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OMFG! Apple Inc is a Cash Generating Monster! $AAPL Analysis

Apple Release a Smashing Third Quarter Result and what is interesting about it is the bloody amount of cashflow it can generate. This goes to show what a great company to invest in.

[Full Results can be viewed here >>]


Net Income [9mths 2009]: 5.7 bil

Net Income [9mths 2010]: 9.7 bil

Profit have been jumping up like mad. This is the second largest market cap company in the world and you have a 77% increase in profits from last year same time.

Net Operating Cashflow, Capital Expenditure and Free Cashflow

Net Operating Cashflow [9mths 2009]: 7.0 bil

Net Operating Cashflow [9mths 2010]: 12.9 bil

If profits is impressive, my more favored measurement is even more astounding. Operating Cashflow jumped 84%. their operating cashflow is 4 times their net profit due to some add backs from depreciation, and an increase in payables.

Capital Expenditure [9mths 2009]: 0.686 bil

Capital Expenditure [9mths 2010]: 1.9 bil

There is a jump in capital expenditure. 1.9 billion in capital expenditure in one quarter is A LOT. But it is still far less than their net operating cashflow.

That said, here is their free cashflow:

Free Cashflow [9mths 2009]: 6.314 bil

Free Cashflow [9mths 2010]: 11 bil

Shit. That is an awesome Free Cashflow no matter how you look at it.

What can they do with this Free Cashflow?

They can:

  1. Repay their debts. Their debts stands at 4.9 billion. They can just pay it off but likely they are not going to do that. Its pointless since interest rates are favorable now.
  2. Pay out as dividends. Apple doesn’t pay dividends. We hope they do in the future.
  3. Buy back shares.
  4. Keep it. Which is what they do. This Large amount was added to their coffers.

Cash Holdings as a % of Assets, Equity and Market Cap

The amazing thing about these software company is that they have so low capex, so high revenue due to their brand and product, that they keep adding and adding cash.

Cash & Equivalents Holding: 45.85 bil

Assets: 64 bil

Long Term debts: 4.9 bil

Market Cap: 229 bil

What this means is that:

Cash makes up 71% of Assets.

Cash makes up 20% of Market Cap

Holy cow. I wonder if they continue to progress, it will be safer to put money in Apple than a Bank. Its larger than a bank, have a higher growth rate than a bank, and does not have as much nonsense  as a bank.

Its Return on Equity is high at 30%. Its high but so is Microsoft. But as an investor as long as you know how the ROE is derived and its high, it will be better to stick your money in there than under the pillow.

Sales figures

Mac Sales

Many thought that Mac Sales will be cannibalized by the iPad. This chart shows otherwise. Sales of Mac have been improving tremendously.

iPod Sales

The segment that have been cannibalized is probably the iPod. They are essentially very similar to the iPAD. Sales have gone down but revenue have been up as more iPod Touch is sold which generates higher revenue compare to traditional ipod.

iPhone Sales

iPhone sales have been improving very nicely.


Tech Companies like Apple have an advantage if you can come up with a compelling product. For a low research and development and capital expenditure, coupled with good brand you can really multiply your sales and profits.

However, tech industry is known to be really fickle but Apple have truly turned into a gigantic company that is able to gobble up and friends and competitors to enable them to have an edge.

This is a market leader and at a good price may prove a good investment


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Wednesday 21st of July 2010

But i think the problem with such tech companies is that they're very dependent on their product lines. Which means to say if they fail to come up with compelling products, their earnings can diminish very rapidly as well. It was not that long ago that Apple was on the verge of bankruptcy before they came up with the ipod that turned the business around. Similarly for Nokia, who was in all ways a market leader until their position slowly eroded with the advent of touchscreen smartphones. Its hard to have a sustainable competitive advantage in the industry when everyone else is also innovating at breakneck pace. Just my 2c.


Wednesday 21st of July 2010

they have a beauty to their business model, low capex high free cashflow. but also low barriers. but do note that MSFT, Nokia and Apple are strong brands and their brands can have an advantage. that is why they keep building them.

people will take advantage of low barriers, you can have china companies coming up with similar tablets now that Google gives them an edge with a smashing operating system.

but beware of that huge cash position. these tech companies will always generate these cash and this warchest will gobble up good technologies.

perhaps i am excited about this since i blog quite a fair bit of these competition at

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