Did Apple Spend $2 Billion to Bail Out Sharp?

[MacRumors]

Apple analyst Horace Dediu has dug deep into Apple's 2012 capital expenditures and found some spending, above and beyond what Apple had previously disclosed. He discovered that Apple spent $2.3 billion more than it had forecast on "product tooling, manufacturing process equipment and infrastructure".

However, Apple didn't actually shell out cash for its increase in CapEx, but instead is booking vendor financing. Dediu believes it may have been to bail out Sharp, which was in dire financial straits earlier this year.

Circumstantial evidence points to the asset being production equipment (or even a whole plant) previously owned by Sharp. Sharp is a key supplier of screens to Apple but is also in financial distress. Sharp has also been the object of an intended investment by Foxconn [Hon Hai]. That deal fell through as Sharp's finances deteriorated. My guess is that these attempts to shore up Sharp are directed by Apple to ensure both continuity of supply and a balanced supplier base (offsetting Samsung, another supplier.) If Sharp were to enter into some form of bankruptcy, the key plant(s) used in producing screens for Apple might be "up for grabs" by creditors and they might be taken off-line, jeopardizing Apple's production capacity, irrespective of contractual obligations. I believe that Apple's late and unprecedented expenditure was to secure this asset. I further believe that the financing for this deal was done through a swap of "pre-orders".

Dediu has much more on the spending and his analysis at Asymco.

Article Link: Did Apple Spend $2 Billion to Bail Out Sharp?

[gmanist1000]

Makes sense if they want to move away from Samsung displays.

[abhishake]

Why not just buy Sharp at a steep discount?

[rnizlek]

Interesting, but I wonder why Apple wouldn't just buy the production factory outright and have Sharp operate it. That way, if anything happened to them, the plant would not be at risk of shutting down.

[Navdakilla]

take that samsung!

[globalhemp]

Perhaps Apple will skip past standard HD and go for Ultra-HD (aka "4K").

Check out this 84" Sony XBR Ultra-HD TV that has 4X the resolution than standard "full HD" (1080).

http://store.sony.com/webapp/wcs/sto...ntifier=S_4KTV

[NT1440]

Originally Posted by abhishake

Why not just buy Sharp at a steep discount?

Because its not up for sale....yet

If apple tried a takeover you get an inflated bidding process costing way more than a company is worth. It's great for the stockholders whom bail immediately afterwords but you leave the company in far more debt than it had before.

[gibbo132]

Nice to see Apple playing nicely for once rather than suing!

[gmanist1000]

Originally Posted by globalhemp

Perhaps Apple will skip past standard HD and go for Ultra-HD (aka "4K").

Check out this 84" Sony XBR Ultra-HD TV that has 4X the resolution than standard "full HD" (1080).

http://store.sony.com/webapp/wcs/sto...ntifier=S_4KTV

You talking for the real Apple TV? That would be an expensive TV!

[turtlez]

Originally Posted by gibbo132

Nice to see Apple playing nicely for once rather than suing!

Suing for good reason is hardly being mean. How would you like it if someone came along and stole your designs that you work on all year round.

[Moonjumper]

Hopefully this is step towards getting IGZO displays in the Apple lineup, and from a stable company.

[KdParker]

What does sharp make for Apple?

[thejadedmonkey]

Originally Posted by gibbo132

Nice to see Apple playing nicely for once rather than suing!

They're not really though. Had they played nice, they wouldn't be forced to rely on Sharp and could use Samsung's production facilities. Instead, they didn't play nice and this 2 billion bailout is a consequence.

[lilo777]

Originally Posted by Navdakilla

take that samsung!

They will. Apple winning $1 billion by suing Samsung and loosing $2 billion because it had to prop Sharp to get the components they could easily get from Samsung. That makes perfect economic sense (and APPL trend proves it).

[peterdevries]

Originally Posted by KdParker

What does sharp make for Apple?

LCD screens..

[NT1440]

Originally Posted by thejadedmonkey

They're not really though. Had they played nice, they wouldn't be forced to rely on Sharp and could use Samsung's production facilities. Instead, they didn't play nice and this 2 billion bailout is a consequence.

Yup, this is completely one sided. Samsung has no responsibility in the relationship between them an Apple deteriorating.

It's two massive companies having a pissing match.

[realeric]

Better than burning the money for stock dividends.

[WannaGoMac]

Originally Posted by rnizlek

Interesting, but I wonder why Apple wouldn't just buy the production factory outright and have Sharp operate it. That way, if anything happened to them, the plant would not be at risk of shutting down.

This way if labor practices turn out bad, it's not Apple's fault. Just like it does with Foxconn...

[macchiato2009]

Apple should buy Sharp... and expand the company

[thejadedmonkey]

Originally Posted by NT1440

Yup, this is completely one sided. Samsung has no responsibility in the relationship between them an Apple deteriorating.

It's two massive companies having a pissing match.

I never said Samsung didn't have some fault, simply that it takes 2 to tango.

[NT1440]

Originally Posted by thejadedmonkey

I never said Samsung didn't have some fault, simply that it takes 2 to tango.

What do you mean by "had they played nice" when only referring to Apple? Or was the "they" all encompassing (Apple & Samsung)?

I may have mistaken your wording on that last post.

[extricated]

Slightly off-topic, but yet another thing that illustrates people shouldn't assume items (like the iPad Mini) are overpriced just because the components are relatively inexpensive.
Expenditures like this have to be absorbed into their products as a cost of doing business.

Otherwise, Apple wouldn't be profitable (and Eddie Cue couldn't have his Ferrari).

[nuckinfutz]

Originally Posted by gibbo132

Nice to see Apple playing nicely for once rather than suing!

There's nothing wrong with suing. Courts are here to handle conflict resolution in a civil matter. Hundreds of years ago people spilled blood over these types of conflicts (territory, resources etc). Please stop trying to demonize a civil process that has saved millions upon millions of lives.


Back on topic:

I hope this is an investment. Remember Apple invested 500 million in LG to enable higher production. Sharp is moving over wholesale to IGZO panels but that cost money and their HDTV business dried up.

[TMay]

Originally Posted by lilo777

They will. Apple winning $1 billion by suing Samsung and loosing $2 billion because it had to prop Sharp to get the components they could easily get from Samsung. That makes perfect economic sense (and APPL trend proves it).

You are "loosing" your ability to read. Apple is prepaying for product that Samsung doesn't produce, IGZO displays.

[phoenixsan]

a long history of getting big savings in components, having bought all stock available in some cases.Having said the latter, I suppose dont hurts have a lot of cash and using some from that pile of cash to secure vital components ( we dont know for sure about bailing, but.....)