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Print 22 comment(s) - last by TakinYourPoint.. on May 10 at 1:59 PM

Microsoft is twenty spots behind Apple; HP, Verizon, and AT&T are a bit ahead of it

Apple, Inc. (AAPL), the world's most profitable smartphone maker, may trample most corporations in market capitalization (total value of outstanding shares) and profits, but it is relatively far from the top of the latest Fortune 500 List for 2012, which ranks companies by adjusted revenue figures.

Apple's $108B+ USD revenue in 2011 was good enough to bump it from 35th to 17th.  That's twenty spots ahead of Microsoft Corp. (MSFT) which managed to creep upwards one spot on $69.9B USD revenue fueled by windfall sales of Windows 7, the fastest selling operating system in history.

Apple was just a hair ahead of 100+ year veteran International Business Machines, Inc. (IBM) which dropped to 19th place from an 18th place showing in 2011.

Apple store NYC
A record year propelled Apple upwards in the global corporate revenue rankings, but it remains behind a couple tech giants, according to Fortune. [Image Source: Double DT]

America's largest carrier Verizon Communications -- the joint venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc. (LON:VOD) -- placed 15th, but second place rival AT&T, Inc. (T) came in four spots ahead in 11th, on merits of a more diverse, higher revenue portfolio.

Hewlett-Packard Comp. (HPQ), still clinging to the world's top spot in computer sales, and Ford Motor Comp. (F) the bailout-free star of Detroit, Michigan, were #10 and #9 respectively.  General Electric Comp. (GE) a notorious tax-absconder, and General Motors Comp. (GM), the revitalized bailout recipient were #6 and #5, respectively, in revenue.

Three of the top top four spots were occupied by oil companies with only Wal-Mart Stores, Inc. (WMT) breaking into the top ten.  Wal-Mart was bumped from number one by Exxon Mobil Corp. (XOM), a company second only to Apple in market capitalization and profit.

This was the Fortune 500 List's 58th year. The list is a yearly feature in Fortune magazine, a publication of Time Warner, Inc. (TWX).  Time Warner pulled no punches -- the former AOL owner's own rank this year fell from 95th to 103rd.

Source: CNN Money



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RE: I don't understand...
By aliasfox on 5/8/2012 11:09:28 AM , Rating: 2
I'll agree that Apple is a bubble, but not for the reasons you state.

Reasons Apple will stay for a while:

- Not easily replicated. Apple has a hundred billion (with a B) that it uses to buy up supplies years ahead of time. Not only does this ensure that it has stable supply at a stable cost, but also ensures that nobody else gets access, either. Why sell 15% of your supply to HTC and hope Moto buys another 10% and Nokia buys another 5% when you can sell 80% to Apple and be sure your factories are humming for the next 18 months? Even if those other companies had the cash to buy up a supplier's inventory, they lack the sales to flush it out the other end. This also means that Apple is able to sell products at lower cost if it so wants to - witness the iPad 2 or the iPhone 4, further eroding the ability of competitors to make too much money.

- Technology for technology's sake isn't what fuel's Apple's sales. To 90% of the population, LTE, WiMAX, 4G, OLED etc are all just a bunch of letters and numbers. Gingerbread, Honeycomb, Ice Cream Sandwich are all desserts. Tegra, OMAP, Exynos, Adreno, Snapdragon, Mali are all just gibberish. When half the people on this site say "my phone is great after i root it and put custom ROM on," well, then you've turned most of the population. Most people just want to use their devices - and Apple's historically provided that, with only a few hiccups along the way. Compare that with Android, where even their most ardent supporters always say "oh, that'll be fixed next time."

