In the quarter ending June 2011, Apple spent less than $1 billion on property, plants, and equipment.
By March 2012, the number had spiked beyond $2 billion, beyond $3 billion, and approached $4 billion.
Here’s a chart he made to show what the spike looks like so far:
Here’s the the interesting part about all this massive spending.
No one outside of Apple knows where it’s going.
“The capital is being deployed almost silently and, though vast in scale, barely gets a mention from analysts,” writes Dediu. “Not even a single question has been raised at any earnings call about this spending.”
His theory is that Apple, which prefers an “integrated” approach in everything it does, will soon make more of the components inside its gadgets, like chips.
That would explain why Apple has been so busy hiring former Texas Instruments employees, for example.
The truth is, Apple is a very secret company and it doesn’t have to say, specifically, where it’s spending that money.
For all we know, it could be building TV set factories.
One thing one know for sure is the Apple is always working on products that would cannibalize its current lineup.
Maybe Apple is investing billions in a product that could kill the iPhone, like computerized glasses.
It’s a look at the company’s PE ratio vs. that of the S&P 500.
Note that this is the “forward PE”, so at the moment it’s based on estimated earnings, but the gist would be the same even if you used trailing PE.
Of course, this chart makes Apple investors pull their hair out, since the ‘E’ has been growing so fast, they don’t understand why it’s converged with the general market like this. In theory, fast growing earnings should cause higher multiples.
On the other hand, as fast as it’s growing, we don’t think there are too many companies out there that have reversed such a big secular trend of PE compression.
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Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.
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