Apple Inc.

- Financial Statements
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)

Assumptions & Valuation Overview

Valuation Date: 1/29/2010 Last Historical Year: 2009 Days in Year: 360
Company Name: Apple Inc. Debt Issue Date: 2010 Debt Amount: $1,000
Share Price: $192.06 Share Units: 1000 Tax Rate: 30%

Basic Shares Outstanding: 900,678 Options Calculations (in Thousands Except Exercise Price):
Basic Equity Value: $172,984
Diluted Shares Outstanding: 920,526 Exercise
Diluted Equity Value: $176,796 Name Number Price Dilution
Less: Cash & Investments $35,395 Tranche A 34,375 $81.17 19,847
Plus: Debt $0 Tranche B
Plus: Minority Interest $0 Tranche C
Plus: Preferred Stock $0 Tranche D
Plus: Other Liabilities $0 Tranche E
Enterprise Value: $141,401 Total 19,847

Historical Projections
FY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E

EV / Revenue: 5.8 x 3.8 x 3.3 x 2.6 x 2.3 x 2.0 x 1.9 x 1.7 x

EV / EBIT: 30.4 x 16.0 x 11.4 x 9.1 x 7.8 x 7.0 x 6.4 x 6.0 x
EV / EBITDA: 28.4 x 15.1 x 10.7 x 8.6 x 7.3 x 6.6 x 6.1 x 5.7 x

Equity Value / FCF: 37.3 x 20.8 x 17.1 x 13.5 x 12.1 x 10.9 x 10.1 x 9.1 x
P / E: 48.9 x 28.3 x 21.2 x 16.6 x 14.1 x 12.2 x 11.1 x 9.8 x
P / BV: 7.9 x 5.6 x 4.1 x 3.1 x 2.4 x 2.0 x 1.6 x

Operating Assumptions
 Historical Projections
FY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E

Revenue Growth %: 27.2% 52.5% 14.4% 25.0% 17.0% 11.0% 9.0% 7.0%
COGS % Revenue: 66.2% 64.1% 59.0% 59.0% 59.0% 59.0% 59.0% 59.0%
R&D % Revenue: 2.4% 2.0% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9%
SG&A % Revenue: 11.1% 8.9% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3%

Stock-Based Compensation % Revenue: 1.0% 1.4% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
Depreciation & Amortization % Revenue: 1.3% 1.3% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
Effective Cash Interest Rate: 5.3% 3.4% 1.4% 1.0% 1.0% 2.0% 2.0% 3.0%
Debt Interest Rate: 0.0% 0.0% 0.0% 9.0% 9.0% 9.0% 9.0% 9.0%
Effective Tax Rate: 30.2% 31.6% 31.8% 30.0% 30.0% 30.0% 30.0% 30.0%

Accounts Receivable % Revenue: 6.5% 7.8% 7.8% 7.8% 7.8% 7.8% 7.8%
Accounts Receivable Days: 23.3 28.2 28.2 28.2 28.2 28.2 28.2
Inventory % COGS: 2.1% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8%
Amortization of Intangibles: $40 $37 $28 $13 $10

Accounts Payable % COGS: 23.0% 22.1% 22.1% 22.1% 22.1% 22.1% 22.1%
Accounts Payable Days: 82.6 79.6 79.6 79.6 79.6 79.6 79.6
Accrued Expenses % Operating Expenses: 102.9% 87.6% 87.6% 87.6% 87.6% 87.6% 87.6%
Short-Term Deferred Revenue % Revenue: 4.3% 4.8% 4.8% 4.8% 4.8% 4.8% 4.8%
Long-Term Deferred Revenue % Revenue: 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%

CapEx % Revenue: 3.0% 2.9% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%

Income Statement
FY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E

Revenue: $24,578 $37,491 $42,905 $53,631 $62,749 $69,651 $75,919 $81,234

Cost of Goods Sold: $16,282 $24,049 $25,324 $31,655 $37,037 $41,111 $44,811 $47,948
 Gross Profit: $8,296 $13,442 $17,581 $21,976 $25,712 $28,540 $31,109 $33,286
Operating Expenses:
Research & Development: $596 $759 $830 $1,038 $1,214 $1,348 $1,469 $1,572
Selling, General & Administrative: $2,724 $3,345 $3,566 $4,458 $5,216 $5,789 $6,311 $6,752
Total Operating Expenses: $3,320 $4,103 $4,397 $5,496 $6,430 $7,137 $7,780 $8,324

