.9% 312.1%
EBITD 46.0% 68.9% 59.4% 46.4% 67.4%
Income Taxes 37.5% 24.7% 20.3% -3.7% 42.0%
Net Income 49.8% 89.8% 78.0% 70.1% 77.7%SEQUENTIAL CHANGENet Sales 28.5% -13.9% 16.3% 29.6% 31.5%
Cost of Goods Sold 30.6% -15.1% 21.5% 34.2% 28.1%
Gross Profit 25.6% -12.3% 9.1% 22.4% 37.1%
SG&A 21.2% -5.3% 17.9% 9.2% 20.7%
R&D 11.2% 7.0% 8.9% 6.5% 16.4%
Operating Income 28.3% -15.8% 6.4% 28.6% 43.7%
Other, Net -26.7% 51.5% 16.0% -75.9% 871.4%
EBITD 27.6% -15.3% 6.5% 27.2% 45.8%
Income Taxes 15.3% -30.8% 8.8% 11.0% 69.9%
Net Income 33.4% -9.0% 5.8% 32.4% 39.4%
SOURCE: TBR AND APPLE
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.31
Appendix – Balance SheetAPPLE, INC.Consolidated Balance Sheets (in $ Thousands)
CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10FISCAL QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11ASSETSCurrent Assets
Cash & Short-term Investments 24,796,000$ 23,155,000$ 24,288,000$ 25,620,000$ 26,977,000$
Accounts Receivable 3,090,000 2,886,000 3,447,000 5,510,000 6,027,000
Inventory 576,000 638,000 942,000 1,051,000 885,000
Deferred Tax Assets 1,180,000 1,142,000 1,216,000 1,636,000 1,724,000
Other Current Assets 3,690,000 4,515,000 6,140,000 7,861,000 8,314,000
Total Current Assets 33,332,000 32,336,000 36,033,000 41,678,000 43,927,000
Long-term marketable securities 15,024,000 18,549,000 21,551,000 25,391,000 32,730,000
Property, Plant, Equip. (Net of Dep.) 3,115,000 3,504,000 3,990,000 4,768,000 5,868,000
Other, Net 2,455,000 2,668,000 3,151,000 3,346,000 4,217,000
Total Assets 53,926,000$ 57,057,000$ 64,725,000$ 75,183,000$ 86,742,000$
LIABILITIES AND EQUITYCurrent Liabilities
Accounts Payable 6,511,000 5,666,000 8,469,000 12,015,000 14,301,000
Accrued Expenses 3,996,000 4,021,000 4,452,000 5,723,000 5,953,000
Total Current Liabilities 13,097,000 12,229,000 15,612,000 20,722,000 23,795,000
Other non-current liabilities 4,139,000 4,539,000 4,981,000 5,531,000 7,065,000
Total Liabilities 18,158,000 17,709,000 21,614,000 27,392,000 32,076,000
Stockholders' Equity
Common Stock & PIC 8,962,000 9,553,000 10,133,000 10,668,000 11,502,000
Retained Earnings 26,695,000 29,670,000 32,870,000 37,169,000 43,050,000
Other 111,000 125,000 108,000 (46,000) 114,000
Total Stockholders' Equity 35,768,000 39,348,000 43,111,000 47,791,000 54,666,000
Total Liabilities & Equity 53,926,000$ 57,057,000$ 64,725,000$ 75,183,000$ 86,742,000$
FINANCIAL RATIOSCost of Sales 2.55 2.64 2.31 2.01 1.85
Days Sales Outstanding 17.73 19.24 19.76 24.38 20.28
Turns on Inventory 71.95 51.89 48.43 51.51 67.95
Days Inventory Outstanding 5.07 7.03 7.54 7.09 5.37
Fixed Asset Turnover 20.67 16.32 16.76 18.58 20.11
Days Cash Outstanding 142.30 154.38 139.23 113.35 90.79
Total Asset Turnover 1.24 0.97 1.03 1.16 1.32
