“A day before Apple (AAPL) is scheduled to report its 3rd quarter earnings, Robert Paul Leitao thinks he has put his finger on what’s wrong with the Street’s view of the company,” Philip Elmer-DeWitt reports for Fortune.
“Leitao, who rides herd over 30 amateur analysts at The Mac Observer’s Apple Finance Board, has been tracking the gap between Apple’s revenue and its earnings,” P.E.D. reports. “Both are growing like gangbusters, but earnings have been growing faster than revenue.”
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P.E.D. reports, “The key, according to Leitao, can be found in what the accountants call OpEx.”
Read more in the full article here.
Lower operating expenses relative to revenue is great as long as Apple is not shorting its employees or its R&D efforts. Assuming that Apple is doing everything right, then you are seeing increased efficiencies at least partially due to increased economies of scale.
Not so fast. Apple is employing aliens, literally extra terrestrials, in 1 Infinite Loop. Every so often they’re allowed to phone home on the iPhone 5, ET phone home, as it were. In exchange they work for peanuts but unlike monkey boy Ballmer, these are skilled monkeys.
It easier than that: share of iPhones in the business grew. And iPhone is the highest margin product at Apple among all categories.
AAPL basic formula for success:
– Sales/Revenues UP
– Operating Expenses (OpEx) DOWN
– Net Income/Profits Up (brilliant)
Focus.
By keeping focused they can grow their businesses without having to give it all back in bloated bureaucracy, R&D efforts, etc.
Look at how other companies grow: OUT.
Sony. Nokia. HP. GM. P&G. etc.
They add more product lines. Each comes with more managers, more R&D, more operating costs.
Apple is growing a smaller number of product lines UP.
They’re careful about what new products to develop and launch. Then they make sure each becomes a large, worthwhile business. And they make sure each bolsters the other.
Fewer tent poles, but a much higher tent.
VERY well put!
Spectacular post!
Hammer meets nail…
+1
Brilliantly delineated, disposableidentity! I’ve copied your remarks and will quote you frequently to my broker!