Saturday, February 23, 2013

Apple's Revenue By Region: There's More To The Company's Story

On February 27th Apple will host its annual meeting of shareholders. While much attention is being paid to the company's holdings of cash and marketable securities and the recent sell-off in the share price, very little attention is focused on the company's organic growth. 

In the December quarter, Apple's  revenue rose nearly 27% on an equal week basis and the company reported record revenue and net income in the 13-week period. The impact of "share creep" from stock-based compensation reduced earnings per share $.06 year-over-year despite a $14 million gain in net income and the 14-week prior-year quarter reduced the rate of reported revenue growth to about 17.7%.

Due to extraordinarily high gross margin in the December and March quarters of FY2012, Apple will report negative earnings per share growth in the first six months of the current fiscal year.  Although I expect sequential margin recovery from the December quarter's 38.63% through the March quarter of next fiscal year, Apple's rate of earnings per share growth in FY2013 will be the lowest rate of growth in the company's recent history. But there's much more to Apple's growth story.

Apple's Growth By Revenue Region
Apple manages its businesses on a geographic basis. With the release of the company's December quarter results, management created an additional revenue region called "Greater China" and now reports revenue from other countries in the former Asia-Pacific revenue region as "Rest of Asia Pacific." 

Illustrated below is the percentage of recognized revenue delivered by each of Apple's revenue regions in the last fiscal year. 
Last fiscal year, both the United States and China represented more than 10% of Apple's reported revenue. The graph below illustrates revenue by region in the fiscal year and the corresponding rates of regional revenue growth.