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 $88,285
Valuation Summary - Apple Inc.
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)

Valuation Statistics - Apple Inc. Apple Inc. - Range of Valuation Multiples / Premiums

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

Public Company Comparables:

2009 EV / Revenue: 0.3 x 0.5 x 1.1 x 2.8 x
2010E EV / Revenue: 0.3 x 0.5 x 1.0 x 2.3 x
2009 EV / EBITDA: 4.4 x 7.3 x 7.6 x 10.6 x
2010E EV / EBITDA: 3.7 x 5.1 x 5.5 x 6.8 x
2009 P / E: 15.0 x 16.1 x 19.7 x 29.1 x
2010E P / E: 10.9 x 12.2 x 16.3 x 16.6 x

Precedent Transactions:
Trailing EV / Revenue: 0.4 x 1.9 x 2.7 x 6.0 x
Forward EV / Revenue: 0.4 x 2.1 x 2.7 x 5.0 x
Trailing EV / EBITDA: 8.7 x 11.5 x 14.4 x 17.3 x
Forward EV / EBITDA: 9.6 x 13.4 x 19.1 x 23.9 x

Discounted Cash Flow Analysis:

11-15% Discount Rate, 5-9x Terminal Multiple:
on Multiples / Premiums Apple Inc. - Implied Per Share Value Range

Applicable 25th 75th

Maximum Apple Inc. Minimum Pecentile Median Pecentile Maximum
Multiple Figure Multiple Multiple Multiple Multiple Multiple

3.1 x $42,905 $ 52.12 $ 59.64 $ 89.08 $ 170.37 $ 181.29

2.6 x $53,631 54.32 66.62 96.83 173.80 189.43
11.5 x $13,184 101.49 143.02 146.90 190.08 203.41
8.4 x $16,480 103.84 129.06 137.54 160.94 187.95
47.2 x $9.08 136.10 145.77 179.19 264.11 428.24
44.6 x $11.59 126.68 140.94 188.68 192.55 516.50

8.3 x $42,905 $ 57.41 $ 129.08 $ 165.82 $ 319.62 $ 424.32

7.5 x $53,631 63.66 163.31 198.04 328.66 472.85
39.7 x $13,184 162.40 202.99 244.29 285.53 606.40
32.8 x $16,480 211.19 277.70 379.76 465.76 625.62

$ 163.88 $ 182.19 $ 201.98 $ 223.36 $ 246.46

Balance Sheet Adjustment: $35,395
 Public Company Comparables

2009 EV / Revenue:

2010E EV / Revenue:

2009 EV / EBITDA:

2010E EV / EBITDA:

2009 P / E:

2010E P / E:
Precedent Transactions

Trailing EV / Revenue:

Forward EV / Revenue:

Trailing EV / EBITDA:

Forward EV / EBITDA:
Discounted Cash Flow Analysis

11-15% Discount Rate, 5-9x Terminal Multiple:

$0.00 $100.00 $200.00 $300.00 $400.00 $500.00 $600.00 $700.

Min. 25th Median 75th

11-15% Discount Rate, 5-9x Terminal Multiple: $ 163.88 $ 182.19 $ 201.98 $ 223.36

Forward EV / EBITDA: $ 211.19 $ 277.70 $ 379.76 $ 465.76

Trailing EV / EBITDA: $ 162.40 $ 202.99 $ 244.29 $ 285.53
Forward EV / Revenue: $ 63.66 $ 163.31 $ 198.04 $ 328.66
Trailing EV / Revenue: $ 57.41 $ 129.08 $ 165.82 $ 319.62

2010E P / E: $ 126.68 $ 140.94 $ 188.68 $ 192.55

2009 P / E: $ 136.10 $ 145.77 $ 179.19 $ 264.11
2010E EV / EBITDA: $ 103.84 $ 129.06 $ 137.54 $ 160.94
2009 EV / EBITDA: $ 101.49 $ 143.02 $ 146.90 $ 190.08
2010E EV / Revenue: $ 54.32 $ 66.62 $ 96.83 $ 173.80
2009 EV / Revenue: $ 52.12 $ 59.64 $ 89.08 $ 170.37
 Min to 25th
25th to Median
Median to 75th
75th to Max

