Apple’s disappointing Q1 results is indicative of world capitalism's inability to return to normal rates of growth, according to the World Socialist Web Site.
Writing on the site, Barry Grey commented that the sharp reversal of the company’s growth trajectory was a reflection not only of stagnation and slump in the real economy, behind the giddy heights on world stock markets, but a warning that vastly inflated asset values are unsustainable and will inevitably come crashing down.
“Driven upward by multitrillion-dollar bank bailouts and an orgy of money printing and debt expansion promoted by the world’s central banks, stock prices have tripled since the low point of the post-Wall Street crash recession, further enriching the world’s financial oligarchs and widening the chasm between the rich and super-rich and the rest of the planet,” said Grey.
“This process is starkly illustrated by one statistic: In 2003, when Apple last suffered a quarterly sales decline, its market capitalization was $5 billion. Today, even with the recent drop in Apple stock, the company’s market value is well over $500 billion. The massive and irrational inflation of stock values is an expression of the growth of financial parasitism.
“In the feverish pursuit of profit, capital is going not into productive investment—on the contrary, the social infrastructure is being left to rot and the living standards of the working masses are being driven down—but instead into increasingly risky, exotic and fraudulent forms of speculation.
In Association with
“The decline in Apple’s sales is one more indication that an entire period of economic and geopolitical development, spanning a quarter century, is coming to an end, ushering in a new and violent period of economic conflict, nationalism and militarism between major powers, together with an upsurge in the class struggle.”
Apple’s second quarter earnings fell short of expectations, but greater focus was on its disappointing outlook for the next quarter. The company, led by CEO Tim Cook (pictured) is forecasting revenue of between $41bn to $43bn, substantially behind the $45bn-$47bn previously expected.
The iPhone accounts for two-thirds of Apple revenue and fewer are beings sold than a year ago. Apple still shifted 570,000 iPhones a day in the first three months of 2016, grossing €560 on each device.
Apple attaches quite a price premium to its brand cachet. Across its various products and services, Apple operates on a gross margin of 40% and an operating margin after overheads of 28%. The net profit margin in the quarter was 21%, with €100m dropping to the bottom line every day.
Shares Buyback
To prop up the share price, Apple is throwing money at shareholders. The company commenced its capital return programme in August 2012 and by March 2018 it is intended that €220 billion will be dispersed. Though the share is now yielding 3.6%, Wall Street doesn’t want to know.
According to David Donnelly, an analyst with Cantor Fitzgerald Ireland: “It wasn’t all bad news. The bright point in the announcement was an increase in returns to shareholders, which are rising by $50bn. A 10% increase in the quarterly dividend to $0.57 will account for roughly $15bn of that increase, while the remainder is to be spent on lengthening Apple’s current share buyback programme, which will now run until March 2018.
“At present, Apple is spending about $6bn per quarter buying back stock, something which it can easily afford to do given its net cash on the balance sheet stands at over $153bn. Stripping out its c.$29 in net cash per share, the stock is trading on 8.2 times 2016 expected earnings, a substantial discount to the rest of the S&P.” Donnelly added that the yield when buybacls are factored in is 3.6%.
In Barry Grey's view: "The systemic crisis of world capitalism is, as in the years leading up to World War II, driving the ruling classes ever more violently to seek a way out of their impasse through nationalism, war and dictatorship. At the same time, it provides the impulse for socialist revolution, the only alternative to world war. The crucial question that must be resolved is the building of a new political and revolutionary leadership for the coming struggles of the working class."
