Apple Joins the $500 Billion Club

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.

Company Market Value on 2/28/12
Cisco Systems $109 billion
Exxon Mobil $411 billion
General Electric $203 billion
Intel Corp. $136 billion
Microsoft Corp. $267 billion
Apple Inc. $498 billion

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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Comments

[Natalie Pace]

05:22 PM on 03/29/2012

What do you think of the Fair Labor Association's report of workplace abuses at the Foxconn Factory where Apple products are manufactured? Make your voice heard in my survey.

http://www.nataliepace.com/np.php?fxn=survey

[Natalie Pace]

05:20 PM on 03/29/2012

The Fair Labor Association, a monitoring group, found widespread problems at the Foxconn factory, where Apple products are made.

“There’s this lingering sense among workers that they’re in a dangerous place,” Auret van Heerden, president and chief executive of the Fair Labor Association, said in an interview with the New York Times.

Read more about the report and the factory/Apple promises for reform in the NY Times article. http://www.nytimes.com/2012/03/30/business/apple-supplier-in-china-pledges-changes-in-working-conditions.html?hp

I also recommend reading the article I wrote on this problem in 2010, to get some more context on just how long this "issue" has been a problem, and some of the tragedies that have occurred ...

http://www.nataliepace.com/newsletters/members/news.php?np=yes&issue=707/707&article=02

[Natalie Pace]

08:13 PM on 03/01/2012

So... Did you watch the ABC special on the Foxconn factory in China where our Apple iWorld is assembled? (There's a link to the show in my HuffPo blog on Apple.) Do you think that there should be Apple factories here in the U.S.? Do you think that Apple should pressure Foxconn to raise wages and improve the living and working conditions for the Chinese worker? Do you care? Please vote in this anonymous survey...

http://www.nataliepace.com/np.php?fxn=survey

[jsgaetano]

06:07 PM on 03/01/2012

Seeing how Apple is completely dependent on foreign companies, this is definitely a bubble company.

[Ricardo Nest]

03:02 PM on 03/01/2012

Apple pales compare to Microsoft in terms of patent ownership, however, Apple is blowing Microsoft away in terms of revenue. Must say something about how good their product is. http://bit.ly/yytUbI

[Midnight Son]

11:01 PM on 02/29/2012

$500 billion club and, yet, they still can't afford to do manufacturing here? To hell with Apple.

[sej]

09:10 PM on 02/29/2012

It's not exactly an apples-to-apples (pardon the pun) comparison to compare a company's market capitalization (net worth at a particular point in time) with a country's GDP (it's net income over one year). You'd have to compare income with income or net worth with net worth.

[Natalie Pace]

12:00 PM on 03/01/2012

Countries are typically ranked and "valued" according to their GDP. (FYI: GDP does take into consideration imports/exports, but doesn't include all of the overhead costs that corporate net income does.) Companies (particularly growth companies) are typically valued at their market capitalization. And you are right to note that market cap (market value) is different than annual sales and income. In Apple's case, the sales last year were $128 billion, with income of $33 billion. That puts the price to earnings ratio at 15.45 (as of 3.1.12). That P/E is fairly low for the stock market in general and growth companies in particular...

[dick freebird]

08:26 PM on 02/29/2012

Market valuation is about emotion, not fundamentals. There's that. But that is the
genius of Apple - making the purchase of a data appliance an emotional process.

That, and laying a patent minefield around every stinking gesture the hand might
make. But I've got one for them that is protected by longstanding prior art....

[Natalie Pace]

12:04 PM on 03/01/2012

The fundamentals (at least for now) support the market value in Apple's case. Apple's sales last year were $128 billion, with income of $33 billion. That puts the price to earnings ratio at 15.45 (as of 3.1.12). That P/E is fairly low for the stock market in general and growth companies in particular... The growth of revenue at Apple is astounding. 73% in the last quarter...

[rmcgregor02]

06:49 PM on 02/29/2012

lmao - these are the top companies invested in by institutional investors ... aka government funds.

[Natalie Pace]

11:49 AM on 03/01/2012

Here's a list to look at the top institutional investors. As you can see, the top holders of Apple stock are Vanguard, Fidelity, State Street, T. Rowe Price, PowerShares, TIAA-CREF and more. These are the mutual fund providers and pension managers. So, these are not government funds. They are our retirement funds -- privately held...

http://investing.money.msn.com/investments/institutional-ownership?symbol=aapl

[rmcgregor02]

01:32 PM on 03/01/2012

Now look up Calpers (for example) and add the acronym CAFR; do the same thing with every one of the hundreds of thousands of government investment funds :)

X's and O's

I'm done commenting about this stuff though; I have a bad habit of not shutting up 'bout this stuff.

[independentvoter007]

04:18 PM on 02/29/2012

where are all the anti-capitalism comments? Oh, its Apple, and everyone on this site owns an iPhone...

[retrievals]

04:15 PM on 02/29/2012

On slave labor.

[ringmaster]

04:07 PM on 02/29/2012

When my Mini expires, I'm going to break a lifetime habit and buy a PC.
For al the talk, Apple has has scored a zero as a responsible citizen, even worse than then MS..

[Natalie Pace]

09:06 PM on 02/29/2012

Apple is not the only tech company using FoxConn and Hon Hai factories. Apple, Sony, Dell, Nokia, Cisco, Intel, Microsoft, Nintendo, Amazon, Motorola, Nokia and Hewlett-Packard products have all been made there. Here's a link to an article I wrote two years ago on the issue.

The High Price of Cheap Goods
http://www.nataliepace.com/np.php?fxn=article&id=20100709

For those of you who want to see better working conditions in the Chinese factory, here's the link to sign the petition. Almost 240,000 people have already applied pressure on Apple to make things right.

http://www.change.org/petitions/apple-ceo-tim-cook-protect-workers-making-iphones-in-chinese-factories

[ringmaster]

09:07 AM on 03/01/2012

Yes, the question is, where can I buy electronics from a responsible manufacturer ?