0.00 $500.00 $600.00 $700.00

Max Min Point 25 Point Med Point 75 Point Max Point

$ 246.46 $ 163.88 $ 18.31 $ 19.79 $ 21.38 $ 23.10

$ 625.62 $ 211.19 $ 66.51 $ 102.06 $ 86.00 $ 159.85

$ 606.40 $ 162.40 $ 40.59 $ 41.30 $ 41.24 $ 320.86
$ 472.85 $ 63.66 $ 99.65 $ 34.73 $ 130.62 $ 144.19
$ 424.32 $ 57.41 $ 71.67 $ 36.74 $ 153.80 $ 104.70

$ 516.50 $ 126.68 $ 14.26 $ 47.74 $ 3.87 $ 323.95

$ 428.24 $ 136.10 $ 9.67 $ 33.43 $ 84.92 $ 164.13
$ 187.95 $ 103.84 $ 25.23 $ 8.47 $ 23.41 $ 27.01
$ 203.41 $ 101.49 $ 41.53 $ 3.87 $ 43.18 $ 13.33
$ 189.43 $ 54.32 $ 12.31 $ 30.21 $ 76.97 $ 15.63
$ 181.29 $ 52.12 $ 7.53 $ 29.44 $ 81.29 $ 10.93
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)

Apple Inc. - Comparable M&A Transactions

Equity Enterprise
Acquirer Name Target Name Date Value Value
Hewlett-Packard Company 3Com 11/11/2009 $ 3,180 $ 2,714
Cisco Systems, Inc. Starent Networks 10/13/2009 2,777 2,386
Emerson Electric Co. Avocent 10/6/2009 1,114 1,147
EMC Corporation Data Domain 7/8/2009 2,362 2,085
Oracle Corporation Sun Microsystems 4/20/2009 7,075 5,392
Brocade Communication Systems, Inc. Foundry Networks 7/21/2008 2,899 2,063

Maximum $ 7,075 $ 5,392

75th Percentile 3,110 2,632
Median $ 2,838 $ 2,235
25th Percentile 2,466 2,068
Minimum 1,114 1,147
 Operating Metrics Valuation Multiples
EV / EV / EV / EV /
Trailing Forward Trailing Forward Trailing Forward Trailing Forward
Revenue Revenue EBITDA EBITDA Revenue Revenue EBITDA EBITDA
$ 1,265 $ 1,223 $ 152 $ 110 2.1 x 2.2 x 17.8 x 24.6 x
288 320 154 110 8.3 x 7.5 x 15.5 x 21.6 x
611 542 105 93 1.9 x 2.1 x 10.9 x 12.3 x
301 375 53 64 6.9 x 5.6 x 39.7 x 32.8 x
13,256 12,462 623 559 0.4 x 0.4 x 8.7 x 9.6 x
621 633 156 125 3.3 x 3.3 x 13.2 x 16.5 x

$ 13,256 $ 12,462 $ 623 $ 559 8.3 x 7.5 x 39.7 x 32.8 x

1,104 1,075 155 121 6.0 x 5.0 x 17.3 x 23.9 x
$ 616 $ 587 $ 153 $ 110 2.7 x 2.7 x 14.4 x 19.1 x
378 417 117 97 1.9 x 2.1 x 11.5 x 13.4 x
288 320 53 64 0.4 x 0.4 x 8.7 x 9.6 x
Discounted Cash Flow Analysis - Apple Inc.
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)

Apple Inc. - Cash Flow Projections

FY 2010E FY 2011E FY 2012E FY 2013E FY 2014E

Revenue: $53,631 $ 62,749 $ 69,651 $ 75,919 $ 81,234

EBITDA: $16,480 $ 19,282 $ 21,403 $ 23,329 $ 24,962
Operating Income: $14,635 $ 17,133 $ 19,030 $ 20,761 $ 22,218

