Cash-ing at Apple, Suicides at FoxConn

Apple Inc. reported its 3Q results on Tuesday.

Net income: $3.25 billion in the quarter, up from $1.83 billion in 3Q last year.

Revenues: $15.70 billion, up from $9.7 Billion in 3Q last year.

International sales: 52% of the total revenue in the quarter.

Gross margins: 39.1%

Operating margin: 27.0%

Cash and investments: $45.8 billion

Cash flow: $4.8 billion 3Q last year

3.47 million Macintosh computers, 9.41 million iPods, iPod ASP increase of 12%, 8.4 million iPhones including more than 1.7 million iPhone 4 sales, iPhone handset sales, accessory sales and carrier payments of $5.33 billion, 3.27 million iPads, with the value of iPads at $2.1 billion.

Now, a little rough analysis-

ASP of iPhone4 = $595

Let's assume that labor costs paid by Apple to FoxConn for the manufacture of iPhone4 are 10% of the COGS (which is perhaps higher than the actual number). Assuming a BOM of $190 (iSuppli estimates it to be $187.51), the production labor cost is approximately $21 per phone, a part of which goes to the workers physically working on the phones.

If Apple doubled the amount it paid to FoxConn for the iPhone manufacturing so that the people assembling and testing the phones could have a decent life, its COGS would go up by approximately $21 * 8.4 Million = $176.4 Million. If Apple paid an extra $21 for every device that was manufactured, its manufacturing costs would go up by 24.55 Million *21 or $515.55 million. Assuming Apple's tax rates are around 24%, this implies that Apple incurs increased cash expenses of %515.55 * .76 or about $392 million.

Apple would have reported net income of $2.86 billion, instead of $3.25 Billion. Diluted EPS would have been $3.08 instead of $3.51.

What is the price of suicides of Chinese workers at FoxConn?

Steve jobs has taken a compensation of $1 for each of the past three years, but the total compensation of the five named Executive Officers (reported in the proxy) was more than $50 Million in 2009. One need not feel sorry for Steve Jobs- he has been paid handsomely ($100 million plus) in the past.