Non-financial types are fond of bringing up the fact that Apple just has one income statement for all of their products. The insinuation is that Apple doesn’t get too worked up about gross margins on individual products because they are more concerned about margins as a whole. This couldn’t be further from the truth.
I can guarantee that Apple has detailed financial models on each of their product lines. You don’t get to the point where you’re raking in $200 billion per year in revenue at 40% gross margins without highly informed decision making. Every price change, component switch, or tooling decision will get plugged into the model to see what the impact to the product line’s gross margin is. Even if you are willing to take a hit to the income statement for something that you believe is the right decision but doesn’t increase margins, you need to know up front what to be prepared for.
What is much more likely is that very few people ever get to see these financial models, so many people may actually believe that they don’t exist. But they are there; it’s just that they’re kept on a strict need-to-know basis. I know, because I'm the guy who needs to help keep these models a secret. I keep a paper shredder by my desk at all times, and I don’t ever e-mail this kind of data unless it’s absolutely necessary.
So yes, there are people at Apple who need to make an account for how they are stewarding the gross margins on each product line. Their management of the product line income statement will be a huge component of how they are evaluated for performance and whether they advance within the company.
So just because there is only one P&L doesn’t mean that there isn’t intense scrutiny to every product line’s profitability. These detailed financial models that everyone will use in place of the more generic P&L allow a much more intimate view of all the details. In fact, the scrutiny could be even worse.
What is much more likely is that very few people ever get to see these financial models, so many people may actually believe that they don’t exist. But they are there; it’s just that they’re kept on a strict need-to-know basis. I know, because I'm the guy who needs to help keep these models a secret. I keep a paper shredder by my desk at all times, and I don’t ever e-mail this kind of data unless it’s absolutely necessary.
So yes, there are people at Apple who need to make an account for how they are stewarding the gross margins on each product line. Their management of the product line income statement will be a huge component of how they are evaluated for performance and whether they advance within the company.
So just because there is only one P&L doesn’t mean that there isn’t intense scrutiny to every product line’s profitability. These detailed financial models that everyone will use in place of the more generic P&L allow a much more intimate view of all the details. In fact, the scrutiny could be even worse.
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