- Brand. This ties back to (generally) providing out of the box solutions, decent customer experience (overall), and yes, a good image. Most of Apple's competitors act as OEMs to AT&T and Verizon, meaning most customers have only the vaguest idea what kind of phone they use. Aside from us, not many people say "I have a Samsung Galaxy S2 running ICS" - more like "I have a T-Mobile Android phone." Compare that to iPhone users. "I have an iPhone." Instantly recognizeable, and added to a good customer experience, people will ask for one by name next time it comes to upgrade. If you have a generic Android (that you got for cheap or free), you'll only notice the name if the experience is truly awful - I only know that my friend has a Droid Incredible because he has truly atrocious battery life (I have no idea what he does to it)

Reasons Apple won't be on top forever:

- Brand. Nintendo fell from grace, Gap fell from grace, Xerox and IBM are shadows of their former selves in photocopying and personal computing. It will eventually happen to Apple, unless they're one of the rare brands (like Starbucks) that can keep chugging away for a couple of decades.

- Growth. Apple's stock price is fueled by incredible growth in revenues and profit. But even if its brand stays on top (like Starbucks), its growth will eventually begin to suffer and taper off (like Starbucks). That much is practically inevitable - heck, even today, Apple's already making as many iPhones as people make babies, they can't grow 50% year over year forever.

- Market disruptors. Apple's been the market disruptor for the past 10-15 years. Ripples with the first iMac, then a splash with the iPod, then the tidal wave today with the iPhone, iPad, and MBA/Ultrabooks. But if Apple gets it wrong and ties up too much money in one thing, that could cripple it and give it a lessor ability to respond (either by R&D or acquisition) when someone else comes along and shakes things up. Toshiba after HD-DVD, Sony after... well, how many failures do we need to count?

---

I don't know when these things will happen, but I'm pretty sure they will at some point. I've invested in Apple, and I sold at a profit. That said, watching it shoot up is one heck of a ride.

(waiting for the downvotes)


RE: I don't understand...
By Solandri on 5/8/2012 1:32:22 PM , Rating: 2
This is pretty interesting reading everyone's analysis of Apple. Despite not liking their business ethics, I actually think Apple is in pretty good shape. Yes they're a bubble, but not one that's going to burst. IMHO it's going to slowly deflate out over a couple decades like Sony.

Early Sony/Apple - great design, solid products built in-house, marketing which accidentally was masterful. They kinda became successful without really expecting it.

Mid Sony/Apple (this is where Apple is now) - good design, production outsourced to reduce cost, masterful marketing. Basically selling the same product as everyone else, with a few innovative tweaks thrown in, and coasting off the reputation it built up with its early successes.

Late Sony/Apple - average design, people have caught on that production is farmed out, name-brand cachet has lost its luster. At this point it's indistinguishable from any other brand.

Success comes from a healthy mix of engineering and marketing. The pattern I've seen in the tech industry is that boards (who are usually MBAs) tend to overemphasize marketing and view engineering R&D as an expense. So you get a company which stumbled upon the right healthy mix and became successful. Then the board asks themselves "how can we improve this?" And the answer is almost always outsourcing production (because it costs less) and cutting R&D (because it costs too much). What you have left is a marketing company selling rebranded stuff, living off of its brand name. The original innovation is mostly gone. Sony, HP, AT&T/Lucent, and to a lesser degree IBM all went through this in my lifetime.

I see Apple going the same route. Woz (engineer) and Jobs (marketer) hit that perfect blend of engineering and marketing. Maybe "persuasion" is a better word than marketing - some of the early stories of Jobs encouraging engineers in the development of the original Mac are awe-inspiring. When Jobs returned, without someone of Woz's stature to keep him balanced, the company started a hard turn towards the marketing side. Apple's R&D as a % of revenue is about the lowest there is in the tech industry. Like Sony, they're fast becoming a marketing company selling other companies' products by slapping their brand name label onto it.

Unless they revive their in-house R&D and production, that name recognition is only going to carry them so far before people figure out that they can buy pretty much the same product elsewhere for a lower price. e.g. The Macbooks are designed and manufactured by Quanta, who also designs and makes most of the HP and some of the Dell laptops. Those HPs and Dells which are "copying" the Macbooks? They're not actually copies, they just look alike because they were designed and manufactured by the same (Taiwanese) people.

Apple's strength as I see it is that they're willing to buck the industry trend. They built themselves up as a contrarian company ("think different"). This has led them to be first in certain markets (thin tablets), but also to some flops which nobody else bothered to attempt (Newton). In laptops in particular, they're one of few who insist on a high quality screen. That will serve to help distinguish them from the pack, slowing their fall into mediocrity, and insuring they always have a strong core user/fan base (as with the Mac product line).


