Apple Inc. was founded in 1976 by Steven Wozniak and Steven Jobs. They introduced the first initial version or what was to become the first highly successful mass-produced personal computer, the Apple I. Apple operates in various lines of the computer and music industry today and its operations include not only the designing but also the manufacturing of its computers and software. Apple continues to pursue the personal computer market but not as intently as in the years before. It has opted to change directions a little by venturing into the music world through the marketing of iPod, a digital music player, and iTunes. The opening of 65 new retail outlets, including one in Japan, has precipitated its move into this new world.
Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. 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.
Apple Computer designs, manufactures and markets personal computers and related software, services, peripherals, and networking solutions. The company’s strong operating performance has strengthened its market position and has also increased investor confidence. However, intense competition could affect the company’s margins.
Apple has a global presence spanning the Americas, EMEA, and Asia Pacific. The company derives more than 50% of its revenues from regions outside US, its domestic market. A balanced presence in mature as well as emerging markets has enabled the company to record a steady revenue growth. The company’s financial performance has been strong in the last five years.
The Apple brand is well regarded amongst most consumers. Apple also enjoys a high level of brand awareness and brand recognition for its products throughout the markets in which it operates. Apple leverages its brand image to differentiate its product offering and drive sales.
The company has recorded weak returns on assets and investments in recent years. The company recorded average return on assets of 4.7%, lower than the industry average of 5.8% during 2001-05.
The company is susceptible to a supply risk for key components. IBM is currently the company’s sole supplier of the PowerPC G5 processor, which is used in its current Power Mac, Xserve, and iMac G5 products. Freescale is the sole supplier of the G4 processor, which is used in the company’s eMac, Mac mini, and portable products. IBM experienced manufacturing problems with the PowerPC G5 processor, which resulted in delaying the shipment of various products and constrained certain product shipments during the second half of 2004 and the first quarter of 2005. In a market where speed to market is critical, Apple’s dependency for key components could put it at a competitive disadvantage.
Demand for wireless connectivity and networking products is likely to increase in the future. Apple is ideally positioned to capitalize on this growth, as it already provides a number of offerings in this area. For example, AirPort is the Apple’s wireless networking technology that allows users to create a computer network and connect to the internet without cables, additional phone lines, or networking hardware.
Apple’s US MP3 player market share increased to 78% in March 2006 from 71% in December 2005. However, Apple’s market share in international markets remains far below the US level. Apple’s market share is significantly lower in international markets. This suggests that Apple’s penetration outside of the US has huge scope for growth. The company is planning to increase its retail points of presence, both domestic and international, and along with expanding portfolio of...