Apple Inc (AAPL): Did It Post a $2B Bailout of Sharp?

Apple Inc. (NASDAQ:AAPL) may have provided some assistance to another company. It takes a little forensic accounting to figure it out, because it isn’t obvious in the company’s quarterly earnings report, but an analyst is coming to that conclusion after looking at the actual numbers on the earnings report that seemed to be off from the forecast numbers before the release. Investors in Apple Inc (AAPL) stock, like billionaire David Tepper of Appaloosa Management LP, might be interested in getting a clue as to where the discrepancy lies and how it might affect the company in the long term.

Asymco analyst Horace Dediu looked over the numbers and found a discrepancy. He found that Apple Inc (NASDAQ:AAPL) posted expenses in 2012 that were $2.3 billion higher than what was forecast, and cash outlays for capital expenditures was $2 billion lower than the expenses, which signified that the expense did not come from cash. He postulated that this money went toward Sharp, which has been an important partner for Apple Inc (AAPL) display screens, and Sharp has been having some financial struggles of late.

Dediu wrote: “Circumstantial evidence points to the asset being production equipment (or even a whole plant) previously owned by Sharp. Sharp is a key supplier of screens to Apple but is also in financial distress. … My guess is that these attempts to shore up Sharp are directed by Apple to ensure both continuity of supply and a balanced supplier base (offsetting Samsung, another supplier.) If Sharp were to enter into some form of bankruptcy, the key plant(s) used in producing screens for Apple might be “up for grabs” by creditors and they might be taken off-line, jeopardizing Apple’s production capacity, irrespective of contractual obligations.”

He explained that he believes that Apple Inc (NASDAQ:AAPL) has worked a deal with Sharp to place the production plant on its own books as part of an asset swap in order to keep Sharp afloat. Whether this means Apple will invest more in Sharp and rely on the firm more than on Samsung for components will remain to be seen.