Apple market analysis and foundations assignment PDF

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Summary

It provides details about the apple inc. financial statements and cash flow statements. Here primary and secondary sources and their qualitative and quantitative analysis have been done. Moreover, using apple annual report , regression, time series, various ratio analysis and correlation coefficient...

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APPLE

November 21, 2014

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APPLE

November 21, 2014

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APPLE

November 21, 2014

GROUP NAME: AVENGERS. GROUP MEMBERS: FARWA (HEAD) JAVERIA IRSHAD SHAMA IQBAL AISHA UKASHA arfan SARMAD ALI JAFFAR ALI BILAL zaheer

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APPLE

November 21, 2014

Introduction:

Apple Inc. is an American multinational corporation that designs and manufactures consumer electronics and computer software products. The company's best-known hardware products include Macintosh computers, the iPod and the iPhone. Apple software includes the Mac OS X operating system, the iTunes media browser, the iLife suite of multimedia and creativity software, the iWork suite of productivity software, Final Cut Studio, a suite of professional audio and film-industry software products, and Logic Studio, a suite of audio tools. The company operates more than 250 retail stores in nine countries and an online store where hardware and software products are sold. Established in Cupertino, California on April 1, 1976 and incorporated January 3, 1977, the company was called Apple Computer, Inc. for its first 30 years, but dropped the word "Computer" on January 9, 2007 to reflect the company's ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. Apple has about 35,000 EMPLOYEES worldwide and had worldwide annual sales of US$32.48 billion in its fiscal year ending September 29, 2008.For reasons as various as its philosophy of comprehensive aesthetic design to its distinctive advertising campaigns, Apple has established a unique reputation in the consumer electronics industry. This includes a customer base that is devoted to the company and its brand, particularly in the United States. Fortune magazine named Apple the most admired company in the United States in 2008 and in the world in 2009.

History of Apple Incorporation: Apple Incorporation was established on April 1, 1976 by Steve Jobs, Steve Woznaik, and Ronald Wayne to sell the Apple1which was the first personal computer single handle designed and hand built by Steve Woznaik. Unfortunately for Ronald Wayne, after eleven days of the organization’s existence he sold his shares of apple for $800because of the debt that the three of them had endured during the process Page | 4

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of creating the organization. By 1977 with the invention of Apple2 apple was incorporated with a $92,000 which is invested from Mike Markkula whose intent was to invest more into apple with his total reaching $250,000. Later Michael Scott became the first CEO of apple because Mike Markkula believed that the Jobs and Woznaik were too inexperienced for this job. Scott remained CEO until April of 1983 when John Sculley former president of Pepsi Co, replaced Scott and filled the position. During 1980’s apple was recognized on the fortune 500 list and this organization was on #411after five years of existence The Macintosh 128k was introduced to public during 1984 in Super Bowl Commercial which is now legendary. By September 7, 1984 apple offered the common stock to the public. Apple success was noticeable after 1984 Steve jobs also purchased the computer division of motion pictures studio Lucas film Ltd for $60 Million. In 1996 jobs and apple reunited after sorting out the issues when apple bought his operating system NEXT for $400 Million because it was known for being head of its time. In 1997 Jobs became the interim CEO of apple. The iMac released on August 15, 1998 and became the fastest selling personal computer in History, because it is stylish, one-piece computer which caused the industry to recognize Apple as a competitor and innovator in technology In fact “Apple sold 278,000 iMacs in its first two months and over 2 Million in its first two years. In 2000 Jobs became the official CEO of apple and introduced the IPod a digital music player IPod helped to create profitable entities such as ITunes. In January 9, 2007 Jobs announced the development of the IPhone a cellular telephone source for internet access and included Apple’s unique interface design and also announced the Apple TV. In July, 2008 apple launched the App store to sell third party applications for the IPhone and IPod touch the store sold 60 Million applications in a month and registered average daily revenue of $1 Million. By October, 2008 apple was the third largest mobile handset supplier in the world. On January 14, 2009 Jobs announced that he would be taking a Six-month medical leave of absence because of his health issues Apple announced a large screen tablet like media device known as IPad on January 27, 2010. In June 2011I cloud was unveiled by Jobs and Jobs resigned his position as CEO which is placed by Tim Cook and Jobs became apple’s chairman. On October 5, 2011 Apple announced that Jobs had died marking the end of an era for Apple Inc. The first major announcement by Apple following Jobs passing occurred on January 19, 2012 when Apple introduced iBooks Textbooks for iOS and iBook Author for Mac OS X From 2011-2013 Apple released the iPhone 4 and iPhone4S and iPhone 5 and 5S, 5Cwhich featured improved cameras and packed with intelligent software assistant named Siri and cloud sourced data with iCloud the third and fourth generation iPads which featured Retina displays and the iPad Mini which featured a 7.9 inch screen in contrast to the iPads 9.7 inch screen. These launches were successful with the iPhone 5 released September 21, 2012 becoming Apples biggest iPhone launch with over 2 million pre-orders and sales of 3 million iPads in three days following the launch of the iPad Mini and fourth generation iPad released November 3, Page | 5

