Apple’s revenues have grown nearly 3 times faster than its operating expenses since 2003

Apple Online Store“Bill Shope was recruited from Credit Suisse to replace David Bailey, who had downgraded Goldman’s rating for Apple (AAPL) from ‘buy’ to ‘neutral’ in Dec. 2008 and kept it there for sixteen months while Apple’s shares climbed 150%,” Philip Elmer-DeWitt reports for Fortune.

“Shope seems to have a deeper understanding of what makes the company tick, and he spends much of his long report talking about Apple’s growing content and software ecosystem — how it fuels the company’s revenue growth, how it opens up new markets, how it creates ‘switching costs’ that keeps Apple customers loyal, and what it means for Steve Jobs’ succession,” P.E.D. reports.

The compnay “achieved a major milestone with the 2003 launch of the iTunes music store,” P.E.D. reports. “Apple’s revenues have grown nearly three times faster than its operating expenses. The bang it gets for its R&D expenses is even more striking. By leveraging third-party developers and content providers as a source of value for its software ecosystem, it’s been able grow revenues seven times faster than operating system R&D costs.”

Much more in the full article here.

[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]

13 Comments

  1. Really downgraded to neutral in Dec of 2008? Didn’t the stock dip to the low hundreds or even lower then? I remember thinking it was a great buying opportunity. Not just for Apple, but for most stocks.

  2. Forgot one thing, I wish Apple’s operating expenses were rising faster. I dont want them borrowing good engineers from the Mac platform to help with iPhone and iPad. I want all of their businesses to be sufficiently staffed to continuously innovate and bring the best products to market in a timely manner.

  3. This is part of the reason why Apple will continue to succeed and the destroy the competition. Yes, Apple’s revenue is going up and up. But at the same time, Apple spends its money VERY efficiently.

    This is all possible because Apple (after Steve Jobs returned) is almost always the innovator, doing “the next big thing” first. iMac, iPod, iTunes (Music) Store, iPhone, iPad, (maybe) the new Apple TV, and whatever comes next. By being first, Apple can use a relatively small team over a long length of time to develop the new product, then release it with some limitations. Since it’s all new to the customers, they don’t really care about the limitations; many will not even know such limitations existed, until after Apple releases the next version. Smaller teams working over longer time; very efficient.

    The Apple “copiers” do not have the luxury of time and gradual improvement. Their new product must at least match Apple’s already established product from the first day. The longer they wait, the higher Mt. Apple becomes. Since they had no idea even WHAT to copy until Apple showed them, they have to cram their development cycle into a much shorter time, or Apple will “reset” the finish line with their next release. So they have to do MORE development work in LESS time, compared to Apple.

    And THAT is very inefficient and costly. With Apple making more money and using it more efficiently, how can any competitor even afford to keep up with Apple?

  4. @ jax44

    I don’t think they closed below 80, but i think they went to about 78 intraday at some point fall/winter 2008. I remember watching and being quite annoyed because I bought a bunch at 104 on the way down and thought that was cheap. (It was cheap, just could have been cheaper)

  5. Well I unfortunately have the opposite to KenC’s story. I had owned a little (50, then to 100, then to 125, etc) Apple since 2004 but when the iPhone was introduced I only had 200 shares then and I like most here KNEW what a success the iPhone would be. I bought an additional 1000 shares on margin bringing my aveage price to $170. Life was good when it hit 202. I was dumb enough to not have stop losses because I did not want the market manipulators to stop me out before the stock goes higher. On the way down to it’s eventual low of $77 in March 2009 I was margin called repeatedly to where I didn’t have anymore cash left and the stock market seemed like it was going even lower so I gave up and sold in Feb 09 at $88. If I had held on and had just a little more money, I would be loving life.

    Thanks for letting me get that out, I can’t afford the therapy. ” width=”19″ height=”19″ alt=”grin” style=”border:0;” />

    MDN word Time: Perhaps in time my finances will be where they should have been now.

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