Summary view of Apple's income statement [Updated]

January 28, 2011

Summary view of Apple's income statement [Updated]

Since reporting on the 18th, I’ve mostly finished going over the the fourth quarter Apple data. Here is a quick summary of the articles that covered the financial and product performance:

*Subject*	*Article*
Cash	Having added $20 billion last year, Apple’s cash growth suggests total could top $100 billion next year
Growth	Apple’s Growth Scorecard: 63% average earnings growth over 16 quarters
iPhone pricing	The end of exclusivity doesn’t change the price operators pay for the iPhone
Sales by product	65% of Apple’s sales came from iOS powered devices
Next quarter’s estimates	Estimates for Apple’s second quarter earnings (ending March)
Share price/valuation	Is Apple a candidate for acquisition?
Margins and platform mix of profit	iOS enables 71% of Apple’s profits. Platform products power 93% of gross margin
Cannibalization	iPhone and iPad: Fine Young Cannibals?
Operational Expenses	$76 billion a year from a tableful of products

That leaves one more: Summary view of cash flows.

After introducing it last quarter, this is a chart that I’m trying to improve and use as a single snapshot of growth, product mix, profitability, cost structure and overall sales. The purist in me likes to see the chart clean but it can be a puzzle to some. So for the sake of explanation, this time I’ve added some annotations to the year-ago quarter.

The left half shows flows in the same quarter a year ago and the right side shows the flows in the fourth quarter just ended December 2010. You can see where sales came from, how much of each product’s sales went to suppliers and how much was available to pay employees (and who got what). You can also see how much was paid in taxes and what was retained.

Please click on the figure (requires no scrolling when viewed on screens wider than 1464 pixels).

[Update] Alternate view using “waterfall”.

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Posted by:

Horace Dediu

23 responses to “Summary view of Apple's income statement [Updated]”

eyez00

January 28, 2011 at 4:54 pm

Brilliant chart. Pictures paint a '000 words. Many thanks.

Reply
pk de cville

January 28, 2011 at 4:58 pm

Horace,

Edit required on number 9, number 9, number 9!

Thanks for your analyses!

Reply
Halex_Pereira

January 28, 2011 at 5:20 pm

The explanation is perfect; now everything is clear.

Reply
Philip Elmer-DeWitt

January 28, 2011 at 5:39 pm

One of my readers asks, where is iAds?

Reply
1. asymco
  
  January 28, 2011 at 6:19 pm
  
  Great question. What do we pay those guys on the earnings call for?
  
  Reply
Guest

January 28, 2011 at 5:40 pm

I guess what jumps out for me is how little is paid to employees. I suppose that's the advantage of volume (and the ability to maintain pretty high product margins). Normally a chart like this would make me worry if they are putting enough into R&D and Sales; but it otherwise appears as if Apple is doing well in these areas.

Reply
1. Joe_Winfield_IL
  
  January 28, 2011 at 5:53 pm
  
  Keep in mind that Apple employees don't manufacture the devices. If Apple did their own fabrication, a huge pile of cash would be moved from suppliers to employees.
  
  Reply
  1. asymco
    
    January 28, 2011 at 6:21 pm
    
    I believe production salaries would still end up in cost of goods sold, though I might be wrong. COGS includes shipping, warranties, etc.
  2. HTG
    
    January 29, 2011 at 12:47 am
    
    Yep, that's the correct accounting treatment for production salaries and wages… included in COGS…
  3. Kristian
    
    January 30, 2011 at 1:51 pm
    
    Actually they do manufacture Macs. iOS devices are made by others as are most of the laptops.
2. Kizedek
  
  January 28, 2011 at 10:23 pm
  
  The number of employees that Apple actually has is by all accounts very low for the size (marketcap) of the company. Mostly the main campus in Cupertino; and then the stores, which are quite small stores.
  
  Also, Apple seems to get very high revenue per square foot in its stores, the highest of just about any store chain on the planet, in any industry.
  
  Reply
Steven Kan

January 28, 2011 at 6:27 pm

^^
By the way, I don't mean that as a criticism. It's a very well-done chart, and does provide a clear picture.

Reply
asymco

January 28, 2011 at 6:36 pm

That does make more sense.

Reply
Hap

January 28, 2011 at 6:55 pm

Yes, carrying over the body's experience of gravity to visual display would make more 'sense.' It's very Mac-like to acknowledge how much we operate on metaphors rooted in physical reality.

Reply
Alan

January 28, 2011 at 7:25 pm

I see the total for Q42010 revenues, but I don't see the corresponding label for 2009.

Reply
1. asymco
  
  January 28, 2011 at 7:45 pm
  
  They are both the same scale. In the interest of keeping chart clutter to a minimum you can index off the same mark. (the 2010 figure is not total number but a reference point like a gridline).
  
  Reply
  1. Alan
    
    January 29, 2011 at 3:37 pm
    
    Got it. Clutter is definitely the enemy in this kind of chart. Would be great to have some kind of log scale in the background to be able to easily do growth comparisons in terms of multiples, especially with the new waterfall up format.
2. KenC
  
  January 28, 2011 at 9:20 pm
  
  Yeah, it's a bit shocking to realize how much Apple revs grew year over year.
  
  Reply
asymco

January 28, 2011 at 7:46 pm

I've updated with a second chart using the waterfall metaphor.

Reply
FalKirk

January 28, 2011 at 10:22 pm

I love this site. Stephen Kan makes a suggestion. Nobody flames him. Nobody flames Asymco. Horace Dediu agrees with Stephen Kan and and adopts his suggestions. Everybody's courteous, respectful and helpful. It's a win for everyone.

I'll say it again. I love this site.

Reply
HTG

January 29, 2011 at 1:05 am

I agree with FalKirk….

One thing Horace, and this is not a criticism, but could you also look at the cash flow statement disclosed by Apple in its 10-Qs… I note from the most recent one that Apple spent in Q1 $1.2 billion on property, plant and equipment… which included around $500m in land and buildings alone(!)

Further, its actual operational cash flow was $9.7 billion and the amount actually paid in tax was $826 million vs a provision of $1.9 billion in the income statement for Q1…

What your charts do very well is split up the income statement, but don't say much about what is happening with underlying cash flows…

I would be interested on your thoughts on Apple's cash flow statements as well.

Cheers

HTG

Reply
1. asymco
  
  January 29, 2011 at 6:21 pm
  
  Yes, thanks for pointing this out. This is a view of the income statement not the cash flow. I changed the title to reflect this.
  
  Reply
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