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Background
Object: Apple Inc, an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. I would like to emphasize that this report supports in order to have a general look of long-term investment. Strengths, Weaknesses, Opportunities and Threats (or SWOT matrix) of Apple Inc will be mentioned below. Specifically, I will talk about issues which are relevant for investors in the long time. However they are concerned and depended on numbers with ratios in only financial report.
Strengths
Total assets are about $53,851 billion (Apple Inc balance sheet in Sep-2009).
When we compare with some other companies, Apple Inc is really one of the leaders among technology companies.
Company
Microsoft
Apple Inc
Nokia
Dell
HP
Assets (billion $)
86,112
53,851
51,276
30,060
4,265
Moreover, Apple’s products such as IPhone, IPod or IMac with good quality are appeared every countries and they have a large attraction with customers. For example, according to Brandonweir (from Apple's Quarterly Earnings Reports), 2010, 33 million IPhone have sold until the end 2009(1), “At the September 9, 2009 keynote presentation at the Apple Event, Phil Schiller announced total cumulative sales of iPods exceeded 220 million”(2) according to Downhill Battle in 2010. It figures strong abilities and important position of Apple Inc in the world.
Established on April 1, 1976, with over 30 years surviving, Apple Inc have experienced an increase in their growth, profit and stocks while some large ones else such as IBM could not survive by the time.
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Proficient in: Apple Inc
4.7 (348)
“ Amazing as always, gave her a week to finish a big assignment and came through way ahead of time. ”
Since beginning, Apple Inc has not only survived for 30 years but also acquired many small and medium in various aspects.
It proves strong ambitions to expand company more and more. In addition, from YCHARTS in 2010, R&D (Research and Development) of company is 6.58% of total assets(6), it makes company independent on potential threats. Here is 7 biggest companies of 28 which are acquired by Apple Inc(3) with total investment over 1,335 million dollars, according to Alacrastore in 2010. It is argued that the company has strategy plans for sustainable development in the long time.
Time
Company
Value
7/2/1997
NeXT – Computer programming services
$ 404,000,000
2/9/1997
Power Computing-Clone-Making–Clone computers
$ 100,000,000
31/12/2001
PowerSchool – Online info systems services
$ 62,000,000
1/7/ 2002
Emagic – Music production software
$ 30,000,000
24/4/2008
P.A. Semi - Semiconductors
$ 278,000,000
5/1/2010
Quattro Wireless – Mobile advertising
$ 275,000,000
27/4/2010
Intrinsity - Semiconductors
$ 121,000,000
There are nearly 899,805,500 and 888,325,973 shares issued and out standing until September 2009 (From financial report, p. 56). It is clear that a large of number shareholders do believe in company success and their capital are invested correctly. While their profit from stocks and shares are increasing, it is stated that investing Apple stocks will earn profit more and more. And the company has more capital from investors to use it for developing projects. Moreover, in fact, one positive point of Apple Inc is they do not pay out any dividends. Therefore company could re-invest the money into active capital structures. It shows a sustainable development with clear projects for long-term investment of shareholders.
Weaknesses
Apple Inc has 323 stores however 82% of them (265 by 323) only in US and UK(4), according to Wikipedia, 2010. It is stated that Apple Inc should expand company to get more profit of potential customer from other areas in the world. Moreover, it is a chance to create new contracts with various producers. Because with well-known trade name and quality products, it is argued that if company only wants to increase profits in some big countries, it is a big waste.
Opportunities
Generally, potential investors need a general view about company STOCKS and SHARES since some years ago because it would help them to be sure that basically, their money is invested in right way or not. From 2004 to 2009, company’s stocks are increasing rapidly every year although it is affected by recession in 2008 therefore their profitability is their high earnings per share. Specifically, company’s stocks rose quickly from 100$ in 2004 to 957$ in 2009.
From Apple Inc financial report in 2009, p.35
Meanwhile, from table below seems to suggest that a significant rate of development of Apple Inc when we compare some other index. In 5 years, this stocks in 2009 gets nearly by ten times (957$ and 100$) in 2004 (beginning). Moreover, it shows that stocks and share of Apple Inc is higher than competitive companies about development therefore investing Apple Inc at this time for a long-term is a correct decision.
September
2004
September
2005
September
2006
September
2007
September
2008
September
2009
Apple Inc.
$100
$277
$397
$792
$587
$957
S&P 500 Composite Index
$100
$112
$124
$145
$113
$105
S&P Computer Hardware Index
$100
$115
$123
$181
$152
$180
GROSS MARGIN PERCENTAGE of Apple Inc also rose from 2007 to 2009 with about 35% each year. Profit margin measures the performance of the company in generating profits from sales therefore from this ratio, Apple Inc figures a rapid development with positive effect. This is a percentage showing the relationship between a business’s profits before overheads are taken away (gross profit), and the total amount of income from sales. It is claimed that investors could believe in the company financial situation nowadays completely.