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2012 apple also released a third generation 13 inch Mac Book Pro with a Retina display and new iMac and Mac Mini computers. In September 2014 apple released the iPhone 6 and iPhone 6 plus and also in October iPad mini 3 and iPad Air 2 which are the apple’s latest releases with new improved software and specifications and later on iWatch is also introduced by Tim Cook.

MISSION STATEMENT OF APPLE: According to the Economist , Steve Jobs' mission statement for Apple in 1980 was: “To make a contribution to the world by making tools for the mind that advance humankind.”

VISION STATEMENT OF APPLE: “Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.“

VALUE STATEMENT: The value statement of apple is “THINK DIFFERENT.”

PRODUCTS OF APPLE: The following are the products of APPLE: Page | 6

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Mac:



MacBook Air: Consumer ultra-thin, ultra-portable notebook, introduced in 2008. MacBook Pro: Professional notebook, introduced in 2006.

 

Mac Mini: Consumer sub-desktop computer and server, introduced in 2005. Mac Pro: Workstation desktop computer, introduced in 2006.



iMac: Consumer all-in one desktop computer, introduced in 1998.



Apple sells a variety of computer accessories for Macs, including Thunderbolt Display, Magic Mouse, Magic Track pad, Wireless Keyboard, Battery Charger, the AirPort wireless networking products, and Time Capsule.

IPad:

On January 27, 2010, Apple introduced their much-anticipated media tablet, the iPad, running a modified version of iOS. It offers multi-touch interaction with multimedia formats including newspapers, magazines, e books, textbooks, photos, movies, videos of TV shows, music, word processing documents, spreadsheets, video games. On March 2, 2011, Apple introduced the iPad 2, which had a faster processor and a camera on the front and back. It also added support for optional 3G service provided by Verizon in addition to the existing offering by AT&T. However, the availability of the iPad 2 has been limited as a result of the devastating earthquake and ensuing tsunami in Japan in March 2011. Page | 7

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The iPad Mini was also introduced, with a reduced 7.9-inch display and featuring much of the same internal specifications as the iPad 2 On October 22, 2013, Apple introduced the iPad Air. It added the new 64 bit Apple-A7 processor. The iPad mini with Retina Display was also introduced, featuring the Apple-A7 processor as well. On October 16, 2014, Apple unveiled the iPad Air 2. It added better Graphics and central processing; a camera burst mode, as well as minor updates. The iPad Mini 3 was unveiled at the same time. Since its launch, iPad. Users have downloaded three billion apps, while the total number of App Store downloads is over 25 billion.

iPod:

