Apple's 2010 capital expenditures could signal major investments

Posted:
in General Discussion edited January 2014
Apple has forecast a 70 percent increase in capital expenditures for the 2010 fiscal year, which one analyst has said could be a sign the Mac maker is investing in "strategic new infrastructure."



In his latest note to investors Monday, Robert Cihra, analyst with Caris & Company, noted that Apple's most recent Form 10-K filing with the U.S. Securities and Exchange Commission has called for a major $1.9 billion in capital expenditures during the 2010 fiscal year. That's well up from the $1.1 billion the company spent in 2009.



While the number could be an example of Apple's traditionally conservative guidance given to investors, Cihra said it's also possible that the increased expenses could mean that Apple is planning for something big in the coming year.



"This year's 10K added wording for purchases of 'product tooling and manufacturing process equipment,' which could imply Apple reversing course to actually build certain products/components in-house," Cihra said. "Beyond that are signals of Apple investing in massive new data center capacity (e.g., North Carolina) that could support anything from iTunes/iPhone Apps through new 'cloud computing.'"



Earlier this year, Apple selected Maiden, N.C., as the location for its $1 billion server farm. The exact purpose of that data center has not been stated.



Cihra expects Apple to have a huge December quarter, with sales of iPhones and Macs boosted higher during the holiday season. He has upped his forecast of Mac sales for the first financial quarter of 2010 to 3.4 million. If accurate, that would exceed the record 3 million Macs sold in the September quarter. Those sales will be propelled by the new 13-inch unibody Macbook and redesigned desktop iMac.



He also expects a new record in iPhone sales at 10 million units shipped, well beyond the 7.4 million sold last quarter. After the company faced supply constraints last quarter, Apple has increased orders for iPhones by 20 percent for the holiday. In addition, the handset's recent launch in China is expected to drive sales even higher.



Caris & Company has reiterated its buy recommendation for AAPL stock with a price target of $260.



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Comments

  • Reply 1 of 85
    This can only be good news for the economy. Apple is investing heavily rather than just banking its income. If Apple are going to manufacture their own products again, it is because the volumes they sell now make it worthwhile. Back in the mid nineties, the volumes did not justify having in house manufacturing.



    I also suspect that this will be more for early development of new products, to prevent the recent leaks that have occurred. I'm sure the volume manufacturing will remain with existing suppliers.



    Phil
  • Reply 2 of 85
    With 30+ billion in cash, it's about time they start spending it!
  • Reply 3 of 85
    tundraboytundraboy Posts: 1,874member
    Quote:
    Originally Posted by AppleInsider View Post


    'product tooling and manufacturing process equipment,' which could imply Apple reversing course to actually build certain products/components in-house,"



    That would be amazing news in this era of deindustrialization in the US. You cannot have a vibrant middle class in an economy without a strong manufacturing sector. And you cannot have a strong manufacturing sector if you stop investing in the continuous development of highly efficient manufacturing systems and just surrender without a fight to the low-wage countries. Germany and Japan fought (and continue fighting) to keep their manufacturing sectors. We did not. This is the 'gift' given to us by generations of MBAs who were taught to treat technology and know-how as just another cost item that you can keep cutting down whenever short term profits are threatened.
  • Reply 4 of 85
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by DKWalsh4 View Post


    With 30+ billion in cash, it's about time they start spending it!



    They could start by inventing and releasing a portable consumer device in the $500-$7000 range. I don't care if it's a Netbook, Tablet, Apple-on-a-stick, whatever. The price differential between Macs and PCs is ridiculous. Look at yesterday's Best Buy Sunday flier . Blu ray is included on Sony and Toshiba laptops for $700!!!!!! And 500 Gb of storage!
  • Reply 5 of 85
    mark2005mark2005 Posts: 1,158member
    Quote:
    Originally Posted by teckstud View Post


    They could start by inventing and releasing a portable consumer device in the $500-$7000 range. I don't care if it's a Netbook, Tablet, Apple-on-a-stick, whatever.



    Pretty big range there!!! Must be all the add-ons....
  • Reply 6 of 85
    MacProMacPro Posts: 19,649member
    My guess a lot of those $s will be in cloud based services based here in the US.
  • Reply 7 of 85
    Quote:
    Originally Posted by teckstud View Post


    They could start by inventing and releasing a portable consumer device in the $500-$7000 range. I don't care if it's a Netbook, Tablet, Apple-on-a-stick, whatever. The price differential between Macs and PCs is ridiculous. Look at yesterday's Best Buy Sunday flier . Blu ray is included on Sony and Toshiba laptops for $700!!!!!! And 500 Gb of storage!



