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FEBRUARY 05-11, 2012

CREATING A

LASTING ECONOMY

What We Have To Do To Get There

APPLE FOURTH QUARTER EARNINGS

The iEconomy How Much Is Your Money Worth? A Visual Overview of Your Standard of Living

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APPLE RESTORES S&P 500 EARNINGS

TABLE OF CONTENTS FEBRUARY 05-11, 2012

WITH ENOUGH CASH TO COVER GREECE

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HOW MUCH IS YOUR COFFEE? A VISUAL OVERVIEW OF YOUR STANDARD OF LIVING

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CREATING AN ECONOMY THAT’S BUILT TO LAST AND WHAT WE HAVE TO DO


APPLE RESTORES S&P 500 EARNINGS

WITH ENOUGH CASH TO COVER GREECE By Whitney Kisling

With its report yesterday, Apple Inc., the Cupertino, California-based iPhone maker, single-handedly erased a drop in Standard & Poor’s 500 Index earnings for the December quarter, turning a 4.2 percent decline into a 4.4 percent gain. Apple’s 116 percent profit growth helped push its total cash to $97.6 billion -- enough to cover Greece’s debt payments due in the next two years, according to data compiled by Bloomberg.


While results at companies from Google Inc. to Citigroup Inc. have trailed analyst estimates and Alcoa Inc. posted a loss, the world’s largest technology company beat revenue forecasts by $7.3 billion, the most ever. The performance came during a quarter in which U.S. unemployment averaged 8.7 percent and about 12.7 million Americans were looking for work. “They can probably bail out Greece,” Ian Ainsworth, a Toronto-based money manager at Mackenzie Financial Corp., said in a telephone interview. His firm owns Apple shares and manages $60.9 billion. “It just puts the power of the company in perspective with near $100 billion in cash on the balance sheet and generating that kind of free cash flow. It’s hard to conceive of a company with that kind of power.” Net income more than doubled to $13.1 billion as Apple sold 37 million

iPhones and posted $46.3 billion in sales. The total ranks among the highest quarterly profits on record. MediaOne Group Inc., acquired by AT&T Inc. in 2000, earned $26.6 billion in the second quarter of 1998. Ford

“Apple’s earnings were about 11 times the size of Zambia’s gross domestic product.” Motor Co. earned $17.6 billion in the first three months of 1998. Apple’s earnings were about 11 times the size of Zambia’s gross domestic product. Earnings Season The report may salvage a fourthquarter earnings season that was in danger of being the first since 2009 in which profits declined from a year ago. Analysts project income for S&P 500 companies climbed 3.4 percent in the period, according to data compiled by Bloomberg.

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$74.0

APPLE’S GROWING

BILLION

CASH PILE

$40.0 $12.0

$4.3

BILLION

BILLION

BILLION

BILLION

iPod 10.23.2001 Net Worth: $8 bil Stock Price: $9.07

iPhone 01.09.2007 Net Worth: $77 bil Stock Price: $92.57

MacBook Air 01.15.2008 Net Worth: $122 bil Stock Price: $169.04

Apple shares rose 6.5 percent to $447.56 at 2:21 p.m. New York time, after rallying 8.1 percent earlier, the biggest daily gain since Nov. 24, 2008. The stock is trading at its highest price ever, while the S&P 500 remains 16 percent below the record reached in October 2007, data compiled by Bloomberg show. The company’s almost $100 billion in cash and equivalents is larger than the combined market value of Boeing Co., Alcoa Inc. and Travelers Cos. -- three of the 30 Dow Jones Industrial Average companies. That’s enough money to cover Greece’s 48.2 billion euros ($62.56 billion) due in 2012 and 27.9 billion euros due next year, depending on the exchange rate. The country is facing a 14.5 billion-euro bond payment on March 20. New Zealand For calendar 2011, Apple’s sales rose to $127.8 billion, bigger than the size of New Zealand’s economy,

