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Apple Computer Inc.

Case Analysis
Company Overview
• Apple Computer Inc. is designer and
manufacture of personal computers,
software, peripherals, networking
solutions, and music players
• Products include:
– MacBook, MacBook Pro, Power Mac G5, iMac, Mac
mini, iPod, Xserve G5
– OS X 10.4 Tiger, iTunes, iLife, Final Cut Pro
• Over 130 Apple Retail Stores in 31 states
Mission Statement
• Leads the industry in innovation with its
award-winning desktop and notebook
computers, OS X operating system, and
iLife and professional applications.
• Apple is also spearheading the digital
music revolution with its iPod portable
music players and iTunes online music
store.
Apple SWOT Analysis
• Strengths
– 54% of Apple Profits are in foreign markets
– Knowledge of customer base
– High Quality Products
– Brand Name
– Innovation
– Product Diversification
– Easy use product
• Attractive, Small, light
• Easy to carry
– Apple is the oldest hardware manufacturer
– Control over the product by manufacturing both
computer and their OS
Apple SWOT Analysis
• Weaknesses
– Quality Product control
• iPod Nano may have a faulty screen
• Faulty ipod batteries
– High Price
– Poor leadership
– Internal engineering focus rather than a market
focus
– The Scare of LBO “Leveraged Buyout”
– No Dividends
Apple SWOT Analysis
• Opportunity • Threats
– Enlarge target market with
new product “Nike” – High level of
– Integration with other competition in the
products “ Cars” technology market
– The use of Intel chips
– High product
• The Intel chip allows the
new machines to run the substitution effects
Windows Operation
System
– Developing iTunes and
music player technology
into a mobile phone
format.
Financial Ratio Analysis
• Profit margin 9.97% (2006)
• ROA 11.40%
• ROE 22.90%
• Gross Profit 4.04 B
• Current Ratio 2.533
• Dept/Equity 0
• EPS 1.98
• Dividend payout 0
• P/E 32.45
Solutions/Future Outlook
• Apple can expect a prosperous future
– Steady increase in sales net earnings over the past
5 years
• Almost 200% sales increase from 2004-2005
-Over 80% market share in iPods

• Must continue to develop and acquire new


strengths
– I.e. Innovation, high quality products, good
marketing plan
– Threat of substitution/competition is decreased
Solutions/Future Outlook
• Must minimize number of faulty components of its products
– Increase R&D efforts
– Maintain customer loyalty

• Decrease prices
– iPod ranges from $300 to $400
– Mac desktop starts at $1300
– Result in gaining new customers

• Pay dividends
– Stopped paying in 1995 due to 2 for 1 Stock Splits
– Competitors haven’t been paying
– Improve stockholder loyalty