Apple's Overseas Demand in a Word: Exploding

This article is part of our Rising Stars portfolio series.

In today's world, most companies span several regions and sell across the world. As Foolish colleague Morgan Housel notes, 10 years ago, less than a third of S&P 500 revenue came from outside the United States. Today, more than half of the S&P 500's growth comes from overseas. And that number is growing.

The truth is, investors regularly underestimate how much demand comes from abroad. More importantly, for large, multinational corporations that have already established a presence in their home markets, much of their future growth comes from foreign markets.

With that in mind, today we're looking at Apple (Nasdaq: AAPL). We'll examine not only where its sales and earnings come from, but also how its sales abroad have changed over time. 

Where Apple's sales are today
Today, Apple collects 44% of its sales from its home United States market.

Source: Capital IQ, a division of Standard & Poor's.

Where Apple's sales were five years ago
Five years ago, Apple collected a far larger 59% of sales from the United Sates. As revenues climbed from about $14 billion in fiscal 2005 to $64 billion in the past year, overseas sales led the charge. Despite being known as a company with more U.S.-focused sales than its peers have historically had, international revenue soared 78% in fiscal 2010, versus a relatively "sluggish" 28% sales-growth rate at home. Apple's international sales are simply on fire.

Source: Capital IQ, a division of Standard & Poor's.

But where are the profits coming from?
Another measure to look at is where Apple's profits come from. Sometimes companies can push into new geographies to expand their brand but have limited profits in the new location. That can be a sign of either a growth period or tough dynamics in new markets. In Apple's case, here's the breakdown of its 2010 operating profit before tax.

Source: Capital IQ, a division of Standard & Poor's. Retail sales are distributed in proportion to general sales levels. Accounting for regional differences in retail store sales, end sales may differ slightly.

The Americas are still Apple's largest market in terms of profit, though they beat the European market (which, interestingly, also includes the Middle East and Africa) by only a slim amount. Growth rates continue to soar in Apple's Asia-Pacific region, and it's not unimaginable for that area to constitute the company's largest market in the next half-decade -- or sooner.

Source: Capital IQ, a division of Standard & Poor's. Retail sales are distributed in proportion to general sales level. Accounting for regional differences in retail store sales, end sales may differ slightly.

Along with the rise of wealth in Asian economies, Apple has seen its fortunes soar. Last year, the company tallied up $8.25 billion in sales (not including retail contributions) to its Asia-Pacific region -- an area that includes Australia and all of Asia except for Japan. In the first half of the year, before its historical peak season, Apple is already reporting that it has just under $5 billion in sales to greater China alone. Apple's sales level to China is up four times year over year, and it's not even on China Mobile (NYSE: CHL), the country's largest carrier, with 600 million subscribers.

Competitor checkup
One last point to check is how Apple's footprint compares with some of its peers across the broader technology industry.

Source: Capital IQ, a division of Standard & Poor's.

Not surprisingly, Apple isn't as geographically diversified as Nokia, which sells low-cost "feature phones" that are popular across the world. What's truly shocking is that Apple has managed to make such surprising inroads into markets such as China, despite the high non-carrier subsidized cost of the iPhone. That's in large part the result of having consumers perceive high-end smartphones as a luxury item worth spending large amounts of money on.

What might be surprising to Apple investors is that Research In Motion is seeing comparable gains in International sales. While its U.S. sales tumbled 10% last fiscal year despite booming smartphone sales, its combined International sales grew 91% in that same time frame. However, the tide can quickly shift in smartphones, and Research In Motion is predicting a steep sequential sales decline in the coming quarter, so its emerging-market stronghold may be beginning to crumble as well.

Keep searching
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