Depreciation & Amortization of PP&E: $327 $496 $734 $918 $1,073 $1,192 $1,299 $1,390
Amortization of Intangibles: $0 $0 $0 $40 $37 $28 $13 $10
Stock-Based Compensation: $242 $516 $710 $888 $1,038 $1,153 $1,256 $1,344

Operating Income: $4,407 $8,327 $11,740 $14,635 $17,133 $19,030 $20,761 $22,218
Interest Income: $647 $653 $407 $424 $568 $1,443 $1,780 $3,223
Interest Expense: $0 $0 $0 ($45) ($90) ($90) ($90) ($90)
Other Income & Expense: ($48) ($33) ($81) $0 $0 $0 $0 $0
Pre-Tax Income: $5,006 $8,947 $12,066 $15,014 $17,610 $20,383 $22,450 $25,351
Income Tax Provision: $1,511 $2,828 $3,831 $4,504 $5,283 $6,115 $6,735 $7,605

Net Income: $3,495 $6,119 $8,235 $10,510 $12,327 $14,268 $15,715 $17,746

Earnings Per Share (EPS): $3.93 $6.78 $9.08 $11.59 $13.59 $15.73 $17.33 $19.56
Diluted Shares Outstanding: 889,292 902,139 907,005 907,005 907,005 907,005 907,005 907,005

EBIT: $4,649 $8,843 $12,450 $15,523 $18,171 $20,183 $22,017 $23,562

EBITDA: $4,976 $9,339 $13,184 $16,480 $19,282 $21,403 $23,329 $24,962
Levered Free Cash Flow: $4,735 $8,505 $10,311 $13,061 $14,618 $16,158 $17,507 $19,382
Book Value Per Share (BV): $24.17 $34.56 $47.17 $61.94 $78.98 $97.70 $118.76

Balance Sheet
FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
Assets:
Current Assets:
Cash & Cash-Equivalents: $11,875 $6,559 $20,620 $35,238 $51,396 $68,903 $88,285
Short-Term Securities: $10,236 $26,282 $26,282 $26,282 $26,282 $26,282 $26,282
 Accounts Receivable: $2,422 $3,361 $4,201 $4,915 $5,456 $5,947 $6,364
Inventory: $509 $455 $569 $665 $739 $805 $861
Deferred Tax Assets: $1,044 $4 $4 $4 $4 $4 $4
Other Current Assets: $3,920 $3,140 $3,140 $3,140 $3,140 $3,140 $3,140
Total Current Assets: $30,006 $39,801 $54,816 $70,245 $87,017 $105,082 $124,936

Long-Term Assets:
Long-Term Securities: $2,379 $2,554 $2,554 $2,554 $2,554 $2,554 $2,554
Plants, Property & Equipment: $2,455 $2,839 $3,352 $3,951 $4,617 $5,342 $6,118
Goodwill: $207 $207 $207 $207 $207 $207 $207
Other Intangible Assets: $285 $354 $314 $277 $249 $236 $226
Other Assets: $839 $2,011 $2,011 $2,011 $2,011 $2,011 $2,011
Total Assets: $36,171 $47,766 $63,253 $79,245 $96,654 $115,432 $136,052

Liabilities & Shareholders' Equity:

Current Liabilities:
Accounts Payable: $5,520 $5,601 $7,001 $8,191 $9,093 $9,911 $10,605
Accrued Expenses: $4,224 $3,852 $4,815 $5,634 $6,253 $6,816 $7,293
Deferred Revenue: $1,617 $2,053 $2,566 $3,003 $3,333 $3,633 $3,887
Total Current Liabilities: $11,361 $11,506 $14,383 $16,828 $18,679 $20,360 $21,785

Long-Term Liabilities:
Deferred Revenue: $768 $853 $1,066 $1,248 $1,385 $1,509 $1,615
Long-Term Debt: $0 $0 $1,000 $1,000 $1,000 $1,000 $1,000
Other Long-Term Liabilities: $1,745 $3,502 $3,502 $3,502 $3,502 $3,502 $3,502
Total Liabilities: $13,874 $15,861 $19,951 $22,577 $24,565 $26,371 $27,902