    LOL. I would be scared to see what some of the fanbois here would do with an Apple on a stick. Could we maybe skip that?
  • Reply 8 of 85
    MacProMacPro Posts: 19,649member
    Quote:
    Originally Posted by tundraboy View Post


    That would be amazing news in this era of deindustrialization in the US. You cannot have a vibrant middle class in an economy without a strong manufacturing sector. And you cannot have a strong manufacturing sector if you stop investing in the continuous development of highly efficient manufacturing systems and just surrender without a fight to the low-wage countries. Germany and Japan fought (and continue fighting) to keep their manufacturing sectors. We did not. This is the 'gift' given to us by generations of MBAs who were taught to treat technology and know-how as just another cost item that you can keep cutting down whenever short term profits are threatened.



    Agreed. So fingers crossed for Apple investing in the USA.
  • Reply 9 of 85
    Quote:
    Originally Posted by tundraboy View Post


    That would be amazing news in this era of deindustrialization in the US. You cannot have a vibrant middle class in an economy without a strong manufacturing sector. And you cannot have a strong manufacturing sector if you stop investing in the continuous development of highly efficient manufacturing systems and just surrender without a fight to the low-wage countries. Germany and Japan fought (and continue fighting) to keep their manufacturing sectors. We did not. This is the 'gift' given to us by generations of MBAs who were taught to treat technology and know-how as just another cost item that you can keep cutting down whenever short term profits are threatened.



    I think we have Steve Jobs to thank for Apple's increasingly apparent insightful strategy. The respective end runs of the iPod and iPhone were sheer genius--veritable Trojan horses they were, cleverly offered as "gifts" to the unwashed masses. And Apple was prepared for them as they flocked in to Apple retail stores to drool and to "switch" in mass quantities.



    Now, with plenty of cash, a sound and refined product line, and a good infrastructure, it's time for a new offensive play. Perhaps a tablet whose societal impact may prove to be at least an order of magnitude greater than the impact of the fabled "desktop publishing" revolution of the '80s.



    Sounds like a great game plan to me!
  • Reply 10 of 85
    Quote:
    Originally Posted by teckstud View Post


    The price differential between Macs and PCs is ridiculous. Look at yesterday's Best Buy Sunday flier . Blu ray is included on Sony and Toshiba laptops for $700!!!!!! And 500 Gb of storage!



    The difference in resale values of 3 year old machines is also ridiculous. A three year old windows machine bought for $700 three years ago, is probably worth between $50 and $100 now. A three year old Mac bought for $1400 three years ago, is probably worth between $400 and $700 now.



    Like all premium products, Mac hold their value much better.



    Total cost of ownership is the purchase price plus all other expense (virus S/W, etc) minus final value divided by period of which a product is used for. Macs stay useful for far longer than PCs, and have little additional costs once purchase. Having owned many PCs over the past 15 years and sadly only moving to the Mac 5 years ago, I can wholeheartily say that my expenditure on computers has radically reduced.



    Apple Macs are built to much higher levels of quality than PCs, so you pay for what you get. My employer gives us Lenovo laptops (currently T400's) which although are better than other brands, have nothing on the quality of my MacBook Pro. It's bulkier, has a battery that sticks out of the back, the ThinkLight is not as useful as the Apple backlit keyboard, etc. Don't get me started on the OS!!!



    Opting to buy a Mac or a PC is a personal preference. I know what mine is..
  • Reply 11 of 85
    quadra 610quadra 610 Posts: 6,757member
    Very nice.
  • Reply 12 of 85
    anonymouseanonymouse Posts: 6,826member
    Quote:
    Originally Posted by DKWalsh4 View Post


    With 30+ billion in cash, it's about time they start spending it!



    Well, that $30B is also part of their protection against hostile takeovers, so I think they may want to hold onto some of it.
  • Reply 13 of 85
    tundraboytundraboy Posts: 1,874member
    Quote:
    Originally Posted by anonymouse View Post


    Well, that $30B is also part of their protection against hostile takeovers, so I think they may want to hold onto some of it.