Less: Taxes ($4,391) ($5,140) ($5,709) ($6,228) ($6,665)

Plus: Depreciation $918 $1,073 $1,192 $1,299 $1,390

Plus: Amortization $40 $37 $28 $13 $10
Plus: Stock-Based Compensation $888 $1,038 $1,153 $1,256 $1,344

Less: Increase in Working Capital: $2,136 $1,815 $1,374 $1,248 $1,058

Less: Capital Expenditures ($1,430) ($1,673) ($1,857) ($2,024) ($2,166)

Unlevered Free Cash Flow $12,795 $ 14,284 $ 15,211 $ 16,324 $ 17,189

Present Value of Free Cash Flow $12,064 $ 11,971 $ 11,332 $ 10,811 $ 10,119

Normal Discount Period: 1.000 2.000 3.000 4.000 5.000

Mid-Year Discount: 0.500 1.500 2.500 3.500 4.500

Free Cash Flow Growth Rate: 11.6% 6.5% 7.3% 5.3%

Apple Inc. - Net Present Value Sensitivity - Terminal Growth Rates

Discount Rate
$ 204.96 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0%
0.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68
Terminal Growth

1.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68

2.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68
Rate

3.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68

4.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68
5.0% $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68

Apple Inc. - Net Present Value Sensitivity - Terminal EBITDA Multiples

Discount Rate
$ 204.96 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0%
4.0 x $ 170.39 $ 165.99 $ 161.81 $ 157.83 $ 154.03 $ 150.40 $ 146.95
Terminal EBITDA

5.0 x $ 187.23 $ 182.09 $ 177.20 $ 172.54 $ 168.11 $ 163.88 $ 159.86

Multiple
Terminal EBITDA
Multiple
6.0 x $ 204.06 $ 198.18 $ 192.59 $ 187.26 $ 182.19 $ 177.37 $ 172.77
7.0 x $ 220.90 $ 214.27 $ 207.97 $ 201.98 $ 196.28 $ 190.85 $ 185.68
8.0 x $ 237.74 $ 230.37 $ 223.36 $ 216.70 $ 210.36 $ 204.33 $ 198.59
9.0 x $ 254.58 $ 246.46 $ 238.75 $ 231.42 $ 224.44 $ 217.81 $ 211.50
Apple Inc. - DCF Assumptions & Output

Use Multiples Method? Yes

Discount Rate: 12.5%

Terminal EBITDA Multiple: 7.0 x

Terminal Growth Rate: 3.0%
Terminal Value: $ 174,733

PV of Terminal Value: $96,980

Sum of PV of Cash Flows: $56,296
Enterprise Value: $153,276

Terminal Value % EV: 63.3%

Enterprise Value: $153,276

Balance Sheet Adjustment: $35,395
Implied Equity Value: $188,671

Implied Price Per Share: $ 204.96

WACC Analysis - Apple Inc.
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)

Discount Rate Calculation - Assumptions

Risk-Free Rate: 4.38%
Equity Risk Premium: 7.00%
Interest Rate on Debt: 9.00%

Comparable Companies - Unlevered Beta Calculation

Levered Equity Unlevered
Name Beta Debt Value Tax Rate Beta
Hewlett-Packard Company 1.04 $ 15,830 $ 114,779 20.0% 0.94
Dell Inc. 1.31 3,793 25,241 27.0% 1.18
Cisco Systems, Inc. 1.23 10,273 131,739 22.0% 1.16
Intel Corporation 1.17 2,224 107,224 33.0% 1.15
Motorola, Inc. 1.87 3,925 14,239 34.0% 1.58

Median 1.23 1.16

Apple Inc. 1.57

Apple Inc. - Levered Beta & WACC Calculation

Unlevered Equity Levered
Beta Debt Value Tax Rate Beta

Apple Inc. 1.16 $0 $ 176,796 30% 1.16

Cost of Equity Based on Comparables: 12.50%

Cost of Equity Based on Historical Beta: 15.37%

WACC = Cost of Equity * % Equity + Cost of Debt * % Debt * (1 - Tax Rate) + Cost of Preferred Stock * % Preferred Stock

