Apple Case5. What is your assessment of Apple Computer’s financial performance the past three years?(Use the financial ratios in Table 4.1 on pages 94-96 of the text as a guide in doing your financial analysis.)Based on the ratios, we can see the differences of ratios in Apple, Inc. financial statistics from 2005 until 2007. In their gross profit margin, ratios showed that profit margin are decrease from 40.9% in 2005 to 40.8 % in 2006. But in 2007, the gross profit margins were increase to 51.4% and this percentage is the highest compare to 2005 and 2006. So the higher percentage is better than and the trend should be upward. For operating profit margin, the ratio is consistently increased in 2005, 2006 and 2007.The percentage for the both three years is 11.8%, 12.7% and 18.4%. This was proving that Apple, Inc. is consistently gained the profitability of the current operation. The return on total assets (ROA) for Apple, Inc. for the two year are almost remain the same that is 11.5% in 2005 and it showed a little increase to 11.6 % in 2006. But in 2007the ratio were increased to 13.8%. These ratios measure the return on total investment in the enterprise. We take a look for return on stockholders (ROE) equity for 2005 is 17.9% , 2006 is19.9% while for the 2007 it increase to 24.1% which mean the return on stock holders earning on their investment. For inventory turnover ratio, Apple Inc. state 84.4% in 2005 which is decrease a little to71.5% in 2006. But in 2007, the numbers of inventory turnover ratio were decreased to69.4%. It is not a good for Apple Inc. to measure the number of inventory per year because inventory turnover is low. The debt-to-equity ratio in year 2005 and 2006 is remaining the same which is 0.08%.But in 2007, the ratios of debt-to-equity were increase to 0.10%. These ratios show that Apple Inc. has higher creditworthiness and good balance sheet strength.
As a whole, Apple has had mediocre performance in the PC industry. Sales significantly increased from the mid-80’s to the mid-90’s. However, as sales increased, so did debt, and the threat of bankruptcy in1996 led Apple to transform into Apple Inc rather than Apple Computer. At this time, the company recovered fully with the introduction of non-PC products. These new products had a huge hand in the financial recovery, as Apple continued to lose market share in the PC market. The PC market is rapidly changing, and Apple at times was too slow to respond and did not anticipate the abilities of their competitors. Meanwhile, they used their capabilities to consistently change their strategy. Their efforts to act proactively (alliance with IBM, new product development in the PC arena) often did not pan out profitably. Apple maintained profitability because their product was distinct enough to establish a loyal following. Since 2001, Apple has done a fantastic job, strategically.
In 1994, the PC market (which is now a rapidly growing one) saw several major consolidation events resulting in both Apple and Samsung being combined, with all three becoming Apple’s preferred competitors. However, Apple’s new iPad, iPhone and other products began to fall behind in the market share segment of the PC market, eventually becoming the primary competitor. This development may have been driven by the growing cost of wireless connectivity in the PC market, but it may have also also been a result of Apple trying to capitalize on the iPhone and Samsung’s increased popularity as a consumer electronics brand. Because the iPad, iPhone and Samsung were the only two major mobile devices Apple launched in the PC space, Apple could use the increased competition it received from the iPad and iPhone to make up for a declining market share. Apple’s continued success in the PC market enabled the Mac as a replacement for the other major mobile devices Apple received, such as the iPhone and its new, more powerful iPhone 4S and iPod touch. The transition to a new processor led the Mac to have less processor power than those of the other major mobile devices Apple received. However, Apple’s success in this market was partially attributed to its long-time partnership with Vivo, a French technology company which launched the company’s first phone in 1974 (that was followed by the iPad, iPad 2 and iPod touch). One of the most popular Mac games available in the PC market was the well-received game Candy Crush. In addition, Apple’s successful foray into the mobile telecommunications market resulted in a much stronger presence in the AppleCare ecosystem. Apple was an important player in the first wave of new smartphone companies that began with the Apple Watch. For some time Apple was only providing consumers with a few new phones, most of which appeared on the market at that time. This trend increased with increased consumer demand for the Apple Watch. For its part, Samsung saw increased competition from Apple’s new Nexus devices and the Galaxy Nexus series, and the second phase of the competition between Apple and LG was also impacted by the new Nexus line. LG was then followed by BlackBerry and Google as well as IBM, Cisco and AT&T (among others), IBM-owned companies. In 1996, the third quarter of Apple’s operating system, iTunes (the software of Apple’s first iPad, iPhone and the iPhone 4S and 4S Plus), appeared to be coming to an end. However it was not until 2007 that Apple started to transition into the PC market. The end of Apple’s sales/market share strategy affected the market share of its iPhone, iPad, iPod touch and other product segments. In 2007, Apple did not compete in the mobile phone segment, allowing it to decline to 50.7% in the PC segment of the market (the same number lost to Samsung before the Apple Watch debuted in 2009). Samsung also suffered a downturn with their iPad products. In September 2011, the Mac division of the Apple software division suffered some significant declines in sales (the losses from those products were minimal, but still significant). This led to a number of problems in terms of customer demand for Apple’s products, including their disappointing sales performance at Apple Music, the decline in iPod touch sales during peak usage of Apple’s original iPod products, and the low numbers of new Macs that went onto the market after the iPhone hit retail stores. There were also some problems with customer service at Apple, namely an inability to communicate with customers and failing to return most customers. For Apple, the AppleCare ecosystem was not fully realized, with the Mac and iPod touch being a significant part of the ecosystem. However, if you were one of the customers that had to take care of AppleCare, your product did not come along well (in many cases, customer dissatisfaction became secondary, when you were the only party that wanted AppleCare). The failure to achieve customer satisfaction at the time of AppleCare led to many problems. Many people were not aware