An Accountant’s Soul Presides Over the P&L at Apple
Apple co-founder Steve Jobs is often praised for the beauty, functionality and, yes, the magic of the products he drove Apple to build. And it’s true that the elegance and functionality of devices like the iPhone and iPad were unparalleled when they debuted. One could argue that such is still the case today. But overlooked in the homages we’ve seen recently — to Jobs’s spirit of innovation, his artistry and sheer force of will — is one other aspect of the man that made him one of a kind: his fiscal acumen. Jobs was a true visionary, but he was also a businessman, as Jim Kelleher of Argus Research reminds us.
“Consumers who gush over the beauty and efficacy of Apple products rarely quibble or complain about Apple’s premium pricing,” Kelleher writes in a note to clients. “Behind the tech-weenie veneer on transformative products, there is an accountant’s soul presiding over the P&L at Apple.”
There are innumerable reasons why Apple is sitting atop a pile of $76.2 billion in cash and marketable securities — a conga line of insanely great products, savvy marketing and financial rigor. And together, they drove Apple’s operating margins from 12 percent in 2005 to 30 percent or more today; its revenue from $13.9 billion to an estimated $108 billion.
“Jobs did more than launch, in succession, the Mac, the iPod, the iPhone, and the iPad,” Kelleher says. “He created and nurtured an infrastructure where these products could be conceived, engineered, and brought successfully to market.The marketing apparatus is no less well-oiled than the engineering machine at Apple.”
Or the financial one, for that matter.
Realistically, Apple is so on point right now, has so much momentum in the market, that it is unlikely to stumble any time soon. Kelleher again:
“IPhone currently has a less-than 5 percent handset market share; yet everyone who holds or uses one, whether first-time phone buyer or Apple lifer, is struck with its simple beauty and efficacy. If iPhone “merely” doubled its handset market share, annual revenues would rise by $60 billion. With RIM on the ropes and the Android Empire showing cracks from Google’s purchase of Motorola Mobility, there is no reason to believe that 10% share is the ceiling for iPhone. … In other words, if newly-appointed CEO Tim Cook is no more than a caretaker, if he only presides over the ramp of existing products, he could easily ‘caretake’ the company from the current $100 billion revenue range to twice or thrice that size.”
But that’s not what Cook is going to do. He plans to keep the ball rolling at Apple and he knows how to do it, as he said in an all-hands memo to employees about a month ago.
“I want you to be confident that Apple is not going to change,” Cook wrote. “I cherish and celebrate Apple’s unique principles and values. Steve built a company and culture that is unlike any other in the world and we are going to stay true to that — it is in our DNA. We are going to continue to make the best products in the world that delight our customers and make our employees incredibly proud of what they do.”
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