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$24.5

iPad 01.27.2010 Net Worth: $190 bil Stock Price: $207.88

Current Day

Net Worth: $312 bil Stock Price: $502.60

according to data compiled by Bloomberg. More iPhones were sold each day in the quarter ending Dec. 31 than babies were born in the world, according to data compiled by Bloomberg and the United Nations. Apple’s $97.6 billion in cash and equivalents is enough for the company to buy 2,000 tons of gold at current prices, the weight of 10 blue whales. “One word: impressive,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., which oversees about $75 billion, said in an e- mail. “Steve Jobs has a smile on his face wherever he is.” --With assistance from Nikolaj Gammeltoft, Inyoung Hwang and Lu Wang in New York, Adam Satariano in San Francisco and Timothy Homan in Washington. Editors: Chris Nagi, Michael P. Regan

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Most people who own an Apple product usually own more than one and are extremely satisfied.

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MINIMUM WAGE:

14.25 COST OF A TALL LATTE

2.55 MINIMUM WAGE:

9.00 When most people ask you how much a euro is worth, they think they want you to convert currencies. Little do they know, they are really asking the wrong question. When it comes to currencies, international value is something totaly different than local value. For instance, 100 yen may be only worth a little more than 1 American dollar, but 100 yen can barely buy a pack of gum in Japan. This is what people call the standard of living. Just because the minimum wage in Japan is 791 yen, doesn’t mean that everyone is rich. This infographic will help people measure out a currency’s true worth (how the locals view their money) by using Starbuck’s tall latte prices as a standard and comparing that to the country’s minimum wage.

COST OF A TALL LATTE

2.50 MINIMUM WAGE:

5.02 COST OF A TALL LATTE

2.85

UNITED AUSTRALI STA

1378 . 6 % m . 8 % ooff m

UNITED FRANCE STA

23 78

. 86 % o f m

UNITED SPAIN STA

56

.8 % of m


im

mi

n

28.00 COST OF A TALL LATTE

24.97

UNITED HONG KONG STATES

89

.2 % of min

MINIMUM WAGE:

10.25 COST OF A TALL LATTE

2.35 MINIMUM WAGE:

4580 COST OF A TALL LATTE

3337

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i mm u um mw w age

i mm u um mw w age

. 86 % o f m i n

3.06

4338 . 6 % m iinni . 7 % ooff m

UNITED CANADA FRANCE STATES

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MINIMUM WAGE:

275

3 48

COST OF A TALL LATTE

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COST OF A TALL LATTE

7.00

UNITED UNITEDKINGDOM STATES

. 96 % o f m i n

UNITED SOUTH STATES KOREA

72

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UNITED FRANCE JAPAN STATES

MINIMUM WAGE:

im

MINIMUM WAGE:

um w age

2.80

3388 . 6 % m iinni . 6 % ooff m

im

COST OF A TALL LATTE

im

um w age

ATES E

7.25

UNITED STATES

um w age

i nni m mi

MINIMUM WAGE:

im

i mm u um m w age

ATES IA

.9 % of min

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CREATING AN ECONOMY THAT’S ‘BUILT TO LAST’ James Dyson


Obama wants America to get back to the business of making things. That means developing skilled workers at home while taking a global view.

President Obama is right: America’s long-term success hinges on its ability to invent technology the world wants. It seems simple, but getting America back in the business of making things isn’t.