Debt/Asset Ratio 0 0 0 0 0
Current Ratio 2.55 2.64 2.31 2.01 1.85
Return on Assets 20.4% 21.5% 21.9% 22.3% 23.5%
Return on Equity 30.5% 31.9% 32.7% 33.8% 36.0%
Employees 38,000 38,000 42,250 46,600 51,000
Revenue/Employee $1,369,234 $1,426,522 $1,496,926 $1,582,651 $1,715,671
SOURCE: TBR AND APPLE
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.32
Appendix – Segment Revenue
CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11FISCAL QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11Total Revenue 15,683,000$ 13,499,000$ 15,700,000$ 20,343,000$ 26,741,000$ 23,000,000$
Gross Profit 6,411,000$ 5,625,000$ 6,136,000$ 7,511,000$ 10,298,000$ 8,900,000$
Gross Margin 40.9% 41.7% 39.1% 36.9% 38.5% 38.7%REVENUE BY PRODUCTNotebook 2,758,000$ 2,228,000$ 3,098,000$ 3,194,000$ 3,699,000$ 2,950,000$
MacBook Air & Pro 2,150,000$ 1,530,000$ 2,125,000$ 2,117,000$ 3,175,000$ 2,500,000$
MacBook 608,000$ 698,000$ 973,000$ 1,077,000$ 524,000$ 450,000$
Desktop 1,692,000$ 1,532,000$ 1,301,000$ 1,676,000$ 1,731,000$ 1,300,000$
Mac Pro 202,000$ 162,000$ 153,000$ 248,000$ 291,000$ 240,000$
iMac/Mac mini 1,425,000$ 1,300,000$ 1,075,000$ 1,350,000$ 1,400,000$ 1,050,000$
Total Computer 4,450,000$ 3,760,000$ 4,399,000$ 4,870,000$ 5,430,000$ 4,250,000$
Peripherals 469,000$ 472,000$ 396,000$ 477,000$ 593,000$ 500,000$
iPod 3,391,000$ 1,861,000$ 1,545,000$ 1,477,000$ 3,425,000$ 1,450,000$
iPhone 5,578,000$ 5,445,000$ 5,334,000$ 8,822,000$ 10,468,000$ 11,700,000$
Software and Services 631,000$ 634,000$ 646,000$ 662,000$ 786,000$ 650,000$
iTunes Revenue 1,164,000$ 1,327,000$ 1,214,000$ 1,243,000$ 1,431,000$ 1,500,000$ PRODUCT MIX (PERCENTAGE OF TOTAL REVENUE)Notebook 17.6% 16.5% 19.7% 15.7% 13.8% 12.8%
MacBook Air & Pro 13.7% 11.3% 13.5% 10.4% 11.9% 10.9%
MacBook 3.9% 5.2% 6.2% 5.3% 2.0% 2.0%
Desktop 10.8% 11.3% 8.3% 8.2% 6.5% 5.7%
Mac Pro 1.3% 1.2% 1.0% 1.2% 1.1% 1.0%
iMac/Mac mini 9.1% 9.6% 6.8% 6.6% 5.2% 4.6%
Total Computer 28.4% 27.9% 28.0% 23.9% 20.3% 18.5%
Peripherals 3.0% 3.5% 2.5% 2.3% 2.2% 2.2%
iPod 21.6% 13.8% 9.8% 7.3% 12.8% 6.3%
iPhone 35.6% 40.3% 34.0% 43.4% 39.1% 50.9%
Total Hardware Revenue 88.6% 85.5% 88.2% 90.6% 91.7% 90.7%
Software and Services 4.0% 4.7% 4.1% 3.3% 2.9% 2.8%
iTunes Revenue 7.4% 9.8% 7.7% 6.1% 5.4% 6.5%
Total Non HW Revenue 11.4% 14.5% 11.8% 9.4% 8.3% 9.3%YEAR-TO-YEAR REVENUE GROWTHNotebook 9.4% 17.0% 39.5% 10.5% 34.1% 32.4%
MacBook Air & Pro 126.3% 104.0% 25.0% -4.9% 47.7% 63.4%
MacBook -61.3% -39.5% 87.1% 61.7% -13.8% -35.5%
Desktop 61.9% 45.1% 14.7% 53.9% 2.3% -15.1%
Mac Pro -48.9% -49.5% -45.2% -14.2% 44.1% 48.1%
iMac/Mac mini 137.5% 91.2% 34.4% 82.4% -1.8% -19.2%
Total Computer 24.8% 27.0% 31.2% 22.4% 22.0% 13.0%
Peripherals 21.2% 32.2% 16.5% 22.0% 26.4% 5.9%