Shareholders' Equity:
Common Stock: $7,177 $7,177 $7,177 $7,177 $7,177 $7,177 $7,177
Additional Paid-In Capital: $0 $1,185 $2,073 $3,111 $4,263 $5,520 $6,864
Treasury Stock: $0 $0 $0 $0 $0 $0 $0
Retained Earnings: $15,129 $23,364 $33,874 $46,201 $60,470 $76,185 $93,930
Accumulated Other Comprehensive Income: ($9) $179 $179 $179 $179 $179 $179
Total Shareholders' Equity: $22,297 $31,905 $43,302 $56,668 $72,089 $89,061 $108,151

Total Liabilities & SE: $36,171 $47,766 $63,253 $79,245 $96,654 $115,432 $136,052

BALANCE CHECK: $0.000 $0.000 $0.000 $0.000 $0.000 $0.000 $0.000

Cash Flow Statement

FY 2007 FY 2008 FY 2009 FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E
Operating Activities:
Net Income: $3,495 $6,119 $8,235 $10,510 $12,327 $14,268 $15,715 $17,746
Depreciation & Amortization of PP&E: $327 $496 $734 $918 $1,073 $1,192 $1,299 $1,390
Amortization of Intangibles: $0 $0 $0 $40 $37 $28 $13 $10
Stock-Based Compensation: $242 $516 $710 $888 $1,038 $1,153 $1,256 $1,344
Deferred Income Tax Expense: $73 $398 $1,040 $0 $0 $0 $0 $0
Loss on PP&E: $12 $22 $26 $0 $0 $0 $0 $0
Changes in Operating Assets & Liabilities:
Accounts Receivable: ($385) ($785) ($939) ($840) ($714) ($541) ($491) ($416)
Inventory: ($76) ($163) $54 ($114) ($97) ($73) ($66) ($56)
Other Current Assets: ($1,279) ($274) $780 $0 $0 $0 $0 $0
Other Assets: $285 $289 ($1,172) $0 $0 $0 $0 $0
Accounts Payable: $1,494 $596 $81 $1,400 $1,190 $901 $818 $694
Deferred Revenue: $566 $718 $521 $727 $618 $468 $425 $360
Other Liabilities: $716 $1,664 $1,385 $963 $819 $620 $563 $477
Cash Flow from Operations: $5,470 $9,596 $11,455 $14,491 $16,292 $18,015 $19,532 $21,548

Investing Activities:
Purchases of Securities: ($11,719) ($22,965) ($46,724) $0 $0 $0 $0 $0
Proceeds from Maturities & Sales: $9,424 $16,243 $30,678 $0 $0 $0 $0 $0
Purchases of LT Investments: ($17) ($38) ($101) $0 $0 $0 $0 $0
Capital Expenditures: ($735) ($1,091) ($1,144) ($1,430) ($1,673) ($1,857) ($2,024) ($2,166)
Acquisition of Intangibles: ($251) ($108) ($69) $0 $0 $0 $0 $0
Other: $49 ($230) ($74) $0 $0 $0 $0 $0
Cash Flow from Investing: ($3,249) ($8,189) ($17,434) ($1,430) ($1,673) ($1,857) ($2,024) ($2,166)
 Financing Activities:
Proceeds from Common Stock: $365 $483 $475 $0 $0 $0 $0 $0
Common Stock Repurchased: $0 $0 $0 $0 $0 $0 $0 $0
Dividends Issued: $0 $0 $0 $0 $0 $0 $0 $0
Tax Benefits from Stock-Based Comp: $377 $757 $270 $0 $0 $0 $0 $0
Raise / (Pay Off) Long-Term Debt $0 $0 $0 $1,000 $0 $0 $0 $0
Cash Used for Equity Awards: ($3) ($124) ($82) $0 $0 $0 $0 $0
Cash Flow from Financing: $739 $1,116 $663 $1,000 $0 $0 $0 $0

Increase / Decrease in Cash: $2,960 $2,523 ($5,316) $14,061 $14,618 $16,158 $17,507 $19,382
Cash & Cash Equivalents: $9,352 $11,875 $6,559 $20,620 $35,238 $51,396 $68,903 $88,285
 Err:502
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)

Err:502 Err:502

25th 75th
Minimum Pecentile Median Pecentile Maximum
Methodology Name Multiple Multiple Multiple Multiple Multiple

Public Company Comparables:

Precedent Transactions:

Discounted Cash Flow Analysis:

 Err:502

Applicable 25th 75th

Err:502 Minimum Pecentile Median Pecentile Maximum
Figure Multiple Multiple Multiple Multiple Multiple
 Public Company Comps

