APPLE COMPANY

DIANA DELA MERCED

VANNIEROSE LOYOLA

IRISH JOY SOSA

LEOPOLDO DICEN

DON CHESTER PRUDENTE

INTRODUCTION

APPLE is the world’s largest technology which had a tumultuous journey during its 25
years in the computer industry. With a mission of providing easy-to-use computers to everyday
people, Apple grew to become stronger than IBM in the personal computer segment. In 1984,
with the introduction of the Macintosh, Apple revolutionized the personal computer market by
providing the first widely available graphical user interface (GUI) operating system
(OS).Microsoft offers competition in the form of operating system and software, Dell, Hewlett-
Packard, and Gateway compete head-to-head for direct computer system sales, and IBM and Sun
Microsystem compete in the server industry. Though Apple earned $1,000,000,000 in the net
income in 2001, it has recently posted net losses for the first time in the last five years. Apple has
also targeted Windows Users to “switch” expounding the ease of moving Windows documents
and files to Mac OS. These moves may prevent further declines in Apple market share by
attracting new customers instead of merely retaining current customer.

COMAPANY’S HISTORY

Year OFFICER IN EVENTS

CHARGE
1976 Steve Wozniak / Steve Apple 1
Jobs
1981 Steve Wozniak / Steve Death of Steve Wozniak
Jobs
1983 John Sculley He became on board as president and CEO
1984 Steve Jobs Macintosh
1985 - 1993 John Sculley Laser Writer and Page Maker
MAC II (1987)
Power Book (1991)
1994 – 1995 Michael Spindler Power Mac Line
1995 Gil Amelio Returned Apple to Profitability, such as changing
corporate
structure to create 7distinct profit center
1996-2000 Steve Jobs Interim CEO, acquisition of the "NeXt"
First OL apple store
Introduction of iMac (1998)
IBook(1999), iTool ( 2000)
2nd half of Power Mac G4-cube
2000
SWOT ANALYSIS

INTERNAL ENVIRONMENT

Internal Strengths:

a. Graphics
1. Apple produces Macintosh as the first affordable computer with graphical user’s
interface.
2. Success of Mac II in 1987 and PowerBook in 1991
3. Success of the first online Apple store which became the third largest E-commerce
site
4. Introduction of PowerMac lines of computers, utilizing the powerPc chip developed
by IBM and Motorola
5. Success of licensing to select Macintosh clone vendors
6. Introduction of iMac an affordable computer with an innovative design
7. Introduction of IBOOK in 1999
8. Revival of the investor confidence due to the escalation of stock price into 130 per
share in March 2000 because of the success of iTOOLs which introduce to people the
use of internet applications such as emails, website, iDisk online storage and virus
protection.

b. Publishing
1. The introduction of laser writer and pagemaker

c. Education
1. Success of the first online Apple store which became the third largest E-commerce site
2. Targeted the schools as their market of their products, which is basically used for
education purposes

Weaknesses:

Apple strengths also interfere with its weaknesses, even though the company show the following
as its area of strength, the company also struggled with these areas:

a. Graphics
b. Publishing
c. Education
 1. Apple has temporary leaders or chairman. Because the incorporators (steve wozniak and
steve jobs) were not permanently handling the company.
2. Due to these problems, incurrences of significant losses appear and the company
suffered.
3. Flood of cloned pc and Microsoft launched its response to Mac OS who offered similar
GUI.
4. Upon the success of licensing to select macintosh clone vendors, a 68M loss was
prompted at the end of 1995.
5. Incurrence of unprofitable year when the PowerMac G4 Cube was introduced. It was a
complete failure to Apple so it’s production was halted the year later.
6. Apple products are not affordable to common peoples who are the target market of the
competitors.

EXTERNAL ENVIRONMENT

Opportunities

Apple has seen its opportunities when the computer industry dominated the countries worldwide.
Some of their examples are the following:

1. Intel released its 4004 chip which located all the computer components on a tiny chip.
2. Apple released machines that were capable of both word processing and spreadsheet
functions.
3. Apple became the industry leader and remained on top until 1981
4. The number of computers in grew from 5.5 M in 1982 to 65M in 1992
5. Apple has also seen the success in the consumer electronics market with the popularity of
the iPod for both Apple and Windows user.

