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Apple (AAPL)http://www.wikinvest.com/stock/Apple_(AAPL)1 of 73/12/2008 5:48 PM
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$126.03↓
1.32(1.04%)
as of Mar 12, 4:00 PM EDT
Bulls
Apple's retail stores remain a unique andeffective means of reaching new users andencouraging both brand visibility...read more1.Apple's vertical integration provides seamlessintegration and a self-reinforcing businessmodel that has a unique...read more2.Apple's multi-pronged approach to productdevelopment and its new focus on consumer electronics diversifies its markets, significantlyimproving its expansion opportunities for thenext few years.3.The bubble on Apple's stock price has burst.This means that traders are moving on andApple stock is left as a great...read more4.
Bears
Cannibalization. The proliferation of iPhoneswill come at the expense of iPod sales, as theiPhone includes an iPod.1.Apple's intense reliance on having a steadystream of new and innovative products forces itto spend significantly on...read more2.The prominence of emerging markets in Asiawill be another significant hurdle for Apple. Withmarket share worldwide...read more3.Slowing growth in Apple's current coreproducts, Macs and iPods, will pressure Appleto turn to other markets for...read more4.
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Apple (AAPL)
Apple
is the consumer electronicscompany behind the Macintosh (Mac)personal computer , the iconiciPodportable music player, and, mostrecently, theiPhone. The companyprimarily targets retail consumers rather thanenterprises, and has become known for uniquepromotion and distribution strategies. These tacticshave paid off over the past few years - in 2007, Applegenerated revenue approaching US$ 24 billion, growingmarket share for its niche of Mac desktops and laptopsand continuing to dominate the PMP market, where itcaptured a 50% share that year.
[1]
The companycontinued its growth in the first quarter of 2008, posting35% revenue growth and the largest profits in companyhistory.Apple removed the "Computer" from its corporate namein early 2007, redefining its identity as a diversifiedconsumer electronics company. As further proof of thisnew broader identity, Apple has recently launched keyproducts geared towards the high-end mobile market(theiPhone) and the home entertainment industry(Apple TV). The expensive, highly touted and publiclyscrutinized iPhone in particular is the wildcard for thecompany, whose lifeblood is new product innovation.The iPhone performed well in 2007, with 2.3 millionunits sold worldwide; however, competitors areincreasingly matching the iPhone's features.
[2]
Other keynew products include movie rentals on iTunes and theultra-thin MacBook Air laptop.Apple has parlayed its powerful brand and end-to-endcontrol over the design and manufacturing of hardware,software, and peripherals into a self-reinforcingbusiness model. The iPod has grown faster than anyother music player in consumer electronics history andaccounts for half of the company's revenue from thesales of hardware and content; it has also generated a"halo effect" increase in sales of Macdesktops andlaptops. The company has also opened retail stores,which feature distinctive designs and emphasize
What is the justification for Applesitting on about $18B in cash (or short term investments) in ...moreApple will continue to thrive
Jason Young edited Accenture (ACN) 1 minute ago (more)
Neutral
 
