Apple's $90 billion cash pile

Once again, Apple experiences an amazing quarter, with all-time record sales of iPhones, iPads and Macs. What would you do with that $90 billion cash pile?
Written by Adrian Kingsley-Hughes, Senior Contributing Editor

Once again, tech giant Apple experienced an amazing quarter, experiencing all-time record sales of iPhones, iPads and Macs.

Apple's 2012 first quarter (which ended December 31, 2012) was colossal. During that period the company sold 37.04 million iPhones (beating analyst expectations), a massive 128% unit increase over the year-ago quarter, 15.43 million iPads, a 111% unit increase over the year-ago quarter, and 5.2 million Macs, a more modest 26% unit increase from a year ago.

The only part of Apple's business to see a decline was iPods, which the company only sold 15.4 million of, a 21% unit decline from a year ago.

During the quarter, Apple posted record quarterly revenue of $46.33 billion and record quarterly net profit of $13.06 billion, compared to revenue of $26.74 billion and net quarterly profit of $6 billion during the year-ago quarter. Gross margins were up to 44.7% from 38.5% during the year-ago quarter and international sales accounted for 58% of the quarter's revenue.

As you can imagine, Apple is thrilled.

"We're thrilled with our outstanding results and record-breaking sales of iPhones, iPads and Macs," said Tim Cook, Apple's CEO. "Apple's momentum is incredibly strong, and we have some amazing new products in the pipeline."

"We are very happy to have generated over $17.5 billion in cash flow from operations during the December quarter," said Peter Oppenheimer, Apple's CFO. "Looking ahead to the second fiscal quarter of 2012, which will span 13 weeks, we expect revenue of about $32.5 billion and we expect diluted earnings per share of about $8.50."

So, what's the take away from all this?

  • First, iPhone and iPad sales are going from strength to strength. Any suggestion that Amazon's cheaper Kindle Fire was going to dent iPad sales have now been comprehensively dismissed. I never expected the two to compete because they're very different devices, but some pundits had expressed this opinion. It seems they were wrong.
  • It's possible that strong iPad sales are having an effect on Mac sales. Apple CEO Tim Cook admitted that there 'is cannibalization, clearly, of the Mac by the iPad' but given that Mac sales are still strong, and margins are up, I don't think Apple is all that worried. Cooke believes that PCs and PC OEMs are under far more pressure from the iPad because 'there's many more of them to cannibalize.' He added that 'we love that trend' because 'we think it's great for us.'
  • Cook made some strong predictions about tablet sales, saying that 'there will come a day when the tablet market, in units, is larger than the PC market.' And by tablet, he means iPad, because he made it clear that he saw 'limited-function tablets and e-readers' as being a different category entirely. Another warning shot across the bows of the PC OEMs, and I think that it's one that they need to take seriously
  • Cook was asked if the tablet market was a 'two-horse race' between the iPad and Android devices. Cook's answer was interesting. 'There's a horse in Redmond that always suits up, and always runs, and will keep running,' he said, referring to Microsoft and its aspirations to break into the mainstream tablet market. I don't see any reason for Apple to be threatened by Microsoft just yet, but it would be crazy to not to keep an eye on what's going on in Redmond. Apple probably has one iPad refresh due before Windows 8 and Windows 8 powered tablets make an appearance, and probably a second refresh before they have any chance of gaining any significant traction.
  • Cook also hints at more cool stuff to come. 'Apple's momentum is incredibly strong, and we have some amazing new products in the pipeline.'
  • iPod sales seem to have collapsed, but that's really to be expected for two reasons. First, everyone who wants one already has three, and secondly, the iPhone and iPad are cannibalizing sales. There's still room for the iPod in Apple's line up, but those days of heady sales are at an end.
  • Apple is now sitting on a massive cash pile of some $90 billion, and questions were raised during the financial conference call as to what Apple was going to do with this. The answer suggests that Apple is in not mad rush to go on a spending bender. 'We are not going to let the money burn a hole in our pocket,' said Apple CFO Peter Oppenheimer. 'What we focus on is making the best product. We just want to stay ahead.'
  • It doesn't seem that anybody or anything is a threat to Apple. Sure, Microsoft has the upper hand when it comes to the desktop, and Android is certainly hot, but Apple's business is an absolute financial and sales juggernaut. After a mildly disappointing Q4 2011 (which was really only disappointing thanks to crazy predictions made by analysts), the company is back to having record-breaking quarters. With new devices and refreshes on the way (the next is probably going to be the iPad), I don't see Apple's fortunes changing any time soon.

Any thoughts on what Apple should do with that huge cash pile?

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