Apple’s 2014 Annual Report: Insight on Employee Numbers, Sales Growth, Retail Stores, and More

Apple today filed its 2014 10-K annual report with the U.S. Securities and Exchange Commission, offering a look at how the company has grown over the past year. Among the interesting details included in the report:

– The iTunes Store generated a total of $10.2 billion in net sales during 2014, up from $9.3 billion in 2013. Apple credits the growth to an increase in revenue from app sales, but acknowledged that digital music sales were in decline and partially offset the growth.

– Apple noted that it now has 92,600 full-time equivalent employees, up from 80,300 at the end of fiscal 2013. The majority of that growth was outside of the company’s retail division, which grew by 3,400 to 46,200 full-time equivalent employees.

– Apple’s store count increased by 21 during fiscal 2014, with average revenue per store increasing slightly to $50.6 from $50.2 million in 2013. As noted during its earnings conference call last week, Apple expects to open 25 new retail stores in fiscal 2015 with three-fourths of those stores being outside of the United States. Apple is also planning to remodel five of its existing stores.

– Apple spent a total of $6.0 billion on research and development in fiscal 2014, up significantly from the $4.5 billion spent last year. That amount contributed towards the company’s efforts to “develop new technologies to enhance existing products and to expand the range of its product offerings.” As noted by the Financial Times, Apple’s $6.0 billion investment is the highest level relative to revenues since 2007, which is the year that the iPhone was released.

– Real estate holdings increased slightly, with Apple now owning or leasing 19.7 million square feet of building space, up from 19.1 square feet at the end of 2013. Apple says that most of the building space is in the United States, and is expanding its existing office space and customer support call center in Austin, Texas. Work also continues on the company’s new campus in Cupertino, which is once again said to contain an estimated 3.6 million square feet of space.

– Apple is expecting its capital expenditures to rise to $13.0 billion in 2015, up from the $11.0 billion spent in 2014. $600 million of that amount will be allocated towards retail store facilities, while $12.4 billion will be used for other expenditures including manufacturing process equipment, data centers, and product tooling.

Apple’s annual report, which is mostly targeted at investors and regulators, contains a number of other details about the company’s operations. The report also provides an analysis of current product lines and addresses topics like executive compensation, investments, taxes, and more.

Tim Cook talks Apple Watch, TVs and the power of the iPhone

Tim Cook started out his talk with Gerard Baker, Wall Street Journal’s editor-in-chief, at the WSJD Live conference with a very obvious statement: “The phone is the majority of the company’s revenue,” and it will continue to be for the foreseeable future. Apple doesn’t just make money from phone sales, but also everything that comes with it — apps, iTunes media and, yes, Apple Pay. Cook was eager to point out that Apple Pay reached over a million card activations in just the first 72 hours, and that Visa and Mastercard said that Apple Pay is already the number one player in contactless payments.

When asked what he thought of retailers like CVS and Rite Aid disabling Apple Pay due to a rival technology, he said it was a skirmish. He added that “over the long arc of time,” retailers are only relevant if customers love them and that they’ll need to adapt eventually. He said that Apple Pay is “the first and only mobile payment system that is easy, private and secure.” “We don’t want to know what you buy, we’re not into collecting data, we’re not Big Brother,” Cook said. “We’ll leave that to others,” he added, as if to imply Google might be the Big Brother in question.

Cook said that [the Apple Watch] is something that you would use so much that “you will end up charging it daily.”

Phones aside, Cook also touted other areas of growth for the company. Mac sales, for example, grew “remarkably” last quarter, adding that he thinks the Mac has a great future. Of course, he also mentioned the much-hyped Apple Watch, which he says opens up two new categories for the company: Health and fitness plus fashion. “We didn’t announce a product, we announced three collections,” Cook said, referring to the Watch. “We saw that something you wear has to be more personable, more customizable … the fashion thing is totally new for us.” As for the Watch’s battery life? Though he wouldn’t give details, he did say that it’s something that you would use so much that “you will end up charging it daily.”

As for televisions, Cook reiterated what he said during his Charlie Rose interview, describing today’s TV experience as outdated and “straight from the 1970s.” He praised HBO’s streaming-only service, and says consumers are increasingly trying to get away from a cable TV subscription. As for what Apple’s going to do with TV? Cook played coy and didn’t offer much details, but he seemed optimistic: “I believe something great can be done.”

Answering a question about whether the Android vs. iOS wars will end up like the Mac vs. PC one, Cook said that wasn’t a fair comparison. “There weren’t enough apps on the Mac,” he said. “That isn’t a problem for iOS.” He adds that iOS has over 1.3 million apps, and that generally speaking, developers are writing iOS apps first and then porting them to Android. “We sold a quarter billion iOS devices last year. I wouldn’t call that a low-volume business.”

Cook also tackled privacy at the end, a recent hot button topic. “Your data is yours,” said Cook, emphasizing that the company takes privacy and security very seriously. “We don’t read your iMessages. We designed iMessage as such that we don’t read any of it,” adding that if the government were to ask for it, they couldn’t supply it. After fielding a question over the demise of the iPod Classic among others, Cook hinted that he’s open to a collaboration with AliPay, Alibaba’s online payment system. Jack Ma had said he wanted to work with Apple Pay in a previous talk at WSJD Live. “If we can find some areas of common space, I’d love it.”

Filed under: Cellphones, Apple

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