Apple Inc. (NASDAQ:AAPL), in a massive increase over last year budget, plans to spend $10 billion in its future endeavors. The huge increase in spending reflects the company has realized of the intense competition ahead.
In July, last year, the iPhone maker announced its plans to invest around $7.2 billion in FY2012, excluding the investment on retail stores.
Analyst Katy Huberty of Morgan Stanley analyzed a high degree of correlation in CapEx and revenue growth, over the past seven years. Considering such a move, Huberty estimated the revenues of 56.4 billion for the holiday quarter, which was about $10 billion more compared to Apple’s best performance a year ago with quarterly revenues of $46.33 billion. However, Apple Inc. (NASDAQ:AAPL) reported revenues of 54.5 billion for the quarter, which was an increase of $8.17 billion on a yearly basis. If we go by the calculations, an increase in CapEx (from less than $1.5 billion in 2009 to $9 billion this year) will surely boost the company’s record revenues.
Apart from revenues, the CapEx will also help the company to produce and deliver competitive and innovative products. The new equipment purchased by Apple Inc. (NASDAQ:AAPL) will ensure a steady supply of components and finished products from partners along with cost minimization.
Another analyst from UBS Securities, noted in an earnings conference call that capital expenditures by the iPhone maker is almost as much as Intel does,” and asked, “I think you guys have said, you’re not going to become vertically integrated per se, but in a sense you are since most of that I assume is buying equipment for your partners.”
Replying to the questions, Apple Inc. (NASDAQ:AAPL)’s chief financial officer Peter Oppenheimer told that the company plans to spend “about $10 billion in CapEx this fiscal year, that will be up little under $2 billion year-over-year.”
Oppenheimer added, “we expect to spend a little bit under $1 billion in retail stores and the other $9 billion is spent in a variety of areas. We’re buying equipment that we will own that we will put in our partners facilities. Our primary motivation there is for a supply, but we get other benefits as well. “
Among other companies, the chip-maker, Intel Corporation (NASDAQ:INTC) plans to spend $12.1 to $12.9 billion in CapEx during 2012. The Korean firm, Samsung outlined plans to invest about $12.2 billion in its own semiconductor CapEx, compared to half invested last year to integrated circuits.
Solid State Technology observed one year ago “Samsung is significantly boosting spending for logic ICs. Approximately $6.5 billion of Samsung’s 2012 CapEx budget is dedicated to logic ICs. Samsung is Apple Inc. (NASDAQ:AAPL)’s foundry partner for the A4 and A5 application processors used in iPad tablet computers, iPhones, and iPod touch devices, and doesn’t want to lose this lucrative business.”