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Apple's 2010 Annual Report: Hiring Spree, Ad Budget Increase, Lower Gross Margins Ahead

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Apple today filed its 2010 annual report with the U.S. Securities and Exchange Commission, and the document reveals a few interesting tidbits of information:

- Apple noted that it had approximately 46,600 full-time equivalent employees as of September 25th, an increase of over 35% since last year's annual report. The company has an additional 2,800 full-time equivalent temporary employees and contractors on its payroll, up from 2,500 last year.

- As noted by TechCrunch, Apple's advertising budget for fiscal 2010 was $691 million, up 38% from last year's $501 million and a much larger increase than in previous years. Even so, the report notes that Apple's rapidly-growing revenues allowed the company to reduce its percentage of revenues spent on advertising from 1.37% to about 1.06%.

- Apple noted in several locations within the report pertaining to risk factors that could impact the company's performance going forward that it expects lower gross margins in the future due to increasing sales of new products with higher production costs.
The Company expects its gross margin percentage to decrease in future periods compared to levels achieved during 2010 and anticipates gross margin levels of about 36% in the first quarter of 2011. This expected decline is largely due to a higher mix of new and innovative products that have higher cost structures and deliver greater value to customers, and expected and potential future component cost and other cost increases.
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While Apple has routinely offered modest expectations regarding gross margins in its financial discussion, the apparent longer-term pressure on margins disclosed in the report is being cited as the reason for a slight dip in Apple's stock price in after-hours trading following the release of the report.

Article Link: Apple's 2010 Annual Report: Hiring Spree, Ad Budget Increase, Lower Gross Margins Ahead
 
Article Link
https://www.macrumors.com/2010/10/27/apples-2010-annual-report-hiring-spree-ad-budget-increase-lower-gross-margins-ahead/
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Wurm5150

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Apr 28, 2010
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Low price of the iPad and MacBook Air = Lower gross margin
 
Don Kosak

Don Kosak

macrumors 6502a
Mar 12, 2010
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Good news for product development, with 35% staff increase. I wonder which groups/departments got the biggest increases?

Margins will probably take a hit -- or, who knows, Apple could launch a new major product or service and hold the status quo. (Remember when they launched the iPod or first introduced the iPhone?)
 
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paulyras

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Dec 3, 2006
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Singapore
Of course, the more apps on the iOS and Mac App Stores, the more the gross margins will compress (at least down towards 30%). Even before factoring bandwidth and servers (really the only overhead), the gross margins by definition can't be more than 30%, as they're passing 70% of revenue on to the developers.

That said, given the minimal cost of sales, etc..., I'm sure they'll take as much of those margins as they can possibly get day, night, and weekends.
 
TMRaven

TMRaven

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Nov 5, 2009
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Bout time apple become more reasonable with their tech prices. By more reasonable it'll prolly be 500 to 450 for iPad.
 
koruki

koruki

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Aug 16, 2009
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Doctor Q said:
Will there be a huge increase in the size of the staff when the data center opens?
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If the data center is well thought out then no there shouldn't be a huge increase in staff to run it.

My guess is the increase in staff is in the retail sector
 
S

SirOmega

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Apr 17, 2006
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Las Vegas
Hmmm.. Microsoft has 86,000 employees. Apple has 46,600. Yet (as of the last quarter) they're roughly equal in revenue for the last 12 months (62-65M). So Apple employees are 50% more efficient than their MSFT counterpart in terms of generating revenue.
 
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Shanpdx

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Sep 24, 2008
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Blazer town!
SirOmega said:
Hmmm.. Microsoft has 86,000 employees. Apple has 46,600. Yet (as of the last quarter) they're roughly equal in revenue for the last 12 months (62-65M). So Apple employees are 50% more efficient than their MSFT counterpart in terms of generating revenue.
Click to expand...

or apple employees are working more than 8 hours ;) but they definitely well paid than microsoft employees
 
johnnymg

johnnymg

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Nov 16, 2008
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koruki said:
If the data center is well thought out then no there shouldn't be a huge increase in staff to run it.

