Apple made $11 billion in component purchase commitments in Q111

Apple continues to use portions of the $65.8 billion it had on hand at the end of the first quarter for “supply chain investments, locking up component resources in an increasingly competitive market,” John Paczkowski reports for AllThingsD.

“According to its latest 10-Q filing, Apple’s purchase commitments rose to $11 billion in the first quarter of 2011, up from $7.9 billion in the fourth quarter of 2010,” Paczkowski reports.

“That’s a 39 percent increase and a record for the March quarter,” Paczkowski reports. “Why the sudden uptick? Two reasons, most likely: The tight supply environment caused by recent calamities in Japan and the expected increases in iPad shipments.”

Read more in the full article here.

MacDailyNews Take: On April 20, 2011, in a conference call with analysts, Apple COO Tim Cook stated that Apple has not had any impact, nor does the company expect any material impact, from the Japan disasters.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

9 Comments

  1. To use its financial warchest for supply line procurements is pure genius. It’s not glamorous like buying Netflix or some other big name company, but it insures the sustained upward trajectory of Apple. Pure genius…

  2. It makes sense to pay foreign suppliers with cash from Apple’s foreign subsidiaries. About $38B of Apple’s $66B in cash is at its foreign subsidiaries. If Apple were to repatriate those profits, they’d have to pay the balance of the US Corporate tax rate of 35%. By using that foreign cash to buy pre-buy components, they are able to avoid worrying about having to pay Uncle Sam.

  3. This Paczkowski and his aricles at D just does not get it and continues to write not so smart ass AAPL stuff. He is never positive rather negative on Apple!

    * Again Japan did not impact 2Q11 Apple supplies!

  4. First, the $11B has nothing to do with Apple’s prebuy program. The long-term prebuy program has committed $2.4B, with an additional $2.0B so far unallocated.

    The $11B is Apple’s normal contracted component buy for the next 5 months. It’s not a sudden uptick, it increases every year, preceding the growth in sales:
    2009Q4 – $4.6B
    2010Q1 – $3.7B
    2010Q2 – $4.9B
    2010Q3 – $6.2B
    2010Q4 – $8.2B
    2011Q1 – $7.9B
    2011Q2- $11.0B

    As you can see, the contracted component amount increases from Q1 thru Q4.

    If you graph this contracted component total against Lagged COGS, (lagged by 3 months), you find that this component buy total is roughly 50% of COGS 3 months later.

    Here it is, component buy of $4.6B in 2009Q4 results in COGS of $9.3B in 2010Q1. If you continue, you get:
    $3.7B becomes $7.9B
    $4.9B becomes $9.6B
    $6.2B becomes $12.8B
    $8.2B becomes $16.4B
    $7.9B becomes $14.4B

    This quarters’ $11B implies a COGS for next quarter of about $22B. Of course, with COGS, one could get a rough estimate of next quarters’ sales.

    1. Brilliant work ……

      Question …… Based on previous sales verses the buy numbers where do you put Apple at for this current or next quarter?

      Thanks in advance for your reply!

      1. Well, once you have the COGS, cost of goods sold, figure, you only have to know that Apple’s average gross margin is about 40% give or take a couple percent. So, divide $22B by 60%, gives you a revenue estimate. Now, this has worked for the last 6 quarters, if you do the math for the results I have posted above. Last quarter’s component purchase commitment of $11B; however seems to imply revenues this quarter of $36B, which seems unfathomable. The analysts I follow are predicting $26B to $27B.

        A couple notes: one, while the component buy total has been about 50% of Lagged COGS, the last quarter where component buy was $7.9B and Lagged COGS was $14.4, this ratio increased to 55%; and two, the PreBuy components are long-term agreements, which means they can last over a year, which should be added into the component buy amount, but it’s impossible to do without more detail.

        So, my caveat is that while I have been looking at this number because it seemed like a good indicator of future Apple sales, and has worked since 2009Q4, it may be showing its fragility now that Apple is mixing things up with the PreBuy components starting last quarter.

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