Threats

1. Hardware sector
a. The DELL
The DELL customer’s business model adds value in 5 ways:
1. The customers avoid delays and price mark-ups because there are no middlemen.
2. The model allows for customization; customer gets exactly what they want.
3. The direct model allows the customers to receive outstanding service after the sale
that is tailored to their needs.
4. Dell is able to implement the latest technological advances in the computer
hardware and software quickly because the time between the assembly and
delivery is so short.
5. Dell’s efficiency creates shareholder’s value
 b. GATEWAY
Gateway believes that the customer’s service is the key to success. While
advertising and promotion are a part of their strategy they hope to attract many of its
customers by word of mouth believing that no marketing technique is as effective as
satisfied customers who promote Gateway to their friends and family. Gateway is
notably distinguishable from Dell in that it operates brick and mortar stores.
Customers who wish to use a computer or talk to sales representative in person are
able to do so at this location.

c. HP and COMPAQ
The new entity resulting from the acquisition of Compaq by HP promises to
distinguish itself from the pack through innovation. Scientists at laboratories from
both companies in the merged firm are eager to collaborate to expand current
capabilities, particularly in the area of handheld and wireless devices. Although
HP/COMPAQ remains a dominant force in the PC market, the company’s primary
focus is currently on communication technology.
2. Software sector

In the software market, the industry profile is radically different. Rather than being
defined by rigorous competition, the market is dominated by Microsoft. Its Windows
operating system comes standard on nearly every PC that a computer may purchase.
While Apple offers its own operating system that comes standard on all Apple computers,
the software is not compatible with PCs. The result is that Apple software sales are
limited by the amount of Apple hardware sales.
Sun Microsystems is the other player worth noting in the software market for PCs.
Sun’s CEO, Scott McNealy, holds documented animosity for Microsoft. For McNealy,
taking market share from Microsoft is not just a necessity for surviving in the software
industry; it is a personal quest. Since 1982, Sun has distinguished itself by its vision.
Rather than meeting today’s computing needs in homes and workplaces, Sun attempts to
thrust computing into the next generation with innovative products and services.
Sun stands the test of time because the company understands that computing
technology is rapidly evolving.”while others protected proprietary, stand-alone
architectures, Sun focused on taking companies into the network age, providing systems
and software with the scalability and reliability needed to drive the electronic
marketplace.” Despite its unique strategy, Sun has enjoyed little success in taking
customers from Microsoft.
 3. Realistic evaluation of the possibilities for the successes of education sector
4. The battle for the market share
Apple’s share of the worldwide desktop market in 2000 was just over 6% and in the
portable market, just below 10%. HP/Compaq is the most established player in the
industry. Before the acquisition, Compaq commanded over 10% of the portable market
and nearly 15% of the desktop market, while HP was also a major player. Dell and
Gateway occupy the direct marketing channel. Dell alone captured over 10% of the
market for both desktop and portable computers in 2000. The most alarming fact is that
between 1995 and 2000, Apple’s share of the market for both products decreased by half.
Apple’s dominance in the education market throughout the 1990s is being lost to
Dell, who is leading with 35% of the market.
A number of factors may be contributing to this loss in education market share:
 Aggressive pricing from Dell
 PC price-performance ratios
 Proliferation of the PC in most sectors

While teachers may prefer Apple for their educational needs, administrators and
parents often question the benefit provided by not using a PC. Apple is struggling to hold
on to its 15.2% market share in this industry, offering its new operating system to all K-
12 teachers free of charge in October 2002.

Finally, Apple appears to be positioning itself to attack Microsoft in the software

market. The company’s new Switcher campaign aims directly at converting Microsoft
customers to Apple by promoting the ease of use that Apple products provide. Apple is
also challenging the dominance of Microsoft Office on Mac OS by providing its
AppleWorks office suite with the purchase of Apple hardware. The newest version of
Mac OS X also includes applications that provide improved e-mail, calendar, and
synchronization functionality previously provided by Microsoft Office.

Worldwide Market Share of Portable Computers

35%

30%

25%

20%
1995
15%
2000
10%

5%

0%
 Worldwide Market Share of Desktop PC's
50.0%
45.0%
40.0%
35.0%
30.0%
25.0% 1995
20.0% 2000
15.0%
10.0%
5.0%
0.0%
 Financial Performance in 2002
0.8

0.6

0.4
Sales Growth
0.2 Gross Margin
Operating Margin

0
Dell IBM Gateway Sun Apple HP

-0.2

-0.4

-0.6

Share of Education Market

60%

50%

40% 1994
1997
30% 1999

20%

10%

0%
Apple IBM Dell Gateway Compaq Others

CORPORATE LEVEL STRATEGY

 1. Apple’s hardware
Computers offered by Apple:
For beginners
For advanced users who will pay a higher price for higher performance

Desktop computer segment:

o iMac- least expensive, aimed at the general computer user
o PowerMac- Apple’s high-end desktop computer and is generally marketed
within the multimedia industry
Apple’s especially designed computer:

eMac - fits on a school desktop and comes with applications for learning. The “e” stands
for education, and this sold to schools and other academic institutions, one of Apple’s
most important niche markets.