Precedent Transactions

DCF Analysis

0 2 4 6 8 10

Min. 25th Median 75th

 Column L
Min to 25th
25th to Median
Median to 75th
75th to Max

10 12

Max Min Point 25 Point Med Point 75 Point Max Point

Comparable Companies - US-Based Hardware & Networking Companies with Over $20 Billion Revenue
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)

Operating Statistics Capitalization

Share Equity Enterprise Revenue EBITDA
Company Name Price Value Value 2009 2010E 2009
Hewlett-Packard Company $ 47.07 $ 114,779 $ 124,430 $ 114,552 $ 124,179 $ 16,433
Dell Inc. 12.90 25,241 15,080 51,430 55,380 3,426
Cisco Systems, Inc. 22.47 131,739 106,671 34,807 41,163 10,076
Intel Corporation 19.40 107,224 92,786 32,784 39,941 12,708
Motorola, Inc. 6.15 14,239 10,665 23,457 22,056 926

Maximum $ 47.07 $ 131,739 $ 124,430 $ 114,552 $ 124,179 $ 16,433

75th Percentile 22.47 114,779 106,671 51,430 55,380 12,708
Median $ 19.40 $ 107,224 $ 92,786 $ 34,807 $ 41,163 $ 10,076
25th Percentile 12.90 25,241 15,080 32,784 39,941 3,426
Minimum 6.15 14,239 10,665 23,457 22,056 926

Apple Inc. $ 192.06 $ 176,796 $ 141,401 $42,905 $ 53,631 $13,184

Valuation Statistics Capitalization Enterprise Value / Enterprise Value /

Share Equity Enterprise Revenue EBITDA
Company Name Price Value Value 2009 2010E 2009
Hewlett-Packard Company $ 47.07 $ 114,779 $ 124,430 1.1 x 1.0 x 7.6 x
Dell Inc. 12.90 25,241 15,080 0.3 x 0.3 x 4.4 x
Cisco Systems, Inc. 22.47 131,739 106,671 3.1 x 2.6 x 10.6 x
Intel Corporation 19.40 107,224 92,786 2.8 x 2.3 x 7.3 x
Motorola, Inc. 6.15 14,239 10,665 0.5 x 0.5 x 11.5 x

Maximum $ 47.07 $ 131,739 $ 124,430 3.1 x 2.6 x 11.5 x

75th Percentile 22.47 114,779 106,671 2.8 x 2.3 x 10.6 x
Median $ 19.40 $ 107,224 $ 92,786 1.1 x 1.0 x 7.6 x
25th Percentile 12.90 25,241 15,080 0.5 x 0.5 x 7.3 x
Minimum 6.15 14,239 10,665 0.3 x 0.3 x 4.4 x

Apple Inc. $ 192.06 $ 176,796 $ 141,401 3.3 x 2.6 x 10.7 x

on Revenue

Projected
EBITDA EPS Revenue EBITDA Margin
2010E 2009 2010E Growth 2009 2010E
$ 18,186 $ 3.14 $ 3.87 8.4% 14.3% 14.6%
4,129 0.79 1.18 7.7% 6.7% 7.5%
12,774 0.97 1.38 18.3% 28.9% 31.0%
18,332 0.41 1.17 21.8% 38.8% 45.9%
1,927 (1.70) 0.14 (6.0%) 3.9% 8.7%

$ 18,332 $ 3.14 $ 3.87 21.8% 38.8% 45.9%

18,186 0.97 1.38 18.3% 28.9% 31.0%
$ 12,774 $ 0.79 $ 1.18 8.4% 14.3% 14.6%
4,129 0.41 1.17 7.7% 6.7% 8.7%
1,927 (1.70) 0.14 (6.0%) 3.9% 7.5%

$16,480 $9.08 $ 11.59 25.0% 30.7% 30.7%

Enterprise Value /
EBITDA P / E Multiple
2010E 2009 2010E
6.8 x 15.0 x 12.2 x
3.7 x 16.4 x 10.9 x
8.4 x 23.1 x 16.3 x
5.1 x 47.2 x 16.6 x
5.5 x NM 44.6 x

8.4 x 47.2 x 44.6 x

6.8 x 29.1 x 16.6 x
5.5 x 19.7 x 16.3 x
5.1 x 16.1 x 12.2 x
3.7 x 15.0 x 10.9 x

8.6 x 21.2 x 16.6 x

Networking & Hardware M&A Transactions Over $1 Billion with US-Based Sellers Since 1/1/2008
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
 Err:502
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)
 Err:502
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)