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 Diluted Equity Preferred
Company Name Price Shares Value Cash Debt Stock
Hewlett-Packard Company $ 47.07 2,438,478 $ 114,779 $ 13,334 $ 15,830 $ -
Dell Inc. 12.90 1,956,656 25,241 13,954 3,793 -
Cisco Systems, Inc. 22.47 5,862,886 131,739 35,365 10,273 -
Intel Corporation 19.40 5,527,030 107,224 17,307 2,224 -
Motorola, Inc. 6.15 2,315,349 14,239 7,606 3,925 -

Maximum
75th Percentile
Median
25th Percentile
Minimum
 on Revenue

Capitalization
Minority Other Enterprise Revenue EBITDA EPS
Interest Liabilities Value 2009 2010E 2009 2010E 2009
$ - $ 7,155 $ 124,430 $ 114,552 $ 124,179 $ 16,433 $ 18,186 $ 3.14
- - 15,080 51,430 55,380 3,426 4,129 0.79
24 - 106,671 34,807 41,163 10,076 12,774 0.97
- 645 92,786 32,784 39,941 12,708 18,332 0.41
107 - 10,665 23,457 22,056 926 1,927 (1.70)
 Projected
EPS Revenue EBITDA Margin
2010E Growth 2009 2010E
$ 3.87 8.4% 14.3% 14.6%
1.18 7.7% 6.7% 7.5%
1.38 18.3% 28.9% 31.0%
1.17 21.8% 38.8% 45.9%
0.14 (6.0%) 3.9% 8.7%
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)