Apple 2.0

Covering the business that Steve Jobs built

How Apple's profits grew 70%

December 22, 2010: 6:48 AM ET

Source: Asymco. Click twice to enlarge.

Asymco's Horace Dediu describes his latest graphic as "Apple's growth, cost structure, product-level and overall profitability in a self-explanatory chart," although judging from our experience and his readers' comments, the chart is not totally self-explanatory.

The two halves of Dediu's graphic show Apple's (AAPL) fiscal fourth quarters for 2009 and 2010 (which he labels calendar Q3 2009 and Q3 2010), where the vertical scale is the company's total quarterly revenue in billions -- $12.207 billion in 2009 and $20.343 billion in 2010.

The white rectangles in the first two columns represent the production costs for each of Apple's main sources of revenue -- iPhones, Macs, iPads etc. The colored bars in the first column represent the gross margin for each of those product lines, where gross margin is defined as revenue minus production costs, excluding fixed expenses and taxes. Fixed expenses -- research and development and selling, general and administrative expenses -- are represented in the third column, and taxes in the fourth.

The final column, the difference between the first column and the sum of the next three, shows Apple's quarterly net income -- $2.532 billion in Q4 2009 and $4.308 billion in Q4 2010.

Dediu's point, in case you missed it, is that the structure of Apple's business -- represented here -- yields extraordinary profits that grew last quarter 70% year over year.

Apple's first fiscal quarter of 2011 -- the big quarter -- ends Saturday, Christmas day, at midnight. The company usually reports earnings three or four weeks later.

[Follow Philip Elmer-DeWitt on Twitter @philiped]

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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