Apple Restores S&P 500 Earnings With Enough Cash to Cover Greece Payments

By Whitney Kisling - Jan 26, 2012 4:12 AM GMT+0700
Call it the iEconomy.

With its report yesterday, Apple Inc. (AAPL), the Cupertino, California-based iPhone maker, single-handedly erased a drop in Standard & Poor’s 500 Index earnings for the December quarter, turning a 4.2 percent decline into a 4.4 percent gain. Apple’s 116 percent profit growth helped push its total cash to $97.6 billion -- enough to cover Greece’s debt payments due in the next two years, according to data compiled by Bloomberg.

While results at companies from Google Inc. to Citigroup Inc. have trailed analyst estimates and Alcoa Inc. posted a loss, the world’s largest technology company beat revenue forecasts by $7.3 billion, the most ever. The performance came during a quarter in which U.S. unemployment averaged 8.7 percent and about 12.7 million Americans were looking for work.

“They can probably bail out Greece,” Ian Ainsworth, a Toronto-based money manager at Mackenzie Financial Corp., said in a telephone interview. His firm owns Apple shares and manages $60.9 billion. “It just puts the power of the company in perspective with near $100 billion in cash on the balance sheet and generating that kind of free cash flow. It’s hard to conceive of a company with that kind of power.”

Net income more than doubled to $13.1 billion as Apple sold 37 million iPhones and posted $46.3 billion in sales. The total ranks among the highest quarterly profits on record. MediaOne Group Inc., acquired by AT&T Inc. in 2000, earned $26.6 billion in the second quarter of 1998. Ford Motor Co. earned $17.6 billion in the first three months of 1998. Apple’s earnings were about 11 times the size of Zambia’s gross domestic product.

Earnings Season

The report may salvage a fourth-quarter earnings season that was in danger of being the first since 2009 in which profits declined from a year ago. Analysts project income for S&P 500 companies climbed 3.4 percent in the period, according to data compiled by Bloomberg.

Apple shares rose 6.2 percent to $446.66 today, gaining the most in a day since May 10, 2010. The stock is trading at its highest price ever, while the S&P 500 remains 15 percent below the record reached in October 2007, data compiled by Bloomberg show.

The company’s almost $100 billion in cash and equivalents is larger than the combined market value of Boeing Co., Alcoa Inc. and Travelers Cos. -- three of the 30 Dow Jones Industrial Average companies. That’s enough money to cover Greece’s 48.2 billion euros ($62.56 billion) due in 2012 and 27.9 billion euros due next year, depending on the exchange rate. The country is facing a 14.5 billion-euro bond payment on March 20.

New Zealand

For calendar 2011, Apple’s sales rose to $127.8 billion, bigger than the size of New Zealand’s economy, according to data compiled by Bloomberg. More iPhones were sold each day in the quarter ending Dec. 31 than babies were born in the world, according to data compiled by Bloomberg and the United Nations.

Apple’s $97.6 billion in cash and equivalents is enough for the company to buy 2,000 tons of gold at current prices, the weight of 10 blue whales.

“One word: impressive,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which oversees about $75 billion, said in an e- mail. “Steve Jobs has a smile on his face wherever he is.”

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net