    On the contrary, I think Apple is the one company that is most immune from hostile takeover because pretty much everyone who has 100 billion dollars knows that the unique corporate culture that makes Apple so successful will disintegrate the moment an outsider takes control.
  • Reply 14 of 85
    drdbdrdb Posts: 99member
    Quote:
    Originally Posted by tundraboy View Post


    On the contrary, I think Apple is the one company that is most immune from hostile takeover because pretty much everyone who has 100 billion dollars knows that the unique corporate culture that makes Apple so successful will disintegrate the moment an outsider takes control.



    I think you overestimate the intelligence of the corporate world
  • Reply 15 of 85
    richysrichys Posts: 160member
    Quote:
    Originally Posted by womble2k2 View Post


    Apple Macs are built to much higher levels of quality than PCs, so you pay for what you get. My employer gives us Lenovo laptops (currently T400's) which although are better than other brands, have nothing on the quality of my MacBook Pro. It's bulkier, has a battery that sticks out of the back, the ThinkLight is not as useful as the Apple backlit keyboard, etc. Don't get me started on the OS!!!



    Is the 'ThinkLight' that pointless white LED 'lamp' that sits at the top of the screen? Who knew it had a name? It's also the most pointless 'feature' I've ever seen on a laptop. I've had my work supplied X61 for a while now, and have never found a need for the ThinkLight. Mind you, I've never found a need for the ThinkVantage button either. And I wish it had a trackpad. And a battery that lasted long enough for a meeting. Still, at least it's not a Dell...
  • Reply 16 of 85
    We've got a nice new state of the art assembly plant here in Winston-Salem NC that was just vacated by Dell that is just down the road from Apple's new server farm location in North Carolina.

    We'd be happy to have a forward thinking company locate here instead of a "me too" operation!
  • Reply 17 of 85
    asciiascii Posts: 5,936member
    Surely it is a server farm? Or they could be concerned about IP theft from having things manufactured overseas, but I doubt it.



    In terms of manufacturing, I think there is a long way to go technology wise. Mass production is *supposed* to make thousands of things exactly the same, but there is still quality variance from item to item (e.g. iMac screens). And there is the whole field of molecular scale assembly which will change everything.
  • Reply 18 of 85
    Quote:
    Originally Posted by womble2k2 View Post


    Apple is investing heavily rather than just banking its income.



    Not really. The increase in capital spending represents less cash than Apple is currently adding to their hoard every, single month. The scale of Apple's cash reserve is hard to appreciate, but it is immense, and will continue to grow at a startling rate even after this investment. In fact they are banking the vast majority of it.



    Quote:
    Originally Posted by anonymouse View Post


    Well, that $30B is also part of their protection against hostile takeovers, so I think they may want to hold onto some of it.



    Not really. In the past, the Apple board has adopted "poison pill" rules to make hostile takeovers unpalatable. I don't know if they have them in place at this moment, but they can adopt them again at any time they wish. This assumes that any company could raised anywhere close to the amount of money which would be required to take Apple over. Even with massive leveraging, almost nobody could manage it, and not because of Apple's cash reserve, but because of their market cap, and also because the board would resist a hostile takeover.
  • Reply 19 of 85
    It's anybody's guess, but I think the investments will be made to step it up in the realm of delivering rich media content, perhaps even offering streaming of said media from the cloud, and to support the upcoming (albeit rumored) tablet machines they're working on. They may also step it up to deliver software as a service, and provide greater reliability and performance for existing services, such as MobileMe, which needs LOTS of work.
  • Reply 20 of 85
    brucepbrucep Posts: 2,823member
    Quote:
    Originally Posted by teckstud View Post


    They could start by inventing and releasing a portable consumer device in the $500-$7000 range. I don't care if it's a Netbook, Tablet, Apple-on-a-stick, whatever. The price differential between Macs and PCs is ridiculous. Look at yesterday's Best Buy Sunday flier . Blu ray is included on Sony and Toshiba laptops for $700!!!!!! And 500 Gb of storage!



    500 gb of storage !! and no bloatware or viruses

    yay !!! oy vay !!! songs from fiddler on the roof start playing ...



    i predict



    Apple will become a carrier them selves and offer data service for their upcoming NANO phone's . MAYBE 3 more farms will be built !!\\and obama will finance it in part . 2 of the 3



    they also will break the bungie contracts and get halo and cod titles on the mac >>failing at that they will buy out right EA . and they also will declae peace with MS AND OFFER WINDOW 7 AS AN OPTION !!



    this upcoming tablet will be a simple 9x6in ipod-touch will 3x the power /full OSX and full grazing right's world wide . THE TABLET WILL $799 stripped or $999 OLED screen

    hey i can dream can't I





    peace

    9
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