The Really BIG Apple

Apple Retail Store

Image courtesy of Apple

The Really BIG Apple
| published January 29, 2015 |

By Thursday Review staff


If you think Comcast will be big once its merger with Time Warner is completed sometime this year, you haven’t seen big. Comcast—which already owns NBC Universal—will become the cable and internet provider to 62% of the country once all the fine points are worked out and the last of the regulatory hurdles are jumped across. AT&T is big too, and its proposed monster merger with DirecTV will make it a giant to its closest rivals, Comcast and Verizon. All told, these companies are big, healthy, and highly profitable.

But there are some things bigger, and Comcast CEO Brian Roberts alluded to that fact a year ago when he first explained the broad strokes of the Comcast-Time Warner deal, and as the spaghetti was hitting the fan in Washington. Explaining that the merger was only reasonable considering the even bigger animals out there in the digital jungle, Roberts said that Comcast was protecting its flanks from the mega companies that may soon dominate our entertainment and our connectivity, ironic coming from a company with the largest share of control over both bandwidth and broadband lanes. Roberts was referring in part to Amazon and Google, but also someone even bigger.

Apple, as it turns out, made more money in the last quarter of 2014 than any corporation on the face of the Earth, ever. Even as a percentage of its overall value as a company, and even when measured against all other prevailing market and economic templates, Apple reported better earnings in late 2014 than any company in the history of bookkeeping.

Apple reports that its cash-on-hand exceeds $178 billion. That’s billion, with a B. And that’s cash, mind you, not equipment nor inventory, not buildings nor real estate, not intellectual property nor parking spaces, not corporate jets nor office credenzas. Cash.

Late night talk show hosts had tons of comic fun with the math: Apple has enough money sitting around that it could, if it chooses, send every American man, woman and child a check for $568. Apple won’t do that, of course, but it will happily develop a new product very soon to lure you into given it another $568.

The point? People might begrudge every dime they pay to Comcast or AT&T or DirecTV, and they will grumble every time there is even a modest price increase. But millions of people—soon, billions worldwide—will happily shell out hundreds of dollars for the latest sleek high tech swag from Apple. That’s exactly what happened in the last four or five months of 2014 as millions of people ponied up the dough for the latest iPhone or iPad.

And it’s not just in the United States. As we reported just weeks ago, Apple has made major dents in the Asian smartphone markets, and became the first non-Korean company to exceed a 20% market share south of the 38th Parallel. In Japan, South Korea, Hong Kong, Singapore, and even in China (where legally iPhones cannot be sold, but can be found anyway on off-market venues), Apple products continue to chip away at the dominant hometown brands, like Samsung, Lenovo, and Xiaomi. Apple iPhone sales doubled in Brazil, and reached new levels of sales in places as diverse as Italy and Saudi Arabia.

This surge in growth has channeled unprecedented streams of cash into Apple’s already swollen coffers. It will surely enable the company, now helmed by CEO Tim Cook, to advance its technologies even further and bring to market even better applications, increasing the allure of it eye-candy products. Example: next on Apple’s list of things to do—bring its smart watches and handy wrist apps to the public before Sony, Google and others can grab the market for themselves. If Apple can catch the frontend of the potentially addictive wearable product wave, it can rake in even more cash. After much anticipation and technological tinkering, Apple says it is ready to sell its first smartwatch model as early as April.

Demand for new iPhone and iPads, even in the humble words of Cook, have been “staggering.” Though Apple suffered through a brief period last fall when some phones had issues with certain applications and systems—a problem it was able to quickly correct—and its short foray into what became known as “bendgate,” wherein some customers were reporting that the thin and lightweight iPhone 6 was getting damaged when placed in back pockets, sales of the new devices exceeded all expectations. In the three month period from October 1 to December 31, Apple sold 74.5 million iPhones—more phones than the total sales of cell phone units in a single quarter by any other company, ever. The news prompted investors to push Apple stock up by more than seven percent.

The quarter that ended in December saw $18 billion in profits for Apple, and its stockpile of cash—$178 billion, according to its most recent filings—may be the biggest trove of greenbacks ever accumulated by any corporation, in any country…ever.

Put another way: Apple has enough liquid money that it could load up a truck with all that cash, drive from San Francisco to Philadelphia, haul that lettuce up the elevators to the upper floors of the sleek Comcast tower, and drop it down on Brian Roberts’ desk. Would Apple want to buy Comcast? Not likely, nor would Comcast be inclined to sell. But the fantasy does illustrate the growing omnipresence of Apple’s franchise and brand-name, and the impact it has on the flow of disposal income worldwide.

Still, there are minor issues, and there are doubters. Despite the mega surge in iPhone sales, iPads saw a drop during the 4th quarter, dipping 22% below where they had been at the same time the year before. Most analysts say it was a simple equation for typical buyers: the iPhone was the more urgent and "essential" purchase, and the iPad is still largely regarded as a luxury item. Doubters question whether the high-end price of the iPad will ever make it as formidable a product as the ubiquitous smartphone, especially considering the iPad's unique identity which places it somewhere between being a small computer and an oversized phone. Likewise, still other analysts are skeptical of the smartwatch as the Next Big Thing. Some marketing surveys indicate that most consumers consider the wearables “toys,” and have shown little enthusiasm for the starting prices.

But, cell phones were once considered expensive toys too, and those sleek Apple devices—which can now be found virtually everywhere on the planet—keep selling. Whether Apple can continue to rake in so many billions for its gadgets may depend on whether people take the leap and buy their next wristwatch from Apple.

Related Thursday Review articles:

Apple’s iPhone Scores Big in Asian Markets; Thursday Review; January 21, 2015.

Apple; Bent, But Not Broken; Thursday Review staff; Thursday Review; September 25, 2014.