2009
2008
2007
Net sales
$36,537
$32,479
$24,006
Cost of sales
23,397
21,334
15,852
Gross margin
$13,140
$11,145
$ 8,154
Gross margin percentage
36.0%
34.3%
34.0%
GEARING, which is defined DEBT divide EQUITY, is important because the level of risk increases as the proportion of debt increases and equity shareholders are paid after the demands of loan capital providers have been met. According to financial report, Company’s long-term debt is zero while equity is $ 1743 therefore gearing = 0 is enough low to invest with fairly safety. Apple Inc has a very good financial standing and is not in any immediate danger of bankruptcy. When we have a brief look, gearing and debt of others competitive companies like HP, Dell or Microsoft are higher so much than Apple Inc. Therefore shareholders could believe the safety of their capital in the long time. On the other hand, ASSET TURNOVER, which is defined TOTAL SALES divide ASSETS (36537 / 53851 = 67.85%) is used to measure the performance of the company in generating sales from the assets at its disposal. Asset turnover is one of two important ratios for shareholders to return on capital employed therefore it helps investors identify the safety of their capital. With 67.85%, it shows a positive number of efficiency for long-term investment.
CURRENT RATIO which is defined CURRENT ASSETS divide CURRENT LIABILITIES relates the current assets of the company to its current liabilities. It is a measure of a company’s ability to meet its short-term solvency. These assets should at least be sufficient to meet the any short-term liabilities – generally that is taken to mean a ratio of 2:1 or better because many State Securities Bureaus will require this ratio for stocks and make investors believe financial situation of company. When we compare among some large technology companies, apple is the best of them (table above). This ratio shows that Apple Inc would be considered to have good short-term financial strength. If we have a look QUICK RATIO, which is defined: (CURRENT ASSETS minus INVENTORY) divide CURRENT LIABILITIES, excludes inventory from the current assets figure because it may be difficult to convert inventory to cash quickly. This ratio assumes that inventory is not available as part of the asset base available to meet the demands of immediate liabilities. 1:1 ratio or higher is considered good because it proves financial strengths of company to meet any sudden accident. Apple Inc is better able to meet their current liability obligations by using their liquid assets when the company is compared to the industry. With 1.86, Apple Inc defeated main competitive companies to pay its short-term debt and made customer confidence for company success.
Threats
Apple is still a successful modern company nowadays however actually, according to Ben McClure (Investopedia), 2010 when Apple Inc spends too much money with 1.109 billion dollars (2008) on R&D (Research and Development)(5) while some other aspects such as architecture of agents around the world need more capital to invest although it is a positive point which made a good position of Apple Inc nowadays.
Another view that we need to consider carefully is recession. Actually, from the stocks chart above, Apple Inc was affected by this in 2008 (decreased from $792 in 2007 to $587 in 2008). Therefore when recession has not gone out completely, shareholders should examine their investment for sustainable future.
Conclusions
From SWOT matrix above, with rapid grow speed of stocks & company and also developing strategies in the long-term, I want to recommend that Apple Inc is a good choice to invest in the long time. Although the company has some threats and weaknesses, Apple Inc has every confidence from investors who have invested in the long time before. When we analysed SWOT above, financial ratios and numbers show a quick increase with stable development therefore it is claimed that investing Apple Inc for a long-term is a right decision.
Notes
Anyway, this report only analyses some salient features and predictions above can be not sure 100% in the future. Because company’s success is affected by many different aspects such as demand of customers in the long time however some of them are not mentioned in this report. Although the ratios and the financial numbers of Apple Inc are fairly good, nothing is impossible in the long-term.
References
(1) Brandonweir, 2010, how many iphone have been sold, [accessed 29 November 2010], available at http://www.mahalo.com/answers/how-many-iphones-have-been-sold. (2) Downhill Battle, 2010, Are all those iPods empty?, [accessed 29 November 2010], available at http://www.itunesperipod.com/. (3) Alacrastore, 2010, Apple Inc Mergers and Acquisitions, [accessed 29 November 2010], available at http://www.alacrastore.com/mergers-acquisitions/Apple_Inc-1001101. (4) Wikipedia, 2010, Apple store, [accessed 29 November 2010], available at http://en.wikipedia.org/wiki/Apple_Store. (5) Ben McClure (Investopedia), 2010, R&D Spending And Profitability: What's The Link?, [accessed 29 November 2010], available at http://www.investopedia.com/articles/fundamental-analysis/10/research-development-rorc.asp (6) YCHARTS, 2010, AAPL, [accessed 3 December 2010], available at http://ycharts.com/companies/AAPL
Apple Financial Report. (2016, Mar 10). Retrieved from https://studymoose.com/re-apple-financial-report-essay
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