RE: I don't understand...
By aliasfox on 5/8/2012 2:19:32 PM , Rating: 2
Apple still does a lot of design in-house - the CNC machined and lasered enclosures for MacBooks are something that nobody else has access to at the moment, and to say iPads and iMacs are farmed out in terms of design work sounds kind of absurd.

That said, you can see a bit of what you're talking about in some of their low-end stuff. Take the last plastic MacBook, for example. It was reasonably pretty and a reasonable computer, but change the white enclosure to a textured grey and you could pretty much pop a Dell logo in place of the Apple and you'd have a nice Inspiron instead.

I will agree on the R&D - smart R&D and acquisitions are the best long term use of the cash hoarde that Apple has, not dividends. The best thing to do when you're ahead of the game is to stay ahead of the game.

Insourcing production though doesn't seem like the right idea. The kind of massive scale in terms of human labor that all of these companies need is something the US won't be able to do without making these devices cost much more than they already do.

As to your last point - I can forsee a day where Apple's no longer at the top of the game, but I don't think I'll ever see the day where Apple won't try to be luxury - nicely designed enclosures, upper-end components (almost the entire line is i7 based right now), and nice interfaces (screens, keyboards, touchpads) will likely be Apple's hallmark.


RE: I don't understand...
By douchefree on 5/8/2012 10:27:00 PM , Rating: 2
I take it you haven't seen the HTC One series of machined polycarb with laser drilled speaker holes. This isn't super high technology. Car manufacturers have done this for decades. If you want really high tech mass production look to CMOS manufacturing. Those factories cost billions to build.


RE: I don't understand...
By TakinYourPoints on 5/9/2012 12:08:35 AM , Rating: 2
quote:
Insourcing production though doesn't seem like the right idea.


It isn't. Apple/HP/Dell aside, the poster child for this is IBM spinning off their laptop division to Lenovo. The result has been a resurgence in the company, just look at how their profits exploded since they refocused their business.


RE: I don't understand...
By TakinYourPoints on 5/9/2012 12:05:51 AM , Rating: 2
quote:
Apple's R&D as a % of revenue is about the lowest there is in the tech industry. Like Sony, they're fast becoming a marketing company selling other companies' products by slapping their brand name label onto it.

Unless they revive their in-house R&D and production, that name recognition is only going to carry them so far before people figure out that they can buy pretty much the same product elsewhere for a lower price. e.g. The Macbooks are designed and manufactured by Quanta, who also designs and makes most of the HP and some of the Dell laptops. Those HPs and Dells which are "copying" the Macbooks? They're not actually copies, they just look alike because they were designed and manufactured by the same (Taiwanese) people.


Completely incorrect. Apple does their own R&D, board design, SoC design (the A4/A5/A5X are in-house, believe it or not), and chassis machining in-house, after which they contract physical production out to their specs. When it came to the transition to machined aluminum, Apple actually spent hundreds of millions of dollars themselves on the equipment to make their aluminum chassis with.

Apple's percentage R&D is low compared to other companies simply because they don't make that many products. They only spend on what they decide to focus on, and their focus is extremely tight. When Jobs came back to Apple he reduced the Mac product line from dozens of models to only four (pro/consumer laptop/desktop), and he axed things like printers. If Apple releases a phone, it is only one model per year. If they release a tablet, it is one model per year. Laptop and desktop designs last them for years, the only difference being the CPU/GPU inside.

Compare this with other tech companies that not only release dozens of smartphones, they also make TVs, set-top players, washers and dryers, you name it. Any PC manufacturer has dozens of product lines while Apple only has a few, and they are differentiated primarily on display size and thickness.

In any case, to say that the companies that they contract physical production to is actually responsible for Apple's product designs is totally wrong.


RE: I don't understand...
By TakinYourPoints on 5/8/2012 11:50:38 PM , Rating: 2
Excellent post


"Let's face it, we're not changing the world. We're building a product that helps people buy more crap - and watch porn." -- Seagate CEO Bill Watkins














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