Apple's Second Quarter 2007 Financial Results: $770 Million Profit

[dejo]

Rocketman was comparing Apple's profits with Microsoft's profits, indicating that Microsoft's profits are more than six times higher. I was pointing out that on an EPS basis, Microsoft's profits are 44% lower than Apple's. Sorry, I failed to make that clear.

That's okay. Thanks for "edumacating" me!

Here's a summary for us dimwits:

Apple
EPS $0.87
Sales $5.26B ^20%
Profit $770 million ^177%

Microsoft
EPS $0.49 ^72% (.56x Apple)
Sales $14.4B ^32% (2.73x Apple)
Profit $4.9 Billion ^65.5% (6.36x Apple)

 

[flopticalcube]

That's okay. Thanks for "edumacating" me!

Here's a summary for us dimwits:

Apple
EPS $0.87
Sales $5.26B ^20%
Profit $770 million ^177%

Microsoft
EPS $0.49 ^72% (.56x Apple)
Sales $14.4B ^32% (2.73x Apple)
Profit $4.9 Billion ^65.5% (6.36x Apple)

That is a meaningless comparison. Besides having many more shares outstanding than Apple, Microsoft trades at around $30 per share where as Apple trades at $100.

PE ratio Microsoft 61
Apple 115

Microsoft would seem the better bargain on this basis (all other things being equal).

 

[IJ Reilly]

Microsoft would seem the better bargain on this basis (all other things being equal).

Which of course they never are. Sure Microsoft's sales and profits are huge. But what is the point of this comparison? Apple is growing their profits much more significantly, which is reflected in their EPS and the historical change in the stock's price. This is what investors care about.

 

[Cult Follower]

Go apple i love you keep it up

 

[WildCowboy]

How is comparing EPS between companies relevant? (Sorry, I'm sure the answer is obvious, but I fried my brain today.)

If Apple goes forward with their rumored stock split, the EPS gets cut in half. Comparing a company's own EPS (as long as you account for stock splits) over time is valuable for an internal gauge of performance, but I'm not seeing the connection between two different companies with different numbers of shares outstanding.

 

[Evangelion]

EPS 44% lower, and that is the number which matters most to investors.

I'm sorry, but you do not know what you are talking about. EPS is merely Earnings per share. If Apple split it stock, then their EPS would go down. Would that mean that Apple's financial performance would also be down? No it woul not.

 

[Evangelion]

How is comparing EPS between companies relevant? (Sorry, I'm sure the answer is obvious, but I fried my brain today.)

If Apple goes forward with their rumored stock split, the EPS gets cut in half. Comparing a company's own EPS (as long as you account for stock splits) over time is valuable for an internal gauge of performance, but I'm not seeing the connection between two different companies with different numbers of shares outstanding.

Exactly. It's like when people stare at shareprices to detrmine which company is "better", when they fail to realize that the two companies might have different amount of shares floating around. Now they have moved to stare at the EPS instead? It makes no sense.

 

[flopticalcube]

Which of course they never are. Sure Microsoft's sales and profits are huge. But what is the point of this comparison? Apple is growing their profits much more significantly, which is reflected in their EPS and the historical change in the stock's price. This is what investors care about.

Just pointing out the uselessness of EPS comparisons. PE is better but as you can see a "bargain" isn't always what it seems. I would definitely buy Apple over MS any day.

 

[IJ Reilly]

Just pointing out the uselessness of EPS comparisons. PE is better but as you can see a "bargain" isn't always what it seems. I would definitely buy Apple over MS any day.

Yes, you are all correct. My brain was fried when I wrote that. The point I was driving at and made so poorly is that EPS growth is what investors care about, not profit numbers. Comparing Apple and Microsoft's raw revenues or profits (especially for any given quarter) doesn't say much if anything, in terms of how well a company is doing. Apple's revenues and profits have grown far more than has Microsoft's over the last five years, and this is reflected in their stock prices.

Sorry for the confusion. I was typing under the influence of tiredness.

