5 Tech Companies More Profitable than Exxon Mobil
February 29, 2008
A lot has been said recently about the “Record Profits” of the oil industry. Words like “Price Gauging” and “Insane Profits” fall from the lips of would be pundits all over the Internet. what I would like to do today is show you that Exxon Mobil is not the big bad profiteering company many people think they are. In fact I am going to tell you about five companies in the Tech sector with larger profit margins than Exxon Mobil.
Exxon Mobil
Gross Profit Margin1: 43.3%
EBIT Margin2: 18.7%
EBITDA Margin3: 18.5%
Pre-Tax Profit Margin4: 18.6%
52 week Range on stock price: 69.02 - 95.27
Market Cap: 481.04B
Those numbers look very, very good, don’t they? With profit margins like those Exxon Mobil has been able to pull down record profits like no other public company in the world! Are those numbers insane? Should Exxon Mobil be punished for having such massive profits?
If you think Exxon Mobil should have its “insane” profits taxed by the government than you should also want these five tech companies taxed for their record profits too.
Apple Inc
Gross Profit Margin: 38.1%
EBIT Margin: 18.7%
EBITDA Margin: 17.7%
Pre-Tax Profit Margin: 18.7%
52 week Range on stock price: 83.75 - 202.96
Market Cap: 114.17B
Apple’s Gross Profit Margin is a little bit lower than that of Exxon Mobil but its Pre-Tax Profit Margin is better than that of Exxon Mobil. Let’s not forget that the stock price of AAPL took an amazing roller coaster ride over the past 13 months. Just before MacWorld 2007 APPL was trading in the $80 range. It passed $200 a share in 2007 before crashing down to its current $130 range today.
Gross Profit Margin: 69.3%
EBIT Margin: 32.2%
EBITDA Margin: 33.9%
Pre-Tax Profit Margin: 32.2%
52 week Range on stock price: 437.00 - 747.24
Market Cap: 148.98B
Look at those number. If anyone is guilty of profiteering should it not be Google? This Internet advertising juggernaut is blowing everyone away. Or, it was, last year. Google stock peaked a few months before Apple did and recent news has not helped it one bit. Still, look at those margins!
Yahoo
Gross Profit Margin: 66.6%
EBIT Margin: 16.7%
EBITDA Margin: 21.4%
Pre-Tax Profit Margin: 16.7%
52 week Range on stock price: 18.58 - 34.08
Market Cap: 39.26B
Even though Yahoo has suffered since Google began eating their lunch (breakfast, dinner, brunch, snacks, etc…) it is still a very profitable company. Its Pre-Tax Profit Margin is not looking so hot these days and they are suffering under a number of shareholder lawsuits (some tied to their declining Microsoft’s buy out offer). Yahoo also has problems with spending large amounts of money buying up web companies and then letting them die.
Intel Corp
Gross Profit Margin: 62.5%
EBIT Margin: 21.6%
EBITDA Margin: 32.8%
Pre-Tax Profit Margin: 21.5%
52 week Range on stock price: 18.05 - 27.99
Market Cap: 118.60B
Intel is old school tech. They have been a big player in the microchip industry for a long time. Fighting off competition from AMD and Texas Instruments is what this company does well. They have been around for a long time and likely will be around for even longer.
Microsoft
Gross Profit Margin: 81.4%
EBIT Margin: 39.3%
EBITDA Margin: 39.9%
Pre-Tax Profit Margin: 39.3%
52 week Range on stock price: 26.60 - 37.50
Market Cap: 259.94B
Microsoft, everyone seems to forget just how big this company is. Their Market Cap is a little over half of that of Exxon Mobil and their margins are even higher than that of Google! Even with the lukewarm reaction to the release of Windows Vista Microsoft has had no problem remaining profitable. This is due in part to the amazing Xbox line of video game consoles.
Conclusion
Now that you see the profit margins of these five tech companies compared to that of Exxon Mobil do you still think they are making insane profits? Do you think these five companies should suffer the same “windfall profit tax” that many in Congress want to befall the oil companies?
Exxon Mobil may be posting huge profits in regards to dollar amounts but, if they had the profit margins in place of any of these five tech companies they would be making even more money.
1Gross Profit Margin (Profit Margin After Cost of Goods Sold): Revenues minus cost of goods sold, divided by revenue, expressed as a percentage
2EBIT Margin: Earnings before interest and taxes, divided by revenue, expressed as a percentage.
