Feeds

As US sinks, Apple sees a glorious future in China

Juiced by the Middle Kingdom's burgeoning middle class

Next gen security for virtualised datacentres

Apple may have disappointed Wall Street by not meeting their conservative predictions for its most recent fiscal quarter, but that didn't stop Cupertino from predicting that next quarter will be a barn burner.

The consensus on Wall Street was that Apple's earnings per share would be $7.28, according to the Thomson Financial Network. Apple didn't reach that already conservative prediction, coming in at just $7.05.

For the quarter currently underway and ending in December, however, Apple is thinking big. "We are targeting EPS to be about $9.30," CFO Peter Oppenheimer told analysts and reporters on a Tuesday conference call discussing the just-ended quarter's result.

"We expect revenues to be about $37 billion, compared to $26.7 billion in the December quarter last year," he said.

Last year, Apple improved its revenues by $6.36bn from its fourth quarter to the end-of-year holiday quarter – a 31.3 per cent jump. Oppenhiemer's projections call for essentially the same jump this year: from $28.27bn in the recently ended quarter to $37bn in the current quarter.

And don't suppose Apple CEO Tim Cook and his band of merry Cupertinians can't do it again. But don't think they'll be doing it solely by stuffing iPads, iPods, iPhones and Mac under Christmas Trees, Hunukkah menorahs, and Kwanzaa kinaras.

Look a little further east. Cook reminded his listeners on the call that "China progress has been amazing." In fiscal 2009, revenue for greater China – meaning Taiwan included – represented a mere 2 per cent of Apple's total revenue. In fiscal 2011, which just ended, it amounted to 12 per cent.

"And if you just look at the quarter that we just ended, it accounted for 16 [per cent]," Cook said, "and so it's our fastest growing major region by far." Revenue from China for the quarter was up 270 per cent when compared with the same quarter last year.

And there's no reason that growth will slow substantially, even though the news out of China today is that its annual GDP growth has slipped to "only" 9.1 per cent.

Compare that to the following scenario, released Tuesday in a Morgan Stanley Global Economic Forum report:

Our baseline assumption remains that the [US budget negotiating] super committee fails, and there is no agreement on extending or adding to fiscal stimulus for next year. This would lead to a significant hit to consumers' disposable income at the start of next year from the expiration of the payroll tax cut that we think could knock 1Q GDP growth below 1%.

With this looming gloom and doom in the US, it's no surprise Cook is looking elsewhere. "I think, in China, the sky's the limit there," he said.

To soar in that sky, Apple is investing in China. "We are building retail," Cook said. "We went in with an online store, we're building an [Apple Premium Reseller] channel, we're building a third-party channel, we're doing significant advertising – we're really doing everything, basically, that we're doing in the United States, we're doing in China."

What's driving Cook's enthusiasm is a group with money in their pockets and hunger for status-supporting goods in their guts. "In my lifetime I've never seen a country with as many people rising into the middle class that aspire to buy products that Apple makes," he said.

"And so I think it's an area of enormous opportunity. It has quickly become number two on our list of top-revenue countries very, very quickly."

One final point about China's rise as a revenue producer. After a short discussion about Apple's current $81bn cash hoard – upshot: don't expect Cook to immediately overturn Jobs' "no dividends" rule, though he did say "I'm not religious about holding cash" – CFO Oppenheimer interrupted, saying "I'd like to add to Tim's answer, just to remind everybody that of the little over $81bn in cash that we ended the September quarter with, a bit more the $54bn, or two-thirds of it, was offshore."

Which helps explain why Apple – among others – is lobbying the US Congress to institute a tax holiday to repatriate those billions back into the US, although whether any of that heap would be used to issue a dividend is not known. ®

Secure remote control for conventional and virtual desktops

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
Facebook, Google and Instagram 'worse than drugs' says Miley Cyrus
Italian boffins agree with popette's theory that haters are the real wrecking balls
Sit tight, fanbois. Apple's '$400' wearable release slips into early 2015
Sources: time to put in plenty of clock-watching for' iWatch
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.