Apple’s portable computers:

 iBook – are priced for consumers on budget

 PowerBook – with higher performance , represent Apple’s most expensive
consumer product line.

Apple also markets customizable severs, keyboards, mice, and others accessories,
all of which are designed to coordinate with the CPU’s and monitors. Apple offers a
variety of case design for their monitor and CPU’s that give their products a
unique and elegant look.

Apple launched

*iPOD- an audio player, pocket size & portable

2. Apple’s software

It had a licensed its operating system for IBM compatible PC’s before Microsoft’s
Windows took hold; apple has instead created proprietary software that complements its
hardware. Apple has developed innovative applications that encourage digital creativity. The
company’s Quick Time Player is one of the leading media players.
3. Marketing and Distribution
Apple has marketed its products with creative and dazzling advertising campaign.
The famous commercial that introduced the Macintosh during the Super Bowl and the
five year old “Think Different” campaign. Apple has won many advertising awards,
including the second annual primetime Emmy Award for best commercial.
A well manage supply chain is essential. Management tried to restructure the whole
chain by implementing cutting-edge SAP R/3 software, but due to lack of top down
commitment the effort was not fruitful. Apple had struggled with both insufficient supply
and excess inventory because of shaky forecasting ability. Timothy D. Cook aim to
reduce inventory stocked in channels and decrease order to delivery time.
FINANCIAL STATEMENTS
(1998-2002)

APPLE COMPUTER
 Annual Income Statement
(In Millions except EPS data)
Fiscal Year End for APPLE COMPUTER (AAPL) falls in the month of September.
           
30/09/200 30/09/200 2/30/200 30/09/199 30/09/199
  2 1 0 9 8
Sales 1443.00 5363.00 7983.00 6134.00 5941.00
Cost of Goods 1062.00 4128.00 5817.00 4438.00 4462.00
Gross Profit 381.00 1235.00 2166.00 1696.00 1279.00
Selling & Administrative &          
Depr.&Amort. Expenses 396.00 1568.00 1546.00 1310.00 1211.00
Income after Depreciation          
And Amortization -15.00 -333.00 620.00 386.00 268.00
Non-Operating Income -45.00 281.00 472.00 290.00 61.00
Interest Expense N /A 0.00 0.00 0.00 0.00
Pretax Income -60.00 -52.00 1092.00 676.00 329.00
Income Taxes -15.00 -15.00 306.00 75.00 20.00
Minority Interest N /A 0.00 0.00 0.00 0.00
Investment Gains/Losses (`) N /A 0.00 0.00 0.00 0.00
Other Income/Charges N /A 0.00 0.00 0.00 0.00
Income from Cont.
Operations -45.00 -37.00 786.00 601.00 309.00
Extras and Discounted 0.00 12.00 0.00 0.00 0.00
Operations          
Net Income -45.00 -25.00 786.00 601.00 309.00
           
Earnings per share Data          
Average Shares 361.79 345.61 360.32 348.33 335.83
Diluted EPS before          
Non-Recurring Items 0.32 10.23 2.01 1.28 0.98
Diluted Net EPS 0.18 -0.07 2.18 1.80 1.05

APPLE COMPUTER
 Annual Balance Sheet
(in Millions except Book Value per Share)
Fiscal Year End fo APPLE COMPUTER (AAPL) falls in the month of September
  30/09/2002 30/09/2001 2/30/2000 30/09/1999 30/09/1998
ASSETS          
Cash and Marketable Securities 4337.00 4336.00 4027.00 3226.00 2300.00
Receivables 565.00 446.00 953.00 681.00 955.00
Notes Receivable N/A 0.00 0.00 0.00 0.00
Inventory 45.00 11.00 33.00 20.00 78.00
Total Current Assets 5388.00 5143.00 5427.00 4285.00 3698.00
Net Property, Plant and Equipment 621.00 564.00 313.00 318.00 348.00
Investment and Advances N/A 128.00 786.00 0.00 0.00
Other Non-current Assets 39.00 0.00 0.00 0.00 0.00
Deferred Charges N/A 0.00 0.00 0.00 0.00
Intangibles 119.00 0.00 0.00 0.00 0.00
Deposits and Other Assets 131.00 186.00 277.00 558.00 243.00
Total Assets 6298.00 6021.00 6803.00 5161.00 4289.00
 