On October 23, 2001, Apple introduced the iPod digital music player. Several updated models have since been introduced, and the iPod brand is now the market leader in portable music players by a significant margin, with more than 350 million units shipped as of September 2012. Apple has partnered with Nike to offer the Nike+ iPod Sports Kit, enabling runners to synchronize and monitor their runs with iTunes and the Nike+ website. Apple currently sells following variants of the iPod:  



iPod Shuffle: Ultra-portable digital audio player, currently available in a 2 GB model, introduced in 2005. iPod Nano: Portable media player, currently available in a 16 GB model, introduced in 2005. Earlier models featured the traditional iPod click wheel, though the current generation features a multi-touch interface and includes an FM radio and a pedometer. iPod Touch: Portable media player than runs iOS, currently available in 16, 32 and 64 GB models, introduced in 2007. The current generation, which was released on September 12, 2012 features the Apple A5 processor, a Retina display, and dual cameras on Page | 8

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the front (1.2 megapixel sensor) and back (5 megapixel iSight), the latter of which supports HD video recording at 1080p and Siri.

iPhone

At the Macworld Conference & Expo in January 2007, Steve Jobs introduced the longanticipated iPhone, a convergence of an Internet-enabled smart phone and iPod. The firstgeneration iPhone was released on June 29, 2007 for $499 (4 GB) and $599 (8 GB) with an AT&T contract. On February 5, 2008, it was updated to have 16 GB of memory, in addition to the 8 GB and 4 GB models. It combined a 2.5G quad band GSM and EDGE cellular phone with features found in handheld devices, running scaled-down versions of Apple's Mac OS X (dubbed iPhone OS, later renamed iOS), with various Mac OS X applications such as Safari and Mail. It also includes web-based and Dashboard apps such as Google Maps and Weather. The iPhone features a 3.5-inch (89 mm) touch screen display, Bluetooth, and Wi-Fi. At Worldwide Developers Conference (WWDC) on June 9, 2008, Apple announced the iPhone 3G. It was released on July 11, 2008, this version added support for 3G networking and assistedGPS navigation. Page | 9

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In June 2011, Apple overtook Nokia to become the world's biggest smart phone maker by volume. On October 4, 2011, Apple unveiled the iPhone 4S, which was first released on October 14, 2011. It features the Apple A5 processor. Apple sold 4 million iPhone 4S phones in the first three days of availability. On September 12, 2012, Apple introduced the iPhone 5. It added a 4-inch display, 4G LTE connectivity, and the upgraded Apple A6 chip, among several other improvements. Two million iPhones were sold in the first twenty-four hours of pre-ordering and over five million handsets were sold in the first three days of its launch. In March 2013, one of the largest cellular phone companies in the United States, T-Mobile, announced that it would begin selling the iPhone 5 on April 12. Upon the launch of the iPhone 5S and iPhone 5C, Apple sold over nine million devices in the first three days of its launch, which sets a new record for first-weekend smart phone sales. This was the first time that Apple has simultaneously launched two models and the inclusion of China in the list of markets contributed to the record sales result.

Apple TV:

At the 2007 Macworld conference, Jobs demonstrated the Apple TV; (previously known as the iTV) a set-top video device intended to bridge the sale of content from iTunes with highdefinition televisions. The device links up to a user's TV and syncs, either via Wi-Fi or a wired network, with one computer's iTunes library and streams from an additional four. The Apple TV originally incorporated a 40 GB hard drive for storage, includes outputs for HDMI and component video, and plays video at a maximum resolution of 720p.

Apple Watch: Page | 10

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The Apple Watch is a smart watch announced by Tim Cook on September 9, 2014. It has fitness tracking capabilities similar to fit bit. It requires an iPhone 5 or above to work. The release date is early 2015, starting at $349.

