The focus of this analysis is to perform a thorough examination of Apple Computer’s financial performance over the past three years and its growing success. Apple maintains its focus on the design, development and marketing of personal computers, related software, peripherals, portable digital music players and related accessories. The decision of choosing Apple for the analysis is for the reason that this company has visible strengths and success. Apple has made drastic financial strides over the past few years. The company recorded a 44. 5% increase in revenues over 2012 reaching $156. 51 billion with a net income of $41. 73 billion.
With these increasing numbers year after year, Apple has blown away the industry averages and becoming leader in personal computer and electronic industry. What started as merely an idea for inventors Steve Jobs, Stephen Wozniak and Ronald Wayne eventually grew into one of the most popular personal computer systems today. In 1976, the Apple I computer began its journey as purely a shell consisting of only a circuit board that first came to life in the garage of Steve Job's parents home. Although at that time it was not very practical or popular among gamers and gadget enthusiast, it would soon set the stage for the personal computer to come.
A monument of innovation, the Apple I computer was an example of the capabilities that resulted from the innovative thinking. It wouldn't be long however before the Apple II computer would make its impressive debut with its new plastic external case and colorful graphics (Hitt, Ireland, & Hoskisson, 2011). Today, the company’s portfolio is structured around Mac computing systems, iPods, iPhones and servers. Apple Incorporated (NASDAQ: AAPL) is now headquartered in Cupertino, California employing over 47,000 US personnel and 70,000 employees worldwide (Golgowski, 2012).
Apple over the past 36 years has grown into a very innovative company that is recognized on an international scale. During this time however, they have been in a never ending battle to stay on top of the market in regards to technology, products, and services in their marketApple’s current operations are based on the design, manufacturing and marketing of personal computers and its related software. Its newest endeavors brought them into offering a line of portable digital music players, accessories and services.
The company’s products and services include an entire line of Macintosh desktops and laptops; iPod digital music player; iPhone digital music player and smart phone; iTunes Music Store and an ever-growing portfolio of peripherals and accessories for all of their product lines. The company sells its products worldwide through its online store, retail outlets, a direct sales force along with third-party wholesalers, resellers and value-added resellers. Their main focus of a consumer base is structured around individuals, small and midsized businesses, education, enterprise, government and creative customers.
The Apple operating system provides a highly stable environment for users leaving little or no possibility of intrusion by hackers thereby creating a solid alternative to an inconsistent Microsoft environment. 2. Overview of company’s vulnerability to current financial threats From day one, Apple’s core strategy has been innovation and constant improvement. They have consistently been a leader in introducing new products and improving on existing products to keep ahead of the competition. Throughout its history, Apple has taken steps that have propelled Apple into the successful position that it occupies today.
Now, one of Apple’s successful approaches is their supply chain strategy. What they have done was that they closed down Apple's manufacturing plant and outsourced most of Apple's production to overseas companies, which is Foxxcon. This does a few things for Apple. It allows the company to preserve capital, which would have to be used to buy equipment and hire workers if it did its own manufacturing. It also leaves most of the manufacturing details to these suppliers, allowing Apple to focus on what to build and less on how to build it. However, this strategy has brought problems for Apple.
Building supply chain in this way can be extremely effective for a lot of companies and is used for most of the electronics that most of consumer uses today. But the problems it creates are starting to get worse. When Apple sends manufacturing to other companies, they have to teach them how to make what they make. If Apple wants to build a great competitor, there's no better way than to have their competitor build their products. Example of this problem: It came out that Samsung was the only supplier that has been qualified to make screens for the new iPad. That has been disputed, and LG Display (NYS: LPL) may be a supplier as well.
The point is, this is the same Samsung that is actually stealing market share from Apple in the Chinese Smartphone market and makes arguably the best competitor here in the U. S. Now, there is even bigger problem may arise for Apple. What if Foxconn or even a few employees from Foxconn taking all that they have learned building iPhones and iPads and starting their own companies? That will be the biggest threats for Apple Inc. This problem has happened to one of major computer companies many years ago. ASUS was founded by four ex-computer engineers at Acer, and one of Lenovo's first successes was a circuit board made for IBM.
Less than 20 years later, Lenovo would purchase IBM's PC business when the company decided it no longer wanted to compete in the low-cost PC business that China was starting to take over. As a result, two of the top five PC companies today are Chinese, and most PC makers outsource at least some manufacturing to China. This transfer of intellectual property to suppliers was a major concern. It's one of the main reasons some US companies are still manufacturing part of its product in their headquarters, instead of moving product manufacturing to China or other countries where costs are very low.
Apple took a different approach, outsourcing its production and transferring that intellectual property to competitors and countries that have a history of stealing good ideas. Competitors will not be able to steal by making or selling Apple's products, but their devices may improve by learning a few things from Apple. Samsung has clearly become a major competitor in both the Smartphone and tablet market, while also manufacturing Apple's key devices in the same categories. Many argue that Samsung's own products are probably equal in quality.
Apple is a very successful company and competitors will be doing everything they can to duplicate its success. If those same competitors are the ones actually making Apple's product, then they're not far behind. 3. Financial Performance One of the most fascinating things from an economic point of view happened during this most recent recession: Apple posted quarter-after-quarter growth and record-setting revenue numbers. When it comes to the U. S. economy, Apple has been of the few bright spots lately, which has provided hope for many. Apple has become so large that some analysts refer to it as a separate asset lass.
There are stocks, bonds, commodities, and then there is Apple. “It has the largest market capitalization of any corporation in the world, and not surprisingly, is the largest holding of among hedge funds (Krishnamsetty, 2012). Year over year, Apple Inc. has been able to grow revenues from $108. 2B (in 2011) to $156. 5B (in Q4 2012). Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 59. 52% to 56. 13%. This was a driver that led to a bottom line growth from $25. 9B to $41. 7B. Below is a brief income statement of Apple.