Apple-nomics Trickles Down to Suppliers

Trickle-down economics is a heated term used in politics that refers to the idea that economic benefits provided to the wealthy will make their way down to the less fortunate members of society.  Politics aside, Apple Inc. (NASDAQ:AAPL) is creating their own trickle-down effect in the stock market.

Late Tuesday, the tech giant reported colossal financial results for its fiscal 2012 first quarter, which ended December 31, 2011.  Net income increased to $13.06 billion ($13.87 per share), compared to only $6 billion ($6.43 per share) in the same quarter a year earlier.  Revenue also surged 73.3 percent to $46.33 billion.  Apple easily beat the mean analyst estimate of $10.07 per share, and the average revenue estimate of $38.76 billion.  “We’re thrilled with our outstanding results and record-breaking sales of iPhones, iPads and Macs,” said Tim Cook, Apple’s CEO. “Apple’s momentum is incredibly strong, and we have some amazing new products in the pipeline.”

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Apple’s outstanding results are trickling down to many companies throughout the stock market.  Due to heavy criticism about working conditions in factories, Apple recently disclosed a massive report detailing its major suppliers for the first time in history.  While it is unknown exactly how much each supplier contributes to Apple, many companies on the supplier list are seeing their shares rise after the earnings report.  Qualcomm Inc. (NASDAQ:QCOM), which supplies the baseband processor for Apple’s iPhone 4S, received a 2 percent boost in late market trading.  Other Apple suppliers such as Broadcom (NASDAQ:BRCM) and TriQuint Semiconductor (NASDAQ:TQNT) also surged 4.6 percent and 7.3 percent, respectively.

In addition to selling 5.2 million Macs and 15.4 million iPods, Apple sold a whopping 37.04 million iPhones in the quarter, representing 128 percent unit growth over the year-ago quarter.  Sales were powered by the new iPhone 4S.  The latest iPhone unit contains Siri, a voice recognition feature.  Siri is powered by technology from Nuance Communications (NASDAQ:NUAN).  Shares of the leader in voice recognition technology jumped more than 5 percent after Apple’s earnings announcement.  Nuance’s technology can also be found in Ford’s (NYSE:F) SYNC platform.

Wireless communication companies such as Verizon (NYSE:VZ), AT&T (NYSE:T) and Sprint (NYSE:S) are also benefiting from the Apple-nomics effect.  On Tuesday, Verizon reported in their fourth quarter earnings report that they sold 7.7 million units.  A staggering 55% of those units were iPhones.  The company’s CFO Fran Shammo noted that the carrier’s iPhone activity more than doubled during the quarter, due mainly to strong iPhone 4S sales.

Although some feared Amazon’s (NASDAQ:AMZN) new Kindle Fire tablet would dampen Apple sales, this is simply not the case.  Apple’s latest earnings report proves it is still the leader in the mobile revolution, and its effect can trickle throughout the stock market and down to suppliers.  Apple-nomics may even trickle down to book publishers and students, as Apple teams up with Pearson (NYSE:PSO) and McGraw-Hill (NYSE:MHP) to provide digital textbooks on the iPad at a lower price than hardbacks.  Investors interested in Apple’s entire supplier list can obtain the document from here.

Investor Insight: Apple Inc. Earnings: Higher-Than-Expected Net Income.

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com