Apple (AAPL)http://www.wikinvest.com/stock/Apple_(AAPL)2 of 73/12/2008 5:48 PM
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product "test drives", customer education, and easily available technical help. As a result of its efforts, the companygenerated more revenue per square foot ($4000) than almost any other major retailer in the world, includingTiffany's($2500),Best Buy(sub-$1000) and Neiman Marcus ($600) in fiscal 2006.In 2007, the company continued its rapid growth with a 28%yoyincrease in fourth quarter earnings, driven by strong iPodand iPhone sales. Unlike many other technology companies, Apple has not evinced a strong commitment to increasing itspresence abroad, and the quarterly revenue breakdown by region reflects this. The Americas continue accounting for a hefty48% of total revenues, while Europe rings in second, contributing just 21%. Apple is especially weak in Asia, where itsJapanese revenues have dropped 10% from 4Q06 levels (the rest of Apple's Asia/Pacific sales have grown by a paltry fewpercentage points.) However, strong revenue growth in Apple'sretaildivision (nearly 42%) bodes well for the future. Thecompany's success in the mobile phone and personal media player markets may carry over into other consumer devices, withthe company using its brand to grab significant market share.
Contents
1 History and Products2 Trends and Forces2.1 Dependence on new products2.1.1 The iPhone Craze2.1.2 Apple TV: less promising2.2 The "Apple Halo"2.2.1 Retail store advantage2.2.2 iTunes and compatibility2.3 Weak brand in emerging markets2.4 Public image3 Competition4 References
History and Products
After a decade of stagnant sales at Apple, original founder Steve Jobs returned as CEO in 1997 and began a period of reinvention, resulting in the release of several highly innovative products, notably the all-in-one iMac PC (1998) and theiPod(2001). An aggressive subsequent advertising campaign put Apple squarely into the public eye, and today Apple remainsknown for its catchy, clever ads.Apple builds its product portfolio with vertical integration to provide seamless compatibility between hardware, software andperipheral products. The company's ecosystem of products--closely related by design and functionality--has allowed it buildsignificant brand equity, and Apple products are especially popular with middle- to high-end consumers as well as thegraphics/design industry. Apple's current products can be divided into two main categories:
Computersand Software:
Macintosh (Mac) brand desktops, laptops and related hardware/software are a traditionalmainstay of Apple's business. While these products accounted for about 50% of revenue and two-thirds of operating profitin 2007, their contribution ratios have declined in recent years. Mac hardware products include the iMac, MacBook andPowerBook notebook computers, and a number of peripherals. Its software offerings include its OS X operating system, a"UNIX-like" system known for ease of use and sleek, intuitive design.Apple's computers boast unusually high profit margins, especially when compared to companies likeDellandToshiba. Fewer sales can generate significantly more profit for Apple than the same number would for its big-businesscompetitors, both because of Apple's carefully monitored stiff pricing and the extra revenue captured from the sale of accessories in Apple'sretail stores.
Both theiPodand its ads have become iconic hits
 
Apple (AAPL)http://www.wikinvest.com/stock/Apple_(AAPL)3 of 73/12/2008 5:48 PM
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Music:
Apple's music offerings include the iPod and its variations (i.e., Nano, Shuffle, Video) as well as the iTunes mediaplayer and distribution system. Though not the first entrant into this arena, the iPod accelerated the growth of the PMPmarket since its 2001 introduction and now owns a dominant market share around 70%. Over 100 million units have beensold worldwide as of April 2007, making it the fastest selling music player ever.
Revenue Contribution
2006 Q1 2006 Q3 2007 Q1 2007 Q3
Mac40%43%34%47%
desktop
16%16% 13% 18%
notebook 
24%27% 21% 29%
Peripherals, Other Hardware5%5%4%6%Software andServices6%7%5%7%Total Computersand Software51%55%43%60%iPod40%34%48%29%Other Music Sales9%11%9%10%Total Music49%45%57%40%
Source: Company Data
As demonstrated in the table above, Apple's revenue has shifted away from its traditional Mac hardware and softwaretowards iPod, iTunes, and related Music products. Compounding this trend is thecompany's most recent products which expand their portfolio beyond these twocategories:
Mobile Communication:
Apple launched itsiPhonein June 2007. Touted as a deviceconverging communications and media playback, the iPhone combines CDMA/EDGEmobile technology with widescreen PMP ability as well as internet browsing.
Home Entertainment:
In 2007, Apple introduced its Apple TV product for the homeentertainment center. Apple TV allows digital media from a user's computer to be playedon entertainment systems and digital televisions such as high-definitionLCDsandplasmas.
Trends and Forces
Apple's current primary strategy is a shift away fromcomputerstowards diversifiedconsumer electronics. The company's intention to move from a Mac/iPod-driven businessmodel to one that includes many different product lines puts a spotlight on Apple's foraysinto several new markets.
Dependence on new products
Apple's products traditionally have a short life span, and the company can only maintain its unusual but highly profitable
 
Apple Inc. has alreadytranscended usual corporateboundaries to become apowerful cultural--some wouldeven say artistic--phenomenon.
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