iPod 0.6% 11.8% 3.6% -5.5% 1.0% -22.1%
iPhone 89.7% 124.4% 74.3% 91.5% 87.7% 114.9%
Total Hardware Revenue 35.3% 55.7% 67.8% 74.9% 76.6% 80.7%
Software and Services 4.1% 1.3% 21.9% 2.0% 24.6% 2.5%
iTunes Revenue 15.1% 26.5% 26.7% 22.1% 22.9% 13.0%
Total Non HW Revenue 11.0% 17.1% 25.0% 14.3% 23.5% 9.6%
SOURCE: TBR ESTIMATES AND APPLE
APPLE REVENUE MODEL TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.33
Appendix – Processor Units and ASPs
CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11FISCAL QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11UNIT SHIPMENTSNotebook 2,128,000 1,796,000 2,468,000 2,643,000 2,907,000 2,360,000
MacBook Air & Pro 1,558,000 1,137,000 1,556,000 1,582,000 2,395,000 1,925,000
MacBook 570,000 659,000 912,000 1,061,000 512,000 435,000
Desktop 1,234,000 1,147,000 1,004,000 1,242,000 1,227,000 970,000
Mac Pro 54,800 50,700 48,500 77,600 85,000 68,200
iMac/Mac mini 1,167,000 1,083,300 942,000 1,150,000 1,135,000 900,000
Total Computer 3,362,000 2,943,000 3,472,000 3,885,000 4,134,000 3,330,000
iPod 20,970,000 10,885,000 9,406,000 9,051,000 19,446,000 16,500,000
iPhone 8,737,000 8,752,000 8,398,000 14,102,000 16,235,000 15,000,000YEAR-TO-YEAR UNIT GROWTHNotebook 18.5% 28.5% 40.7% 16.6% 36.6% 31.4%
MacBook Air & Pro 254.1% 250.9% 23.9% -3.1% 53.7% 69.3%
MacBook -58.0% -38.6% 83.1% 67.4% -10.2% -34.0%
Desktop 69.5% 40.2% 18.3% 57.8% -0.6% -15.4%
Mac Pro -61.8% -56.5% -50.8% -24.4% 55.1% 34.5%
iMac/Mac mini 103.0% 56.8% 27.3% 70.9% -2.7% -16.9%
Total Computer 33.2% 32.8% 33.4% 27.3% 23.0% 13.1%
iPod -7.7% -1.2% -7.9% -11.1% -7.3% 51.6%
iPhone 100.3% 130.7% 61.3% 91.4% 85.8% 71.4%AVERAGE SELLING PRICENotebook 1,296$ 1,241$ 1,255$ 1,208$ 1,272$ 1,250$
MacBook Air & Pro 1,380$ 1,346$ 1,366$ 1,338$ 1,326$ 1,299$
MacBook 1,067$ 1,059$ 1,067$ 1,015$ 1,023$ 1,034$
Desktop 1,371$ 1,336$ 1,296$ 1,349$ 1,411$ 1,340$
Mac Pro 3,686$ 3,195$ 3,155$ 3,196$ 3,424$ 3,519$
iMac/Mac mini 1,221$ 1,200$ 1,141$ 1,174$ 1,233$ 1,167$
Blended Computer ASP 1,324$ 1,278$ 1,267$ 1,254$ 1,313$ 1,276$
iPod 162$ 171$ 164$ 163$ 176$ 88$ Y/Y GROWTH - AVERAGE SELLING PRICENotebook -7.6% -8.9% -0.8% -5.3% -1.8% 0.8%
Desktop -4.5% 3.5% -3.0% -2.5% 2.9% 0.3%
Blended Computer ASP -6.3% -4.4% -1.7% -3.8% -0.8% -0.1%
iPod 9.0% 13.1% 12.5% 6.3% 8.9% -48.6%
SOURCE: TBR ESTIMATES AND APPLE
APPLE'S UNIT SHIPMENTS AND ASPs TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.34
Appendix – Operating Expense
CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11FISCAL QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 Est. 2Q11Total Revenue 15,683,000$ 13,499,000$ 15,700,000$ 20,343,000$ 26,741,000$ 23,000,000$
SG&A Expense 1,288,000$ 1,220,000$ 1,438,000$ 1,571,000$ 1,896,000$ 1,780,000$