 

[gnasher729]

PE ratio Microsoft 61
Apple 115

Microsoft would seem the better bargain on this basis (all other things being equal).

You are the only person in the world who quotes a PE ratio based on quarterly numbers. Everyone else compares the stock price with the earnings for one year. And for companies that are growing, like Apple does, you quote "trailing PE" and "forward PE": Trailing PE takes the numbers from the last year, forward PE extrapolates current trends for the next year. Apple has a trailing PE of 35, and a forward PE of 25.

The price that people pay for a share is rationally based on the profit that the company makes, plus the expectation of growth in the future, and then of course there will be many irrational factors. In the case of Microsoft, people don't expect any growth anymore. Clearly you will pay more for a company like Apple with 25 or more percent growth than for Microsoft with no room for growth at all.

 

[IJ Reilly]

Another thing I noticed in my reading this morning is that Microsoft beat the street by around 6% (49 vs. 46 cents EPS), to which the markets reacted by pushing MSFT up around 5%. In the end AAPL made a smaller move up the day after beating the conventional wisdom by 35%. This alone tells you volumes about the market's relative expectations for these two companies.

 

[flopticalcube]

You are the only person in the world who quotes a PE ratio based on quarterly numbers. Everyone else compares the stock price with the earnings for one year. And for companies that are growing, like Apple does, you quote "trailing PE" and "forward PE": Trailing PE takes the numbers from the last year, forward PE extrapolates current trends for the next year. Apple has a trailing PE of 35, and a forward PE of 25.

The price that people pay for a share is rationally based on the profit that the company makes, plus the expectation of growth in the future, and then of course there will be many irrational factors. In the case of Microsoft, people don't expect any growth anymore. Clearly you will pay more for a company like Apple with 25 or more percent growth than for Microsoft with no room for growth at all.

Just illustrating a quick point based on the numbers given. Of course PE is annualized. No need to be offensive, gnasher.

 

[reverie]

Apple has 3 desktops selling around 200k each (stagnant since 2005) and 2 portables selling around 450k each (100 % growth since 2005). I think it's obvious that we won't see another desktop line for lack of customer demand.

Introducing a headless mac would cannibalize all 3 present desktop lines and force Apple to raise the price by say $100 for the mac mini, $100 for the iMac and $200 for the Mac Pro.

 

[scotty321]

Is anybody going to shareholders meeting this Thursday?

Is anybody on this forum going to the Apple shareholders meeting this Thursday at 10am?

If so, can you PLEASE stand up & ask Steve Jobs why in the hell he is keeping Intuit CEO Bill Campbell on the Apple Board of Directors, when Bill Campbell has CONTINUED to delivered COMPLETELY SUBPAR financial products for Mac OS X?

Even in the year 2007, Quicken & QuickBooks are absolutely horrible products on the Mac, and COMPLETELY pale in comparison to their Windows counterparts.

Just as a quick example:
1. Quicken for Mac does NOT auto-connect to MOST financial institutions for instantaneous downloading like it does in Quicken for Windows.
2. Quicken & QuickBooks for Mac both feature less than 50% of the feature set of the Windows versions of these products.
3. QuickBooks has no multi-user support, whereas every version of QuickBooks for Windows can be networked.
4. Neither product supports a cross-platform file format so Windows users will actually LOSE MANY FEATURES & FINANCIAL INFORMATION upon switching to Macintosh, and the tedious export/import routine for QuickBooks still does not work reliably under any circumstances.

These are just the top 4 issues off the top of my head, but obviously there are DOZENS UPON DOZENS more! There are no other real personal financial software alternatives for the Mac (with the exception of MYOB, which is okay for small businesses), so we are stuck with these subpar products from Intuit.

And the only way that many Windows users can switch to the Mac is to end up using their INtuit product in Parallels or Boot Camp.

All of this and BILL CAMPBELL SITS ON THE BOARD OF DIRECTORS AT APPLE!!

I will not be able to make it to the shareholders meeting this week -- can somebody please bring up this information at the meeting?

As far as I'm concerned, Bill Campbell should be kicked off the board completely.