Thursday, August 18, 2011

Apple v Exxon--A Footnote

All this stuff about how Apple is "as big as" or "almost as big as" or even "bigger than" Exxon--maybe I haven't read widely enough, but every one of those stories I've seen talks in terms of "market cap"--share price times number of shares outstanding.

Well now.  A moment's reflection  will tell you there is no reason on God's green earth to expect that all shares will sell at the same unit price as a single share.  Might be less, often more.  Indeed if it were to be the same, you'd have to count it as a crashing coincidence.

But of more direct interest--market cap talks only of equity, says nothing of debt.  The whole enterprise value counts both. So, how do Exxon and Apple compare in terms of debt?  There is a difference, although it's perhaps not as great as you might guess.

Start with Exxon. From the balance sheet, we see that non-current liabillities total about $93 billion--a bit over a quarter of the much-noted market cap.  Of course this is accounting-speak: non-current liabilities include, e.g., deferred charges and the dreaded "other."  Pure "accounting" longterm debt is $12.2 billion--pretty slim when you consider the size of the company, but still more than a rounding error.

For Apple, the comparable balance-sheet non-current-liability number is $6.67 billion--a trifle between friends.  Apple's "pure" long-term debt number is just what you'd guess for a Silicon Valley hottie--zero, nada, bupkas, zilch.  

So however you count it, once you throw in liabilities, the total Exxon value is still a good ways north of Apple.

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