Apple Computer Inc.: Case Analysis

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 – Enlarge target market with new product “Nike” – Integration with other products “ Cars” – The use of Intel chips • The Intel chip allows the new machines to run the Windows Operation System

– Developing iTunes and music player technology into a mobile phone format.

• Threats – High level of competition in the technology market – High product substitution effects

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