Monday 18 December 2017

Apple's uncertain future after Jobs

WHAT does the future now hold for Apple, which briefly overtook Exxon Mobil to become the world's most valuable company last August, following the death of its founding genius Steve Jobs?

While Exxon has since regained the top slot, with a market value this week of $359bn (€266bn) against Apple's $350bn, a comparison between the two companies is instructive.

Whereas Exxon had 2010 sales of $392bn and after-tax profits of $38bn, Apple recorded annual sales of "only" $100bn and after-tax profits of €23.6bn over the same period.

Complicating comparison is Apple's $76bn cash hoard. Exxon also has large cash balances, just over $10bn at the middle of June.

When these cash balances are deducted, it can be seen that while Exxon Mobil is trading at the equivalent of 89¢ for every dollar of sales and just over nine times after-tax profits, Apple is valued at 274¢ for every sales dollar and at 11.6 times after-tax profits.

Apple's superior valuation has been justified by its success in launching one blockbuster product after another, the iPod in 2001, the iPhone in 2007 and the iPad in 2010.

With Jobs gone, will Apple be able to sustain the flow of hot new products? The initial omens aren't good. This week, just before Jobs' death was announced, Apple's latest product, the iPhone 4s, debuted to indifferent reviews.

Now that Jobs is gone, the suspicion is Apple will revert to being just another technology company. Sell.

Sunday Indo Business

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