Sales & Marketing Expense 900,000$ 830,000$ 1,028,000$ 1,136,000$ 1,421,000$ 1,300,000$
General & Administrative Expense 388,000$ 390,000$ 410,000$ 435,000$ 475,000$ 480,000$
Research and Development 398,000$ 426,000$ 464,000$ 494,000$ 575,000$ 600,000$
SALES & MARKETING EXPENSE BREAKOUTSales Expense 533,610$ 500,000$ 550,000$ 625,000$ 695,000$ 675,000$
Sales Salary and Commissions 336,700$ 326,000$ 369,440$ 400,000$ 435,000$ 445,000$
Partner and Channel Spending 196,910$ 174,000$ 180,560$ 225,000$ 260,000$ 230,000$
Marketing Spending 366,390$ 330,000$ 478,000$ 511,000$ 726,000$ 625,000$
Marketing Salary/expenses 61,458$ 62,413$ 64,350$ 65,988$ 67,625$ 67,625$
Advertising & Programs 304,933$ 267,588$ 413,650$ 445,013$ 658,375$ 693,072$
Total Sales & Marketing Expense 900,000$ 830,000$ 1,028,000$ 1,136,000$ 1,421,000$ 1,300,000$
SPENDING AS A PERCENTAGE OF REVENUETotal SG&A Expense 8.2% 9.0% 9.2% 7.7% 7.1% 7.7%
Sales & Marketing Expense 5.7% 6.1% 6.5% 5.6% 5.3% 5.7%
Sales Expense 3.4% 3.7% 3.5% 3.1% 2.6% 2.9%
Partner and Channel Spending 1.3% 1.3% 1.2% 1.1% 1.0% 1.0%
Marketing Spending 2.3% 2.4% 3.0% 2.5% 2.7% 2.7%
Advertising 1.9% 2.0% 2.6% 2.2% 2.5% 3.0%
General & Administrative 2.5% 2.9% 2.6% 2.1% 1.8% 2.1%
Research and Development 2.5% 3.2% 3.0% 2.4% 2.2% 2.6%
YEAR-TO-YEAR GROWTHTotal SG&A Expense 18.1% 23.9% 42.4% 47.8% 47.2% 45.9%
Sales & Marketing Expense 21.1% 29.0% 53.8% 59.9% 57.9% 56.6%
General & Administrative 11.5% 14.1% 20.1% 23.3% 22.4% 23.1%
Research and Development 26.3% 33.5% 36.1% 38.0% 44.5% 40.8%
CORPORATEWIDE HEADCOUNTNon-Retail 18,500 19,000 19,850 20,100 21,000 21,000
Sales 1,800 1,830 1,880 1,920 2,000 2,000
Marketing 1,730 1,750 1,800 1,850 1,900 1,900
General and Administrative 2,530 2,550 2,600 2,630 2,700 2,700
Research and Development 3,980 4,100 4,300 4,600 5,000 5,000
Service and Support 7,820 8,120 8,600 8,400 8,700 8,700
Manufacturing, Distribution, and Other 640 650 670 700 700 700
Retail 19,500 19,000 22,400 26,500 30,000 28,000
Total Employees 38,000 38,000 42,250 46,600 51,000 49,000
SOURCE: APPLE AND TBR ESTIMATES
APPLE OPEX MODEL (IN $ THOUSANDS EXCEPT HEADCOUNT) TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.35
Appendix – Revenue by Customer Segment
CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 Est. Est. 1Q11REVENUE (IN $ THOUSANDS)Total $15,683,000 $13,499,000 $15,700,000 $20,343,000 $26,741,000 $23,000,000
Consumer 12,113,780$ 10,389,100$ 12,068,790$ 15,739,820$ 21,416,605$ 18,308,250$
Education 1,745,515$ 1,461,840$ 1,783,185$ 2,131,010$ 2,327,465$ 1,968,500$
Education: K-12 612,665$ 473,180$ 620,550$ 707,260$ 677,155$ 537,750$
Education: University 1,132,850$ 988,660$ 1,162,635$ 1,423,750$ 1,650,310$ 1,430,750$