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It’s a global process. An idea born in Silicon Valley could be engineered in Switzerland, tested in China, and assembled in Taiwan. A stimulus to boost manufacturing may

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Governments need to give students greater incentives to persue scientific career paths catering to industry.

help the U.S. economy in the short term, but reinvigorating postwar-style production or space-race ingenuity is impossible without an increasingly capable workforce. Business demands it. And without it, long-term success will remain elusive. These days manufacturing extends far beyond the assembly line. It’s about inventing and solving problems: researching, testing, and experimenting with ideas and technology. The development of new products more and more defies borders. It’s impossible to make electronic goods exclusively on U.S. or U.K. soil—the supplier base, infrastructure, and

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often the expertise needed to produce everything from electric cars to solar panels is dispersed. Within that context, it’s easier to understand why highly skilled jobs are going the way of assembly and manufacture. New research by the National Science Foundation (NSF) reports that more companies

“constructing an economy that’s built to last depends on a ready supply of talented individuals ” are taking research and development—and 85 percent of the new jobs it creates—overseas. Still, this is by no means a one-

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way street. As Caterpillar shifts some R&D abroad, it’s considering moving parts of its manufacturing operations back to the U.S.  Creating new products is no longer one size fits all. But constructing an economy that’s built to last depends on a ready supply of talented individuals: people who invent, create, and develop the ideas that will drive exports and those who can assemble them. China gets it. To make its economy more knowledge and technology intensive, China is investing heavily in science and engineering education, infrastructure, and R&D support. Already wages are increasing, the middle class is growing, and the


country is developing new technology rather than just assembling products. And while the U.S. continues to file more patents than any other country, the Far East’s investment in R&D, fueled by China, matched U.S. contributions in 2009, according to the National Science Board’s report, Science and Engineering Indicators 2012. Engineering: U.S. Vs. Asia To compete, the U.S., like the U.K., needs more engineers and scientists. But of the world’s engineering graduates, less than 4 percent of degrees are earned in the U.S. vs. 56 percent in Asia, says a report from the NSF. It’s no wonder

such companies as Airbus, 3M, and Caterpillar are looking East for R&D talent. At my company, Dyson, we’re in the process of doubling the size of our U.K. R&D team to 750, but we don’t have enough qualified people to fill the specialized roles we need. While we carry out R&D of new technologies, we’re increasingly dependent on a combination of engineers at home and abroad to get our machines to market. Greater job training and partnerships between academia and industry are a step in the right direction. Currently half of U.S. science and engineering degrees go to students from outside

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the country’s borders. Why train brilliant minds simply to send them home again? In his State of the Union address, President Obama acknowledged that it’s these individuals who will invent new products, start small businesses, and create new jobs. While They’re Young But long-term success demands more. Government must invest in science and engineering education at an early age. And for homegrown talent, getting young people to be creative, test their ideas, and solve problems—rather than learning by rote—would help inspire and enthuse. More practical science

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experiments and innovative hands-on engineering classes, combined with more consistent STEM (science, technology, engineering, and mathematics) teacher development, would help reinvigorate interest in subjects children too often give up on. Manufacturing isn’t about us and them anymore. To safeguard it while creating future jobs, the U.S. needs to invest in a highly educated workforce and allow inventive companies, new and old, to thrive. Countries such as Singapore, where we make high-speed digital motors for our appliances, gear their education systems to better suit the progressively high-tech nature of their economy. Both the U.K. and the U.S. could offer greater financial incentives for promising students to study STEM subjects and help plug a growing gap. Better career advice—engineering is both highly rewarding and well paid—and more readily available industrial scholarships and

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experience would ensure that more of these students apply their knowledge to invention. To make the most of this talent, innovative small businesses should be prioritized when it comes to higher tax relief and lending. These companies often come with bigger risks—R&D is expensive and time consuming— but greater potential rewards. And R&D tax credits are essential: They support creative businesses of all sizes without forcing the government to pick winners.

“ Both the U.K. and the U.S. could offer greater financial incentives for promising students ...” It’s not possible to follow the old method of making what worked in the past. New economies and customers are emerging, supplies and suppliers are shifting, and talent can’t be treated territorially. The U.S. should embrace the changing nature of manufacturing while investing in the bright minds that will deliver on its long-term potential.

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People need to become well trained in the areas of math and science in order to secure a prestigious job in the manufacturing sector.

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Bloomberg Redesign  

I wanted to update Bloomberg Businessweek's look and gear it towards a younger audience.