1. The company (1)
Apple Inc. and its wholly-owned subsidiaries (collectively “Apple” or the “Company”) is a
Cupertino-based California corporation founded in 1977.
Apple Inc. designs, manufactures and markets a range of personal computers, mobile
communication and media devices, and portable digital music players, and also sells a variety of
related software, services, peripherals, networking solutions, and third-party digital content and
applications. The Company’s fiscal year is the 52 or 53-week period that ends on the last
Saturday of September
For Q4 2010, apple reported total revenues of $20.34 billion and a net quarterly profit of $4.31
billion – that’s $4.64 per diluted share (2).
Some of the highlights of the company’s performance are

De-risking, market diversification through higher growth in Japan and Asia and Pacific

Overall growth of 30% year on year in last three years, surpassing competitors with high
cash balance, 360% growth in stock price for the 64 months period ending November
2010 when S&P fell by 5%

Company’s marketing approach focuses on exclusivity and holistic experience under the
one Apple roof, which stands it apart
2. Apple’s products / lines of business (3)
Apples products cover personal computing, mobile communication, media devices, portable
digital music players, as well as a variety of related software, services, peripherals, networking
solutions, and various third-party hardware and software products. The Company’s products and
services include Macintosh (“Mac”) computers, iPhone, iPad, iPod, Apple TV, Xserve, a
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portfolio of consumer and professional software applications, the Mac OS X and iOS operating
systems, third-party digital content and applications through the iTunes Store, and a variety of
accessory, service and support offerings. The Company also offers its own software products,
including Mac OS® X, proprietary operating system software for the Macintosh® (“Mac”); iOS,
Apple mobile operating system; server software and application software for consumer,
education, and business customers.
3. Apples Markets
The company operates worldwide and its markets are geographically segmented as the Americas,
Europe, Japan, Asia-Pacific and Retail. An analysis of the region (segment) wise sales is
presented below
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Figures in millions of dollars (3)
Compound
Growth
rate
%
2009%
between
growth
growth
over
over
2009
2008
2008
to
Region
2010
2010
Americas
1.217
24,498 29
18981 15
16552
Europe
1.423
18692
58
11810 28
9233
Japan
1.518
3981
75
2279
32
1728
Asia pacific 1.753
8256
160
3179
18
2686
-9
7292
Retail
2008
net
sales
1.159
9798
47
6656
Total
1.319
65225
52
42905 14
37491
38%
44%
44%
19%
13%
12%
%
of
Americas
% of Japan
&
pacific
Asia
4. Global analysis
The analysis indicates that while the overall year on year compound growth rate has crossed
30%, the share of the Americas segment has declined from 44 to 38% in the overall turnover.
America’s compound growth rate year on year has been only about 67% of the overall growth
rate during the period. Asia Pacific and Japan constitutes the highest growth rate and their share
has grown from 12% of overall sales to 19% during the three years
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5. Financial performance
a) Profitability for last 5 years
•
Apple’s up-swung during the last 5 years, the first time company’s profits have taken
off in a big way at a steady pace, as seen in the chart above
•
Google, a company barely a decade old, is matching the profit of apple, though
Microsoft has been ahead of Apple in terms of absolute figures though with minor
variations
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b) Liquidity for the last 5 years
•
As of September 26, 2009, the Company had $34.0 billion in cash, cash equivalents and
marketable securities, an increase of $9.5 billion from September 27, 2008
•
The principal component of this net increase was the cash generated by operating
activities of $10.2 billion, partially offset by payments for acquisitions of property, plant
and equipment of $1.1 billion.
•
Cash generated significantly exceeded its net income, due primarily to the increase in
deferred revenue, net of deferred costs, associated with subscription accounting for
iPhone.
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c) Cash position for last 5 years
•
While Cash has grown marginally, short term marketable securities have been flat to
declining since Q4 2008; Apple’s surplus capital is increasingly invested in long term
marketable securities and rendered illiquid by 21 billion in cash. Apples cash hoard is
20% of the current market capital, and is effectively trading P/E of 13.5.
6. Apple’s stock price movement over 5 years (June 2005 to November 2010) (4) (5)
An analysis indicates that Apples stock price has shown a steady growth during the period with a