Professional 1,823,705$ 1,648,060$ 1,848,025$ 2,472,170$ 2,996,930$ 2,723,250$
Creative Professional 924,025$ 864,430$ 908,710$ 1,138,055$ 1,323,110$ 1,105,250$
Business 899,680$ 783,630$ 939,315$ 1,334,115$ 1,673,820$ 1,618,000$
Total 15,683,000$ 13,499,000$ 15,700,000$ 20,343,000$ 26,741,000$ 23,000,000$ PERCENTAGE OF TOTAL REVENUEConsumer 77.2% 77.0% 76.9% 77.4% 80.1% 79.6%
Education 11.1% 10.8% 11.4% 10.5% 8.7% 8.6%
Education: K-12 3.9% 3.5% 4.0% 3.5% 2.5% 2.3%
Education: University 7.2% 7.3% 7.4% 7.0% 6.2% 6.2%
Professional 11.6% 12.2% 11.8% 12.2% 11.2% 11.8%
Creative Professional 5.9% 6.4% 5.8% 5.6% 4.9% 4.8%
Business 5.7% 5.8% 6.0% 6.6% 6.3% 7.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Note: Includes revenue from all sources and product groups.SOURCE: TBR ESTIMATES
APPLE REVENUE BY CUSTOMER SEGMENT TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.36
Appendix – PC Revenue
CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11REVENUE (IN $ THOUSANDS)Total $15,683,000 $13,499,000 $15,700,000 $20,343,000 $26,741,000 $23,000,000PC Revenue $4,450,000 $3,760,000 $4,399,000 $4,870,000 $5,430,000 $4,250,000
Consumer $2,621,340 $2,296,450 $2,625,560 $2,879,330 $3,470,395 $2,718,750
Education $1,059,415 $811,130 $1,056,765 $1,169,530 $1,079,605 $852,000
Education: K-12 $447,665 $307,280 $464,250 $536,410 $470,305 $365,250
Education: University $611,750 $503,850 $592,515 $633,120 $609,300 $486,750
Professional $769,245 $652,420 $716,675 $821,140 $880,000 $679,250
Creative Professional $506,895 $477,760 $478,690 $571,005 $574,720 $440,750
Business $262,350 $174,660 $237,985 $250,135 $305,280 $238,500
Total $4,450,000 $3,760,000 $4,399,000 $4,870,000 $5,430,000 $4,250,000PERCENTAGE OF PC REVENUEConsumer 58.9% 61.1% 59.7% 59.1% 63.9% 64.0%
Education 23.8% 21.6% 24.0% 24.0% 19.9% 20.0%
Education: K-12 10.1% 8.2% 10.6% 11.0% 8.7% 8.6%
Education: University 13.7% 13.4% 13.5% 13.0% 11.2% 11.5%
Professional 17.3% 17.4% 16.3% 16.9% 16.2% 16.0%
Creative Professional 11.4% 12.7% 10.9% 11.7% 10.6% 10.4%
Business 5.9% 4.6% 5.4% 5.1% 5.6% 5.6%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%PC PERCENTAGE OF TOTAL REVENUEConsumer 16.7% 17.0% 16.7% 14.2% 13.0% 11.8%
Education 6.8% 6.0% 6.7% 5.7% 4.0% 3.7%
Education: K-12 2.9% 2.3% 3.0% 2.6% 1.8% 1.6%
Education: University 3.9% 3.7% 3.8% 3.1% 2.3% 2.1%
Professional 4.9% 4.8% 4.6% 4.0% 3.3% 3.0%
Creative Professional 3.2% 3.5% 3.0% 2.8% 2.1% 1.9%
Business 1.7% 1.3% 1.5% 1.2% 1.1% 1.0%
Total 28.4% 27.9% 28.0% 23.9% 20.3% 18.5%YEAR-TO-YEAR GROWTHConsumer 32.4% 36.0% 32.9% 29.4% 32.4% 18.4%
Education 24.4% 20.7% 30.8% 12.7% 1.9% 5.0%
Education: K-12 29.1% 13.0% 45.4% 24.7% 5.1% 18.9%
Education: University 21.1% 25.9% 21.2% 4.1% -0.4% -3.4%
Professional 4.9% 8.8% 25.5% 14.5% 14.4% 4.1%