APPLE’S COMPETITORS: Apple has become a major digital asset management company. It has created an OS and UI that makes. Apple has created a position for itself that makes it nearly impossible for other companies to compete head on. Even though apple has taken a major leadership position in the PC and CE and even smart phone market the company does have some interesting competitor who are watching it closely and trying to figure out how to respond but this competition is not coming from traditional PC and CE players. Instead it’s coming from the likes of Samsung, Google, Microsoft, Amazon and Sony because of their strong investment in content. So Apple Inc. vs. Samsung electronics CO. LTD was a big and first competitor of a series of ongoing lawsuit between Apple Inc. and Samsung electronics regarding the design of smart phones and tablet computer between them the companies made more than half of smart phones sold worldwide as of July 2012. In the spring of 2011. Apple began litigating against Samsung in patent infringement suits Apple and Motorola mobility were already engaged in a patent war on a several fonts. Apple multinational litigation over technology patents became known as part of the mobile device smart phone patent war extensive litigation in fierce competition in the global market for consumer mobile communication. By July 2012 the two companies were still embroiled in more than 50 law suits around the globe with billions of dollar in damages claimed between them. While Apple won a ruling in its favor in the US. Samsung won ruling south Korea, Japan and the UK on June 2013. Samsung won a limited ban from the US international Trade commission on sales of certain Apple products after the commission found Apple had violated a Samsung patent but this voted by US Trade Representative Michael Forman. Another big Apple competitor is Google and Microsoft. Apple haters may not want to admit it but Apple’s business model is working out very well and not just because it’s helping apple Page | 11

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continue to post sky high profits. It’s also helping the company keeps its customer fanatically loyal to the brand. Apple is able to do this writes John Grubs of its products, from hardware to software. This is important because unlike Microsoft and Google. Apples does not have to rely on third party vendors to get it software on the market we have seen over the year that Microsoft and Google have grown tired of OEMS who hurt their platform performances by either building inferior hardware or adding their own unnecessary bloat ware to mix. Microsoft has recently tired its hand at building its own hardware with its surface line of tablets and Google is repeatedly trying to push android manufactures to raise their standards with android. Silver program but neither of these efforts has given Google and Microsoft the same control that apple now has. Google or Microsoft have enormous market share but neither has control over the device on which their platform run. Microsoft and Google can’t force OEMS to make better computers and device to stop junking them up with unwanted add-ons. Apple on the other hand, can force anything it can achieve into devices. Apple wants to go 64bit on Arm? Apple can do it alone.

CURRENT PROFIT AND REVENUE OF APPLE:

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ANNUAL INCOME STATEMENT OF APPLE: Page | 13

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INCOME STATEMENT: Period Ending

Sep 27, 2014 Sep 28, 2013 Sep 29, 2012

Total Revenue

182,795,000

170,910,000

156,508,000

Cost of Revenue

112,258,000

106,606,000

87,846,000

70,537,000

64,304,000

68,662,000

6,041,000

4,475,000

3,381,000

11,993,000

10,830,000

10,040,000

Non Recurring

-

-

-

Others

-

-

-

Total Operating Expenses

-

-

-

52,503,000

48,999,000

55,241,000

980,000

1,156,000

522,000

53,483,000

50,155,000

55,763,000

-

-

-

Income Before Tax

53,483,000

50,155,000

55,763,000

Income Tax Expense

13,973,000

13,118,000

14,030,000

-

-

-

39,510,000

37,037,000

41,733,000

Non-recurring Events Discontinued Operations

-

-

-

Extraordinary Items

-

-

-

Effect Of Accounting Changes

-

-

-

Other Items

-

-

-

39,510,000

37,037,000

41,733,000

Gross Profit

Operating Expenses Research Development Selling General and Administrative

Operating Income or Loss Income from Continuing Operations Total Other Income/Expenses Net Earnings Before Interest And Taxes Interest Expense

Minority Interest Net Income From Continuing Ops

Net Income

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APPLE Preferred Stock And Other Adjustments Net Income Applicable To Common Shares

November 21, 2014

-

-

-

39,510,000

37,037,000

41,733,000

By seeing the above income statement of apple we conclude that apple had a bad or gloomy year in 2013. Apple has reported its first fall in profit for nearly 10 years - a move that could further threaten its market value. The reasons for such result are discussed below Analysts expected a tumble of up to 18% in earnings when the company delivered its second quarter trading statement on Tuesday. In the end, the technology giant announced that its profit for the second quarter of the financial year - the three months to the end of March 2013 - were down $2.1bn (£1.38bn) to $9.56bn (£6.27bn), which was what analysts had predicted. Soon after announcing the profit fall, the Apple board cleared the way to buy back $100bn worth of shares by 2015. It is rumored that higher component prices and the lower costs of some of its products were what ate into Apple's profit margins. There has also been stronger competi...