Decoding Apple’s $8 billion in capital expenditures for 2012
A huge uptick in planned spending has analysts scratching their heads
Once a year in its Form 10-K Apple (AAPL) reveals to the SEC — and to investors — how much it has set aside in the year ahead for so-called CapEx — capital expenditures on land, buildings, machinery, equipment and leasehold improvements (i.e. retail stores).
In that regard, the 10-K the company filed last week was a doozy:
The Company anticipates utilizing approximately $8.0 billion for capital expenditures during 2012, including approximately $900 million for retail store facilities and approximately $7.1 billion for product tooling and manufacturing process equipment, and corporate facilities and infrastructure, including information systems hardware, software and enhancements.
That $8 billion is a record, up sharply from the $4.6 billion it set aside last year. And the $7.1 billion that’s left when you subtract out the spending on retail stores is a 78% increase from the $4 billion it invested in manufacturing equipment and corporate infrastructure in 2011.
Several analysts have taken a crack at what this means. Both Barclay’s Ben Reitzes and Morgan Stanley’s Katy Huberty note that in the past, Apple’s growth in revenue has closely tracked its growth in capital expenditures, and each takes the CapEx guidance as a sign that Apple’s fiscal 2012 revenue will outpace their estimates:
- Reitzes says it implies revenues of about $160 billion, well ahead of his estimate of $142 billion.
- Huberty thinks it may suggest revenues as high as $184 billion, nearly $40 billion higher than her estimate of $145 billion.
Huberty expects Apple to spend about $1 billion of that $7.1 billion on its new headquarters. Reitzes seems to think that much of it will be spent on server farms for iCloud.
Asymco‘s Horace Dediu has a different — and considerably more detailed — take on CapEx spending. He breaks it down into its component parts and compares estimated spending with actual cash outlays. Apple’s spending on machinery and equipment, he points out, most closely tracks its production of iOS devices (iPhones, iPads and iPod touches), suggesting that iOS device production in 2012 will grow at the same rate is always has: 100% per year. See his chart below.