WACC 12.50%
d Stock * % Preferred Stock
Merger Model - Apple Inc. and Research in Motion Limited
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)

Transaction Assumptions

Per Share Purchase Price: $75.00 Equity Purchase Price:

% Cash: 33.3% Cash Used:
% Debt: 33.3% Debt Issued:
% Stock: 33.3% New Shares Issued:
Foregone Cash Interest Rate: 1.0% Debt Interest Rate:

Revenue Synergy %: 10.0% Revenue Synergy COGS %:

Cost Synergies % OpEx: 10.0%

Goodwill Creation & Balance Sheet Adjustments

Goodwill Calculation: Fixed Asset Write-Up:

Equity Purchase Price: $43,049 PP&E Write-Up %:
Less: Seller Book Value: ($6,987) PP&E Write-Up Amount:
Plus: Write-Off of Existing Goodwill: $147 Depreciation Period (Years):
Total Allocable Purchase Premium: $36,209
Intangible Asset Write-Up:
Less: Write-Up of PP&E: ($174) Purchase Price to Allocate:
Less: Write-Up of Intangibles: ($7,242) % Allocated to Intangibles:
Less: Write-Down of DTL: ($43) Intangibles Write-Up Amount:
Plus: New Deferred Tax Liability: $2,225 Amortization Period (Years):
Total Goodwill Created: $30,975
New Deferred Tax Liability:

Buyer - Financial Profile Seller - Financial Profile

Buyer Name: Apple Inc. Seller Name: Research in Motion Limited

Share Price: $192.06 Share Price:
Diluted Shares Outstanding: 920,526 Diluted Shares Outstanding:
Diluted Equity Value: $176,796 Diluted Equity Value:
Enterprise Value: $141,401 Enterprise Value:
Tax Rate: 30% Tax Rate:

Buyer - Income Statement Seller - Income Statement

FY 2010E FY 2011E
Revenue: $53,631 $62,749 Revenue:
Cost of Goods Sold: $31,655 $37,037 Cost of Goods Sold:
Gross Profit: $21,976 $25,712 Gross Profit:
Operating Expenses: $5,496 $6,430 Operating Expenses:

Depreciation of PP&E: $918 $1,073 Depreciation of PP&E:

Amortization of Intangibles: $40 $37 Amortization of Intangibles:
Stock-Based Compensation: $888 $1,038 Stock-Based Compensation:

Operating Income: $14,635 $17,133 Operating Income:

Interest Income / (Expense): $379 $478 Interest Income / (Expense):
Pre-Tax Income: $15,014 $17,610 Pre-Tax Income:
Income Tax Provision: $4,504 $5,283 Income Tax Provision:

Net Income: $10,510 $12,327 Net Income:

Earnings Per Share (EPS): $11.59 $13.59 Earnings Per Share (EPS):
Diluted Shares Outstanding: 907,005 907,005 Diluted Shares Outstanding:

Combined Income Statement

FY 2010E FY 2011E
Combined Revenue: $70,862 $83,617
Revenue Synergies: $1,723 $2,087
Cost of Goods Sold: $41,410 $48,905
Revenue Synergy COGS: $862 $1,043
Gross Profit: $30,313 $35,755

Operating Expenses: $8,193 $9,689

OpEx Synergies: $270 $326

Depreciation of PP&E: $1,348 $1,637

Depr. of PP&E Write-Up: $22 $22
Amortization of Intangibles: $399 $470
Amort. of New Intangibles: $1,448 $1,448
Stock-Based Compensation: $939 $1,101

Operating Income: $18,233 $21,713

Interest Income / (Expense): $404 $510
Foregone Interest on Cash: ($143) ($143)
Interest Paid on New Debt: ($1,291) ($1,291)
Pre-Tax Income: $17,203 $20,789
Income Tax Provision: $5,161 $6,237

