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.
Google
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
