Apple continues to go from strength to strength: the all-conquering tech giant is expected to announce another set of bumper results this evening, with some analysts predicting fourth quarter profits of almost $4bn, on revenues of around $19bn - largely due to the remarkable success of the iPad and the iPhone. Some argue that this would be a good time for a little financial present to shareholders - though with more competitive threats on the horizon, should it spend the money elsewhere instead?
The iPad has undeniably been the technology success story of 2010. Estimates of units sold range from 4.5m to 5.3m - but either way, there’s no denying that sales have smashed expectations. It's also prompted copycat versions by everyone from BlackBerry to, bizarrely, Next (yep – the MOR clothing retailer). Gartner reckons sales could swell to 25m in 2011, while the market for tablet computers as a whole could hit 103.4m in 2012, and 154.2m in 2013. The iPhone 4 is going great guns too; despite those much-publicised signal issues, it’s still expected to have sold more than 13m units since its release back in June. Between them, the two products are expected to bring in over $10bn in revenue. Tasty.
Last week Apple shares topped the $300 mark, pushing its market cap past $280bn. It’s a massive turnaround from 1997, when Steve Jobs took back the reins of the company he had been forced out of a few years before. Back then, Apple was a mere tiddler compared to leviathans like Microsoft and Dell, with a value of just $2bn. In the subsequent 13 years it has overtaken both - and if it keeps growing at its current rate, it might even surpass Exxon to become the world's biggest company. It's still $50bn or so behind, so this may not happen immediately. But given that its share price has surged by nearly 50% in the last year, you wouldn't rule it out.
One potential awkwardness is the small matter of the $50bn Apple put away as a ‘buffer’ during the recession, just in case people stopped wanting to buy shiny gadgets (fat chance). Since this is clearly not the case, there are whispers that giving some of this cash back to shareholders would be a nice way to show its appreciation of their support.
At the moment, it doesn't pay dividends. And that may continue: there's a good economic argument that a share buy-back at these prices would be daft. Equally, Apple's success relies on taking ownership of markets that its competitors haven’t even considered yet - and that means lots of investment in R&D. With competitors starting to eat into its market share - particularly in mobile, where Android is outstripping even Apple - it can't afford to rest on its laurels just yet. Besides, not paying a divi doesn't seem to be doing its share price any harm...