Net Income: $12,042 $14,552

Earnings Per Share (EPS): $12.27 $14.82

Diluted Shares Outstanding: 981,719 981,719

Accretion / Dilution: $0.68 $1.23

Accretion / Dilution %: 5.9% 9.1%

Sensitivity Analysis - Year 1 EPS Accretion/Dilution and Purchase Price vs. Operating Expense Synergies:

Expense Synergies % Seller OpEx:

5.9% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
$ 110.00 (8.2%) (7.9%) (7.6%) (7.3%) (7.0%) (6.6%) (6.3%)
$ 105.00 (6.5%) (6.2%) (5.9%) (5.6%) (5.2%) (4.9%) (4.6%)
Per Share Purchase Price

$ 100.00 (4.8%) (4.5%) (4.1%) (3.8%) (3.5%) (3.2%) (2.8%)

$ 95.00 (3.0%) (2.7%) (2.4%) (2.0%) (1.7%) (1.4%) (1.1%)
$ 90.00 (1.2%) (0.9%) (0.6%) (0.3%) 0.1% 0.4% 0.7%
$ 85.00 0.6% 0.9% 1.2% 1.5% 1.9% 2.2% 2.5%
$ 80.00 2.4% 2.7% 3.0% 3.4% 3.7% 4.0% 4.3%
$ 75.00 4.2% 4.5% 4.9% 5.2% 5.5% 5.9% 6.2%
$ 70.00 6.0% 6.4% 6.7% 7.0% 7.4% 7.7% 8.0%
$ 65.00 7.9% 8.3% 8.6% 8.9% 9.3% 9.6% 9.9%

Sensitivity Analysis - Year 1 EPS Accretion/Dilution and Purchase Price vs. Revenue Synergies:

Revenue Synergies % Seller Revenue:

5.9% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
$ 110.00 (11.8%) (10.7%) (9.7%) (8.7%) (7.7%) (6.6%) (5.6%)
$ 105.00 (10.1%) (9.0%) (8.0%) (7.0%) (5.9%) (4.9%) (3.9%)
Per Share Purchase Price

$ 100.00 (8.3%) (7.3%) (6.3%) (5.2%) (4.2%) (3.2%) (2.1%)

$ 95.00 (6.6%) (5.6%) (4.5%) (3.5%) (2.4%) (1.4%) (0.4%)
$ 90.00 (4.8%) (3.8%) (2.7%) (1.7%) (0.7%) 0.4% 1.4%
$ 85.00 (3.1%) (2.0%) (1.0%) 0.1% 1.1% 2.2% 3.2%
$ 80.00 (1.3%) (0.2%) 0.9% 1.9% 3.0% 4.0% 5.1%
$ 75.00 0.6% 1.6% 2.7% 3.7% 4.8% 5.9% 6.9%
$ 70.00 2.4% 3.5% 4.5% 5.6% 6.6% 7.7% 8.8%
$ 65.00 4.2% 5.3% 6.4% 7.4% 8.5% 9.6% 10.7%
 $43,049
$14,350
$14,350
74,714
9.0%

50.0%

10.0%
$174
8

$36,209
20.0%
$7,242
5

$2,225

Research in Motion Limited

$62.91
572,951
$36,044
$33,547
28%

FY 2010E FY 2011E
$17,231 $20,868
$9,755 $11,869
$7,476 $9,000
$2,698 $3,259

$431 $563
$359 $433
$52 $63

$3,937 $4,682
$25 $33
$3,962 $4,714
$1,148 $1,343

$2,814 $3,371

$5.03 $6.02
560,000 560,000
pense Synergies:

