That's One Green Apple — Making Cash and the Environment King

Surprise, surprise. Apple had yet another blow-out quarter, thanks to sales and margin improvements in its key products, including the iPhone. Seeking Alpha has the specific goods on the cost side of the equation, noting that Apple's COGS "was 63.4 percent of Revenue in the quarter, which translates into a Gross Margin of 36.6 percent, up from 34.7 percent in September 2008. The Gross Margin significantly exceeded the 34-percent issued by Apple during July's conference call." Providing more specific detail on the cause of this improvement, "Apple indicated that the better-than-expected Gross Margin was due to more sales of high-margin products, component costs that didn't rise as much as feared, and lower freight costs." But what's most interesting to me is that Apple has been able to continually drive cost out of direct materials and the operations equation while also investing in sustainability.

A recent Reuter's article provides detail on one such green program, noting that Apple has implemented new standards "that restricts the use of nearly all bromine and chlorine compounds across all their product lines. As such, Apple now offers a wide range of PVC- and BFR-free consumer products including iPhones and iPods, as well as computers that are free of BFRs and most uses of PVC." But Apple is managing to do this while lowering -- not raising -- prices for its items. I previously wrote on the subject that Apple's drive to reduce costs (even for non-commodity products) is putting a new "emphasis on cost reduction and cost management efforts at Apple and throughout Apple's supply chain".

These recent moves have represented a new long-term investment in the supply chain as a competitive cost and innovation advantage. To wit, as I wrote a few months ago, Apple's reduced "pricing is a bet on its supply chain to deliver current and future cost reduction and overall total cost improvement. But it's also a bet that by partnering with suppliers more closely in the downturn as the rest of their business declines, that Apple can solidify relationships that will drive future product innovation while meeting overall corporate charters (e.g., support for its corporate focus on more environmentally friendly products going forward)." Apple's latest earnings report and environmental investments and standards are proof their earlier articulated strategy and plan is paying off, proving you can make both cash and the environment king at the same time -- not to mention driving top line sales and taking away market share from your competition in the middle of a recession.

Jason Busch

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