3EBITDA Margin: Earnings before interest, taxes, depreciation and amortization, divided by revenues, expressed as a percentage.
4Pre-Tax Profit Margin: The pre-tax earnings from continuing operations (not including discontinued or extraordinary items) divided by revenue, expressed as a percentage.
* Disclaimer: The numbers used in this story are from the last quarter fully on record: 06/2007 and comes from data freely available via Forbes.com
Written by Steve D · Filed Under Internet
http://money.cnn.com/galleries/2007/fortune/0704/gallery.F500_profitable.fortune/index.html
This jackass either doesn’t understand basic economic
terms like profitable, which is a measure of the
“total profits” a company makes, or is purposely
confusing the issue for political purposes.
Conveniently, he uses “profitable” in the headline,
then subtly transitions to “profit margins” in the
body of his argument. If he wants to argue about
which company has fatter “profit margins” than Exxon
Mobil he’s likely to find thousands, if not millions,
of companies with higher profit margins.
One key distinction he doesn’t address is the nature
of the products being offered by those 5 companies and
the products being offered by gas companies. Apple,
Microsoft and the others offer products with readily
available alternatives, or in economic terms, products
with elastic demand. Gas is not such a product.
Americans cannot readily utilize alternative sources
of energy, and thus, gas is a product with inelastic
demand. Comparing the “profit margins” of products
with elastic and inelastic demand is grossly
misleading.
Those companies are more profitable. They make more profit per dollar than Exxon Mobil. The only reason Exxon Mobil is seen to be making “obscene profits” is because the company is so large. If Exxon Mobil had not gone through so many acquisitions and mergers they would not be making the “obscene” profits they are making!
If company A makes a $100 profit on earnings of $200 and company B earns a profit of $15 on earnings of $20 which one is more profitable? Company B is more profitable.
Profit margin is the only fair way to compare profits when you deal with companies with differing market caps.
As another example which transaction provides more profit:
Stock A goes from $5 a share to $10 a share.
Stock B goes from $100 a share to $105 a share.
The first one gives you more profit because you doubled your money. Stock B only gave you a 5% return.
Both returned $5 but stock B required an investment of 20x what stock A required.
[…] tax? The oil industry has a pre-tax profit margin less than half of that of the computer industry. They made $40 billion in profits on ~$220 […]
[…] too!… You know, companies like your search engines and ipod makers and chip manufacturers… 5 Tech Companies More Profitable than Exxon Mobil : TechVat Why have so many people become a bunch of titty babies? Quit whining; start carpooling. […]
While it’s nice to compare “profit margin” and “profit,” the fact is that oil is a necessary commodity. Computers, computer parts, computer software and Internet advertising are not. I buy a computer once every five years or so. And computers cost less and less with each generation. However, I have to buy gasoline just about every week.
Oil companies are in business to make money. Period! They are not there to provide a free service. Total profits are what they are. Profit margins are not skewed or out of whack. Making 10 cents on every dollar of sale is very reasonable to me. If you don’t like it, ride a bicycle, buy a hybrid, carpool, take public transportation, or walk if it makes you feel better. Better yet… How about drill in ANWAR or off the coast of Florida or other places in the U.S. to increase our domestic supply and keep us from being dependent on OPEC and other countries? Or how about just building more refineries? The enviro-wackos and liberal politicians are the real problem, not the oil companies.
[…] price gouging and record profits and blah blah blah. It’s probably worth remembering how an oil company’s finances match up against five different tech companies. I’m sure Bill Gates will be called before a congressional committee investigating price […]
Of course you get some Republican kook talking about “Oil guys are in it to make money too!”…..not caring that their greed has gotten out of control. He probably has the money to fill his Hummer every 5 miles, so no problem for him. “F my countrymen!”, he says.
I can only wish bankruptcy upon that dumb ass. (Mike)
I’m sure he’s still proud that he voted for George Walker Texas Ranger Bush twice too….
As for this article, oil companies and computer companies are like apples and oranges. Not comparable.
Exxonmobil profit/profit margins are not “obsene”. If you think that gas is a nessesity, you are wrong. There are alternitives out there. Yes, they cost more. Gas is still cheap at $4.00 like it or not. When the whinners as a whole learn this, and start doing something other then whinning,i.e. drive less, get smaller car, mass transit, electric, CNG, AND(heven forbid) ethanol) then and only then can we start getting these other products cheaper. Funny thing that is. Supply and demand says that the price goes up with demand, but if the demand is there it pays for the infrastructure and lowers the price. wierd huh.