:
14.0% 16.0%
(6.0%) (5.7%)
(4.3%) (3.9%)
(2.5%) (2.2%)
(0.7%) (0.4%)
1.0% 1.4%
2.9% 3.2%
4.7% 5.0%
6.5% 6.9%
8.4% 8.7%
10.3% 10.6%

ue:
14.0% 16.0%
(4.6%) (3.6%)
(2.9%) (1.8%)
(1.1%) (0.1%)
0.7% 1.7%
2.5% 3.5%
4.3% 5.3%
6.1% 7.2%
8.0% 9.0%
9.8% 10.9%
11.7% 12.8%
Merger Model - Seller Diluted Share Count & Combined Balance Sheets
($ in Millions, Except Per Share Amounts in Dollars and Share Counts in Thousands)

Diluted Share & Enterprise Value Calculations - Seller

Company Name: Research in Motion Limited Options Calculations - Current Price:

Share Price: $62.91
Offer Price Per Share: $75.00 Tax Rate: 28% Exercise
Name Number Price
Current Share Price: Purchase Price: Tranche A 10,470 $38.57
Basic Shares Outstanding: 568,900 Basic Shares Outstanding: 568,900 Tranche B
Basic Equity Value: $35,789 Basic Equity Value: $42,668 Total
Diluted Shares Outstanding: 572,951 Diluted Shares Outstanding: 573,986
Diluted Equity Value: $36,044 Diluted Equity Value: $43,049 Options Calculations - Purchase Price:
Less: Cash & Investments $2,498 Less: Cash & Investments $2,498
Plus: Debt $0 Plus: Debt $0 Exercise
Plus: Minority Interest $0 Plus: Minority Interest $0 Name Number Price
Plus: Preferred Stock $0 Plus: Preferred Stock $0 Tranche A 10,470 $38.57
Plus: Other Liabilities $0 Plus: Other Liabilities $0 Tranche B
Enterprise Value: $33,547 Enterprise Value: $40,551 Total

Balance Sheets - Buyer, Seller & Combined

Assets: Buyer Seller Adjustments Combined

Current Assets:
Cash & Short-Term Securities: $32,841 $1,664 ($14,350) $20,156
Accounts Receivable: $3,361 $2,613 $0 $5,974
Inventory: $455 $573 $0 $1,028
Deferred Tax Assets: $4 $176 $0 $180
Other Current Assets: $3,140 $190 $0 $3,330
Total Current Assets: $39,801 $5,215 ($14,350) $30,667
Long-Term Assets:
Long-Term Securities: $2,554 $834 $0 $3,388
Plants, Property & Equipment: $2,839 $1,737 $174 $4,750
Goodwill: $207 $147 $30,828 $31,182
Other Intangible Assets: $354 $1,291 $7,242 $8,887
Other Assets: $2,011 $0 $0 $2,011
Total Assets: $47,766 $9,224 $23,894 $80,884

Liabilities & Shareholders' Equity:

Current Liabilities:
Accounts Payable: $5,601 $496 $0 $6,097
Accrued Expenses: $3,852 $1,604 $0 $5,456
Deferred Revenue: $2,053 $67 $0 $2,120
Total Current Liabilities: $11,506 $2,167 $0 $13,673

Long-Term Liabilities:
Deferred Revenue: $853 $0 $0 $853
Long-Term Debt: $0 $0 $14,350 $14,350
Deferred Income Tax Liability: $0 $43 $2,181 $2,225
Other Long-Term Liabilities: $3,502 $28 $0 $3,530
Total Liabilities: $15,861 $2,238 $16,531 $34,630

Shareholders' Equity:
Common Stock: $7,177 $2,236 ($2,236) $7,177
Additional Paid-In Capital: $1,185 $139 $14,211 $15,535
Treasury Stock: $0 ($45) $45 $0
Retained Earnings: $23,364 $4,664 ($4,664) $23,364
Accumulated Other Comprehensive Income: $179 ($8) $8 $179
Total Shareholders' Equity: $31,905 $6,987 $7,363 $46,255

Total Liabilities & SE: $47,766 $9,224 $23,894 $80,884

- Current Price:

Dilution
4,051

4,051

- Purchase Price:

Dilution
5,086

5,086

Combined