August 22, 2011
Apple: Business Analysis II
As of May 2010, “Apple, the maker of iPods, iPhones and iPads, shot past Microsoft, the computer giant, to become the world’s most valuable technology company” (Heft & Ashlee, 2010). Apple’s expansion in consumer electronics has garnered them a reputation as a powerhouse in this industry also. In this paper, I will review, analyze and summarize Apple Inc. financial health, technological advantages against its competitors, the affects of globalization and conduct a benchmark analysis. Income statements are reports used to show expenses and revenue for a specified time period. Balance sheets are used to report a company’s financial position on a particular day. A cash flow statement/report shows money coming in and going out during a specific time period. All are used to make the best and necessary decisions to determine a company’s profitability. In reviewing Apple’s financial statements in a year’s time, they beat last year’s net income quarterly results by 125%, which was their best quarter to date. With the sale of the iPhone up 142% to last year, the iPad sales up 183% to last year and the upcoming launch of the iOS 5 (iPhone 5) and iCloud this fall, sales are expected to produce strong double digit increases to those of last year during the holiday season. Year to date Apple’s business is up 82% to last year’s numbers overall. The sale of the iPod unfortunately declined in the third quarter by 20% to last year sales. Apple’s balance sheet and cash flow both indicate the company is financially sound and have ample cash reserves. In a recent statement from Apple’s CFO, Peter Oppenheimer, “We are pleased with our performance which drove quarterly cash flow from operations of $11.1 billion, an increase of 131 percent year-over-year” (Apple - Press Info, 2011). The concerning information is the declining sales of the iPod. The iPod sales have slowly declined since the introduction of the iPhone. This is primarily due to the iPhone having a dual purpose, serving as both an iPod and a phone all-in-one. Another concern that is not listed on Apple’s financial statements is that of Steve Jobs taking an indefinite leave of absence to focus on his undisclosed health issue. This is cause for concern because, this leave unlike previously, is indefinite. This also comes at a time when competition has become increasingly fierce, to stay on top or ahead of your competitor in the tech industry, which may also be a concern for Apple’s investors. In comparing Apple’s financial health to those of its competitors; IBM, Dell and HP, Apple has the strongest results thus far. Below is a graph that outlines each company third or second quarter results for year 2011. | |Apple Q3, 2011 |HP Q3, 2011 |Dell Q2, 2011 |IBM Q2, 2011 | |Revenue |$28.57B |$31.2B |$15.7B |$26.7B | |Net Income |$7.31B |$1.9B |$1.1B |$3.7B | |Gross Margin |41.7% |8.1% |7.3% |46.4% |
(Apple - Press Info, 2011; HP, 2011; IBM, 2011; Dell, 2011) In comparing the financial results of the four companies, Apple has the strongest net income. This amount represents their income after all expenses. This number has thoroughly surpassed those of its competitors. This further indicates the strong financial health of Apple Inc. in comparison to its industry rivals.
Management can best use this information to make the best decisions in the best interest of their respective companies. In thoroughly examining their balance sheets and income statements, areas of...