LIABILITIES
Notes Payable N/A 0.00 0.00 0.00 0.00
Accounts Payable 911.00 801.00 1157.00 812.00 719.00
Current Portion Long-term Debt N/A 0.00 0.00 0.00 0.00
Current Portion of Capital Leases N/A 0.00 0.00 0.00 0.00
Accrued Expenses 747.00 717.00 776.00 737.00 801.00
Income Taxes Payable N/A 0.00 0.00 0.00 0.00
Other Current Liabilities N/A 0.00 0.00 0.00 0.00
Total Current Liabilities 1658.00 1518.00 1933.00 1549.00 1520.00
Mortgages N/A 0.00 0.00 0.00 0.00
Deferred Taxes/Income 229.00 266.00 463.00 208.00 173.00
Convertible Debt N/A 0.00 0.00 0.00 0.00
Long-Term Debt 316.00 317.00 300.00 300.00 954.00
Non-Current Capital Leases N/A 0.00 0.00 0.00 0.00
Other Long-Term Liabilities N/A 0.00 0.00 0.00 0.00
Minority Interest (Liabilities) N/A 0.00 0.00 0.00 0.00
Total Liabilities 2203.00 2101.00 2696.00 2057.00 2647.00
 
SHAREHOLDER'S EQUITY
Preferred Stocks N/A 0.00 76.00 150.00 150.00
Common Stocks (Net) 1826.00 1693.00 1502.00 1349.00 633.00
Capital Surplus N/A 0.00 0.00 0.00 0.00
Retained Earnings 2325.00 2260.00 2285.00 1499.00 898.00
Other Equity Adjustments -56.00 -33.00 244.00 106.00 -39.00
Treasury Stock (-) N/A 0.00 0.00 0.00 0.00
Total Shareholder's Equity 4095.00 3920.00 4107.00 3104.00 1642.00
Total Liabilities and Shareholder's
Equity 6298.00 6021.00 6803.00 5161.00 4289.00
Common Equity 4095.00 3920.00 4031.00 2954.00 1492.00
Average Shares 361.79 345.61 360.32 348.33 335.83
Book Value per Share 11.41 11.17 12.40 9.18 5.54
 Fiscal Year End for APPLE COMPUTER (AAPL) falls in the month of September
30/09/199
  30/09/2002 30/09/2001 2/30/2000 9 30/09/1998
Cash Flow from Operating,
Investing,
and Financing Activities
Net Income (Loss) N/A -25.00 786.00 601.00 309.00
Depreciation/Amortization and
Depletion N/A 102.00 84.00 85.00 111.00
Net Change from Assets/Liabilities N/A 211.00 157.00 377.00 387.00
Net Cash from Discontinued
Opertaions N/A -12.00 0.00 0.00 0.00
Other Operating Activities N/A -91.00 -201.00 -265.00 -32.00
Net Cash from Operating
Activities N/A 185.00 826.00 798.00 775.00
Property and Equipment N/A -232.00 -96.00 -24.00 43.00
Acquisition/Disposition of
Subsidiaries N/A 0.00 0.00 0.00 -10.00
Investments N/A 1160.00 -796.00 -948.00 -566.00
Other Investing Activities N/A -36.00 -38.00 8.00 -10.00
Net Cash from Investing Activities N/A 892.00 -930.00 -964.00 -543.00
 
Uses of Funds
Issuance (Repurchase) of Capital
Stock N/A 42.00 -31.00 11.00 41.00
Issuance (Repayment) of Debt N/A 0.00 0.00 0.00 3.00
Increase (Decrease) Short-term Debt N/A 0.00 0.00 0.00 -25.00
Payment of Dividends and Other
Distributions N/A 0.00 0.00 0.00 0.00
Other Financing Activities N/A 0.00 0.00 0.00 0.00
Net Cash from Financing
Activities N/A 42.00 -31.00 11.00 19.00
Effect of Exchange Rate Changes N/A 0.00 0.00 0.00 0.00
Net Change in Cash and
Equivalents N/A 1119.00 -135.00 -155.00 251.00
 