Creative Professional 4.8% 5.9% 25.9% 25.1% 13.4% -7.7%
Business 5.2% 17.7% 24.9% -4.0% 16.4% 36.6%
Total 24.8% 27.0% 31.2% 22.4% 22.0% 13.0%
SOURCE: TBR ESTIMATES
APPLE PC REVENUE BY CUSTOMER SEGMENT TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.37
Appendix – Geography
CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10FISCAL QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11UNIT SHIPMENTSAmericas 1,187,000 971,000 1,358,000 1,460,000 1,360,000
EMEA 1,068,000 899,000 914,000 978,000 1,245,000
Japan 105,000 129,000 129,000 118,000 162,000
Asia Pacific 313,000 338,000 394,000 455,000 516,000
Retail 689,000 606,000 677,000 874,000 851,000
Total 3,362,000 2,943,000 3,472,000 3,885,000 4,134,000APPLE REVENUE BY GEOGRAPHY (IN $ THOUSANDS)Americas 6,092,000$ 4,993,000$ 6,227,000$ 7,186,000$ 9,218,000$
EMEA 5,024,000$ 4,050,000$ 4,160,000$ 5,458,000$ 7,256,000$
Japan 783,000$ 887,000$ 910,000$ 1,401,000$ 1,433,000$
Asia Pacific 1,813,000$ 1,886,000$ 1,825,000$ 2,732,000$ 4,987,000$
Retail 1,971,000$ 1,683,000$ 2,578,000$ 3,566,000$ 3,847,000$
Total 15,683,000$ 13,499,000$ 15,700,000$ 20,343,000$ 26,741,000$ PERCENTAGE OF TOTAL REVENUEAmericas 39% 37% 40% 35% 34%
EMEA 32% 30% 26% 27% 27%
Japan 5% 7% 6% 7% 5%
Asia Pacific 12% 14% 12% 13% 19%
Retail 13% 12% 16% 18% 14%
Total 100% 100% 100% 100% 100%YEAR-TO-YEAR CHANGE IN REVENUEAmericas 15% 27% 39% 37% 51%
EMEA 40% 63% 66% 69% 44%
Japan 57% 51% 63% 121% 83%
Asia Pacific 142% 172% 160% 157% 175%
Retail 13% 22% 73% 75% 95%
Total 32% 49% 61% 67% 71%
SOURCE: TBR ESTIMATES AND APPLE
APPLE REVENUE AND SHIPMENTS BY GEOGRAPHY TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.38
Appendix – Financial Strategy Graphs
3,3622,943
3,472 3,885 4,1343,330
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
4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11In
$ T
hous
ands
MAC UNIT GROWTH YEAR-TO-YEAR
UNITS SHIPPED YTY UNIT SHIPMENT GROWTH
SOURCE: TBR AND APPLE
TBR
$0
$300
$600
$900
$1,200
$1,500
$1,800
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
4Q09 1Q10 2Q10 3Q10 4Q10
Aver
age
Selli
ng P
rice
Uni
t Sal
es
APPLE COMPUTER SALES AND PRICES
Notebook Units Desktop Units Notebook ASP Desktop ASP
SOURCE: APPLE AND TBR
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.39
Appendix – Financial Strategy Graphs
32.0%48.6%
61.3% 66.7% 70.5% 70.4%
-20%
0%
20%
40%
60%
80%
4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11
REVENUE GROWTH YEAR-TO-YEAR
Apple CBQ Average
SOURCE: TBR AND APPLE
TBR
40.9% 41.7% 39.1% 36.9% 38.5% 38.7%
0%
10%
20%
30%
40%
50%
4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11
GROSS MARGIN
Apple CBQ Average
SOURCE: TBR AND APPLE
TBR
30.1% 29.5% 27.0% 26.8% 29.3% 28.3%
0%
10%
20%
30%
40%