mean of $138 and standard deviation of 70.1, with a high coefficient of variance of 0.51
compared to the S&P with a Coefficient of variance of 0.16. This is because apple’s price has
steadily moved up during the period and therefore the deviations from the mean price are
consistently high, that has given a high coefficient of variance.
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Mean
1218.5
138.0
SD
198.2
70.1
Coefficient Of variance
0.16
0.51
-5%
364%
Simple
growth
during
five years
While Apple stock has grown by 364% during five years ending 11/1/2010, the S&P index has
declined by 5%. While apple has demonstrated consistent growth from March 2008, S&P
stagnated around January 2010. Please see Excel sheet for workings and graphical presentation
7. Key findings from Financial analysis (6) (7)
The analysis has been carried out based on the balance sheet and income statements from the k10 SEC filings of Apple for 2009 and 2010. Eleven ratios have been computed, presented
graphically as well as projected for next three years, based on geometric growth rates computed.
All formulae used in computation are self explanatory from the respective Excel cells
Key observations are
1. Current assets and Acid Turnover ratios reflect balanced management of current assets
and liabilities. While the Current ratio has increased till 2009, it has fallen in 2010
indicating improved current asset and cash management or higher current liabilities. The
Acid Test ratio has followed in tandem showing limited impact of inventory during the
period,
2. Profitability figures / ratios such as Owner’s equity, EBIT, net income have steadily
increased and have surpassed sales growth indicating improved market conditions or
efficient management of profitability
3. EPS has shown a dramatic rise in 2010, compared to 2009, receivables turnover ratio has
fallen indicating credit sales or booking sales prior to receipt of cash
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4. Reduction of Fixed asset turnover ratio, Inventory turnover ratio is not a healthy sign of
efficient use of assets, as it indicates reducing turnover per unit value of asset and
inventory
5. The RoE has steadily increased during the period in tandem with other profitability
figures
6. % analysis for 5 years
a) Net income as a % of sales has grown at 20% compounded rate year on year
b) Gross income as % of sales grown by 8% compounded year on year
c) As % of sales, Operating income up by 22%, EBIT by 18% compounded year on year
d) Operating efficiency improved by reduction in operating expenses as % of sales of
about 5% compounded year on year
e) Selling & administrative expenses as % of sales reduced by 9% compounded year on
year
In short Apple has consistently displayed highly improved performance during the 5 year
period in the top line, bottom line and in most operating parameters.
Please see attached Excel sheets for detailed workings, graphs and projections for three years.
8. Balance score card
Apple Computer uses the Balanced Score Card (BSC) framework as a planning tool rather than a
control tool. The elements of Apple’s BSC comprise
– Financial Perspective: covers Return-on-Capital Employed, Cash Flow, Project
Profitability, Profit Forecast Reliability, and Sales Backlog
– Customer Perspective covers Pricing Index, Customer Ranking Survey, Customer
Satisfaction Index and Market Share.
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– Internal Processes comprises Hours with Customers on New Work, Tender
Success Rate, Safety Incident Index, Project Performance Index and Project
Closeout Cycle
– Innovation and Learning Perspective covering Percentage of Revenue from New
Services, Rate of Improvement Index, Staff Attitude Survey, Number of
Employee Suggestions and Revenue per Employee
– Where Apple is headed - Laid out plan of attack for next generation devices,
while game industry is in its sights, not a full-on assault as yet. Apple considers
iPod Touch a gaming platform and expects to unlock value with the
implementation of its Xbox, Live-style Game Centre matchmaking and
achievements service.
apple-dell-nokia
analysis.xls
apple-dell-nokia
analysis.ppt
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References
1. http://phx.corporate-ir.net/External.File?item=
UGFyZW50SUQ9Njc1MzN8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1(k-10filing2010)
2. http://www.findmysoft.com/news/Apple-s-Financial-Results-for-Q4-2010-Record-Revenuesand-Profit-Again/
3. http://applestock.org/10-k-annual-report-2009/
4. http://www.dailymarkets.com/stock/2010/05/13/apple-outshines-gold-for-the-last-5-years/
5. http://finance.yahoo.com/q/hp?s=AAPL&a=05&b=1&c=2005&d=10&e=29&f=2010&g=m
http://finance.yahoo.com/q/hp?s=%5EGSPC&a=05&b=1&c=2005&d=10&e=29&f=2010&g
=m
6. http://applestock.org/apple-aapl-financials/aapl-balance-sheet/
7. (http://applestock.org/apple-aapl-financials/apple-aapl-income-statement/
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