Cah and Equivalents
1326.0 1481.0
Cash at Beginning of Period N/A 1191.00 0 0 1230.00
1191.0 1326.0
Cash at End of Period N/A 2310.00 0 0 1481.00
Dilluted Net EPS 0.18 -0.07 2.18 1.80 1.05
FINANCIAL RATIOS
Profitability Ratios

Gross Profit Margin

50.00%
45.00%
40.00%
35.00%
30.00% Apple Inc.
Competitors
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998

Operating Profit Margin

20.00%

15.00%

10.00%
Apple Inc.
Competitors
5.00%

0.00%
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998

-5.00%

-10.00%
 Net Profit Margin
16.00%

14.00%

12.00%

10.00%
Apple Inc.
8.00% Competitrors

6.00%

4.00%

2.00%

0.00%
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998
-2.00%

Return on Total Assets

20.00%

15.00%

Apple Inc.
10.00%
Competitors

5.00%

0.00%
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998

-5.00%
 Return on Equity
35.00%

30.00%

25.00%

20.00% Apple Inc.

Competitors
15.00%

10.00%

5.00%

0.00%
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998
-5.00%
Liquidity Ratios

Current Ratio
4.00

3.50

3.00

2.50 Apple Inc.

Competitors
2.00

1.50

1.00

0.50

0.00
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998

Quick Ratio
4

3.5

2.5 Apple Inc.

Competitors
2

1.5

0.5

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998
 Inventory to Net Working Capital
1

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998
-1

-2 Apple Inc.
Competitors
-3

-4

-5

-6

-7
Leverage Ratios

Debt to Total Assets

0.7

0.6

0.5
Apple Inc.
0.4 Competitors

0.3

0.2

0.1

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998

Debt to Equity
1.8

1.6

1.4

1.2
Apple Inc.
1 Competitors
0.8

0.6

0.4

0.2

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998
 Long-term Debt to Equity
0.8

0.7

0.6

0.5 Apple Inc.

Competitors
0.4

0.3

0.2

0.1

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998

Times Interest Earned

1000

800

600
Apple Inc.
Competitors
400

200

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998

-200
Activity (Efiiciency) Ratios

Inventory Turnover
600

500

400
Apple Inc.
Competitors
300

200

100

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998

Fixed Asset Turnover

30

25

20
Apple Inc.
Competitors
15

10

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998
 Total Asset Turnover
2
1.8
1.6
1.4
1.2 Apple Inc.
Competitors
1
0.8
0.6
0.4
0.2
0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998

Accounts Receivable Turnover

14

12

10
Apple Inc.
8 Competitors

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998
 Average Collection Period
70

60

50
Apple Inc.
40 Competitors

30

20

10

0
FY 2002 FY 2001 FY 2000 FY 1999 FY 1998
Key Growth Rates

Sales
40.00%

30.00%

20.00%

10.00% Apple Inc.

competitors
0.00%
FY 2002 FY 2001 FY 2000 FY 1999
-10.00%

-20.00%

-30.00%

-40.00%

Operating Profits
100.00%

50.00%

0.00%
FY 2002 FY 2001 FY 2000 FY 1999 Apple Inc.
Competitors
-50.00%

-100.00%

-150.00%

-200.00%
 Net Income
150.00%

100.00%

50.00%
Apple Inc.
0.00% Competitors
FY 2002 FY 2001 FY 2000 FY 1999

-50.00%

-100.00%

-150.00%

-200.00%

Current Assets

30.00%

25.00%

20.00%
Apple Inc.
15.00% Competitors

10.00%

5.00%

0.00%
FY 2002 FY 2001 FY 2000 FY 1999
-5.00%

-10.00%
 Net Fixed Assets
100.00%

80.00%

60.00%
Apple Inc.
Competitors
40.00%

20.00%

0.00%
FY 2002 FY 2001 FY 2000 FY 1999

-20.00%

Current Liabilities
40.00%

30.00%

20.00%
Apple Inc.
10.00% Competitors

0.00%
FY 2002 FY 2001 FY 2000 FY 1999

-10.00%

-20.00%

-30.00%
 Long-term Debt
40.00%

20.00%

0.00%
FY 2002 FY 2001 FY 2000 FY 1999 Apple Inc.
Competitors
-20.00%

-40.00%

-60.00%

-80.00%