On February 29, 2012, Leap Year, Apple achieved what only five other companies have ever done. Apple hit a market capitalization of $500 billion.
Before we analyze whether or not Apple is worth being the most valuable company in the world -- worth more than most countries -- let's take a quick peek at the five other companies that have hit this mark. (There are only 19 countries with more than $500 billion in GDP.)
$500 Billion Club
(Date - Company - Highest Market Value)
March 2000 - Cisco Systems - $538 billion
July 2009 - Exxon Mobil - $513 billion
August 2000 - General Electric - $581 billion
August 2000 - Intel Corp. - $503 billion
December 1999 - Microsoft Corp. - $604 billion
Feb. 29 2012 - Apple Inc. - $505 billion
source: Howard Silverblatt, the Senior Index Analyst for the Standard & Poor's Indices
Where are they now?
As you can see in the chart below, only one company -- Exxon Mobil -- has remained the 2nd most valuable company in the world. The others are worth less than half of their all-time high, with Cisco and Intel falling to 20% and 27% of that value, respectively.
So, will our Apple addiction be as profound and long-lived as our oil addiction?
Certainly not if Google and Amazon have anything to do with it. However, the Apple edge is entrenched in a number of key metrics, which make the valuation deep and difficult to dislodge. It's hard to imagine that the largest company in the world, Apple, boasts 73% earnings growth (year over year), the second highest net profit margin (25.80%) of the $500 billion club, the lowest debt (zero), a treasure chest of cash (over $31 billion) and one of the lowest price to earnings ratios, at just 15.44.
Perhaps the biggest bruise to Apple is yet to come, however. On February 21, 2012, ABC's Nightline featured an inside look into the Foxconn factories in China that make Apple (and other company's) products. The news show highlighted the low salaries and dismal work life of the Foxconn workers. So, will this become another "Nike moment?" as when Nike received all the bad press for having children stitch their shoes? Will Apple receive a lot of bad press? A Google search on "Apple" revealed a page of store locations, cool product reviews and exciting stock information, with only one Twitter mention of the ABC show.
Foxconn and Apple moved quickly to position the companies favorably prior to the February 21, 2012 airing. On February 17, 2012, just days before the show, Apple joined the Fair Labor Association and Foxconn raised wages of its Chinese workers by 16-25 percent, the third rise since 2010. The new salary level is $290 per month -- double what it was three years ago. That helps the factory worker (if only slightly), without digging too deeply into Apple's profit margins.
Incidentally, the last time the Foxconn factories made headline news, in the summer of 2010, not even multiple suicides could get major media channels to feature "The High Price of Cheap Goods." So, if you're interested in improving the lives of the young workers in China who make your iPhone and iPad, before their plight vanishes from our TV screens and minds, join 240,000 others who have signed an online petition. It's only February 28, 2012, and already the story is fading...
If the heat is turned up on Foxconn and Apple to improve the working and living conditions of the factory workers in China, that could, eventually, begin to squeeze Apple's fat profit margins. And if Google and Amazon continue to gain market share on smart phones and Internet pads, then the price of Apple products will have to come down to compete.
There are a lot of 'ifs' in those sentences. And since Apple is sitting on top of the world with a mountain of money, don't bet on it falling off its throne anytime soon.
Data for this article was gleaned from Howard Silverblatt, the senior index analyst for the Standard & Poor's Indices, Money.MSN.com, Sec.GOV and other respected, independent data sources.
About Natalie Pace:
Natalie Pace is the author of You Vs. Wall Street and Put Your Money Where Your Heart Is. She is the founder and CEO of the Women's Investment Network, LLC (a global financial news, information and education site), where she has been adding a splash of green to Wall Street and transforming lives on Main Street for more than a decade. She is a blogger on HuffingtonPost.com and a repeat guest on national television and radio shows such as Good Morning America, Fox News, CNBC, ABC-TV, Forbes.com, NPR and more. As a strong believer in giving back, she has been instrumental in raising tens of millions for public schools, financial literacy, the arts and underserved women and girls worldwide. Follow her on Facebook.com/NWPace. For more information please visit NataliePace.com.
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