My guess is the increase in staff is in the retail sector
Click to expand...

Correct, the staff increase was nearly entirely in retail.

cheers to the longs
JohnG
 
C

cvaldes

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Dec 14, 2006
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Doctor Q said:
Will there be a huge increase in the size of the staff when the data center opens?
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No.

In other threads about the NC data center, others have projected that the staffing needs for the new data center are about 100 people when the site is fully operational. With three shifts per day, regular days off, vacation, sick time, etc., there will probably be no more than thirty people on site at any given moment.

My guess is that they will open the new data center in phases. They might have 30-40 people on staff when they flip the switch.

Most of the setup is probably being done by people on loan from existing data centers as those people have knowledge of Apple's network infrastructure. New employees wouldn't be setting up the new data center.

As others have mentioned, the staffing increases are largely due to retail. Apple opens about 40 stores annually.
 
L

lilo777

macrumors 603
Nov 25, 2009
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SirOmega said:
Hmmm.. Microsoft has 86,000 employees. Apple has 46,600. Yet (as of the last quarter) they're roughly equal in revenue for the last 12 months (62-65M). So Apple employees are 50% more efficient than their MSFT counterpart in terms of generating revenue.
Click to expand...


It's revenue. SOftware and hardware businesses are very different. Apple re-sells a lot of stuff manufactured by Foxconn (like all of it) hence hight revenue and low margins. Microsoft, on the other hand, has much higher profits.
 
jtgotsjets

jtgotsjets

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May 20, 2004
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Lawrence, KS
paulyras said:
Of course, the more apps on the iOS and Mac App Stores, the more the gross margins will compress (at least down towards 30%). Even before factoring bandwidth and servers (really the only overhead), the gross margins by definition can't be more than 30%, as they're passing 70% of revenue on to the developers.

That said, given the minimal cost of sales, etc..., I'm sure they'll take as much of those margins as they can possibly get day, night, and weekends.
Click to expand...

Is that really how app sales get factored in?

To me, margins means income minus cost. So margins on apps should be ridiculously high, no?
 
E

Eric5h5

macrumors 68020
Dec 9, 2004
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Rocketman said:
46,600 employees is more than 100.
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The "100 employees" thing was only ever for the Mac team, not the whole company. Wonder if that's still the case these days...there's quite a few different models now, what with half a dozen base models and variations on each of those.

--Eric
 
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SandynJosh

macrumors 68000
Oct 26, 2006
1,652
3
SirOmega said:
Hmmm.. Microsoft has 86,000 employees. Apple has 46,600. Yet (as of the last quarter) they're roughly equal in revenue for the last 12 months (62-65M). So Apple employees are 50% more efficient than their MSFT counterpart in terms of generating revenue.
Click to expand...

That's an accurate assessment, except I'd also say that the management is also structured more efficiently. Jobs doesn't believe in more then 100 people on a team.

I understand at MS there are even teams working at cross-purposes. That's more common when a company is throwing money and people at a project. It gets so big it becomes unmanageable and unfocused.
 
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SandynJosh

macrumors 68000
Oct 26, 2006
1,652
3
jtgotsjets said:
Is that really how app sales get factored in?

To me, margins means income minus cost. So margins on apps should be ridiculously high, no?
Click to expand...

Think! Apple charges you $100 for an app. That's "Income." They keep $30, that's "profit." So the margin was 30%. Of course they have overhead on running the app store and paying the goofballs that approve apps, so after that is removed from the profit, the net margin will be under 30% somewhere.
 
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SandynJosh

macrumors 68000
Oct 26, 2006
1,652
3
Rocketman said:
46,600 employees is more than 100. How can Steve keep his eye personally on 46,600 employees? Is he Santa Claus? :D

I wonder how the ad award givers would feel about an ad budget of 1.06%?

Most economical advertiser of the decade?

Rocketman
Click to expand...

Good point. I think Proctor & Gambles and Lever Brothers ad budgets are a two digit number, along with Coke and Pepsi. That's an unfortunate consequence of markets with two big horses in the race: high percent of sell-price going to advertisement.
 
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