4Q09 1Q10 2Q10 3Q10 4Q10 Est. 1Q11
OPERATING MARGIN
Apple CBQ Average
SOURCE: TBR AND APPLE
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.40
Appendix – Resource Management Graphs
$1,369 $1,427 $1,497 $1,583 $1,716
$-
$500
$1,000
$1,500
$2,000
4Q09 1Q10 2Q10 3Q10 4Q10
In $
Tho
usan
ds
ANNUAL REVENUE PER EMPLOYEE
Apple CBQ Average
SOURCE: TBR AND APPLE
TBR
$246 $243
$240 $234 $228
$210
$220
$230
$240
$250
$260
$270
4Q09 1Q10 2Q10 3Q10 4Q10
In $
Tho
usan
ds
ANNUAL G&A EXPENSE PER G&A EMPLOYEE
Apple CBQ Average
SOURCE: TBR AND APPLE
TBR
$365 $385 $404 $420 $435
$-
$100
$200
$300
$400
$500
4Q09 1Q10 2Q10 3Q10 4Q10
In $
Tho
usan
ds
ANNUAL R&D EXPENSE PER DEVELOPER
Apple CBQ Average
SOURCE: TBR AND APPLE
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.41
Appendix – Resource Management Graphs
142.30 154.38 139.23
113.3590.79
0.00
50.00
100.00
150.00
200.00
4Q09 1Q10 2Q10 3Q10 4Q10
Num
ber o
f Day
s
DAYS CASH OUTSTANDING
APPLE CBQ AVERAGESOURCE: TBR AND APPLE
TBR
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.42
4Q103Q10
1Q11 Est.
0.001.002.003.004.005.006.007.008.009.00
10.00
0% 10% 20% 30% 40% 50% 60% 70%
CBQ
Cor
pora
te S
core
Quarterly Revenue Growth Year-to-year
4Q10 CBQ VENDOR POSITION AND PROJECTION: APPLE
Trailing 12-Month Average Growth for Multi-Platform Vendors = 20.4%
SOURCE: TBR AND APPLE
TBR
Appendix – Apple Future Outlook Graph
TBR
Apple 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.43
Apple Alliances
Company Details
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 the exclusive 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 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.44
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 2.4 GHz$1,499 for 2.66 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 2.4 GHz
$1,999 for 15-inch 2.53 GHz$2,199 for 15-inch 2.66 GHz $2,299 for 17-inch 2.53 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 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.45
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
$3,599 for 8-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 4Q10 | Computer Business Quarterly ©2011 Technology Business Research, Inc.46
Mod
el L
ineu
p
Price and Functionality
Apple’s Product Portfolio: iPad, iPods and iPhonesFl
ash
Hig
h-Ca
paci
tyW
eb/A
pp P
latf
orm
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):Starting at $49 for 8GB
$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
TBR
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Technology Business ResearchTechnology 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.
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©2012 Technology Business Research Inc.
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