Apple Inc.'s investment potential and competitive position analysis

Investment Opportunity

Nowadays' organizations strive to make it in this extremely dynamic and competitive environment. They have developed numerous strategies in response to the changes emerged, the most relevant of these strategies referring to the incorporation of the latest technologies, the treatment of the employees or the focus on customer satisfaction. Aside this, territorial expansion has also contributed to the strength of a company and to its achievement of a notable competitive position. Much of the success registered by the multinational corporations which expanded their operations nationwide is due to their wide access to resources. In light of the resources however, these were often to always limited, meaning then that each project had to be clearly though through before a decision was made. The aim of this paper is to assess the Apple Company and respond to the question: "Is it able and if so, should it further invest in its development or should they, for now, lay low?"

2. Apple, Dell and IBM

The Apple Corporation was established in 1976 by Steve Jobs and Steve Wozniak and it is headquartered in Cupertino, California. The company produces and distributes hardware, software and consumer electronic products and services. Its most notable items include the Macintosh computers, the Mac OS operating systems, the iPods, or the latest iPhones (Website of Apple Inc., 2009).

Dell Inc. operates in the same industry as the Apple Corporation. It was founded in 1984 in Austin, Texas by Michael Dell and similar to Apple, its operations are expanded at a global level. The main difference between Dell and Apple is that while the latter manufactures a wider variety of products, Dell is predominantly engaged in producing hardware items. Its most reputable gadgets include desktops, servers, television sets, notebooks, printers and a wide array of computer peripherals (Website of Dell, 2009).

The third company within this industry is IBM, the acronym from International Business Machines Corporation. The organization was established 1889 in Endicott, New York; it was incorporated in 1991 and today is headquartered in Armonk, New York. IBM is highly similar to Apple in the meaning that it has diversified its product offering to include both software and hardware products, alongside with it consultancy services. Also, similar to the two organizations previously introduced, IBM conducts it operations at a global scale (Website of the IBM Corporation, 2009).

The table below offers a more numerical presentation and comparison of Apple, Dell and IBM:

Apple Inc.

Dell Inc.

IBM Corporation of Employees

Sales for 2008 (mil $)

Market capitalization (mil $)

Total Assets (mil $)

Total Liabilities and Net Worth (mil $)

Net Income (mil $)

Apple is revealed as the smallest corporation between the three analyzed organizations, registering inferior values in various categories. However, this implies that the company is fairly efficient and manages to make a difference in the industry with less resource consumption.

3. Financial Analysis of Apple Inc.

Unlike other organizations, Apple Inc. does not compile an annual report, but organizes its public information under 10-K fillings, audited and approved by the Securities and Exchange Commission. Much of the financial analysis is based on the information available in these fillings, but also on secondary sources revealing data on Apple.

The table below presents the evolution of several financial highlights throughout the past recent years: =million USD=

Total Assets

Total Liabilities

Total Liabilities + Net Worth

Net Income

Shareholder Equity

Outstanding Shares

Net Cash Provision

The row on Total Assets for instance shows a constant trend of growth, sustainable and revealed throughout all eight years analyzed. The same is true for the liabilities, which evolved in a direct relationship with the assets. The largest growth has been achieved in 2008 as compared to 2007, when the growth totalled 56.83%. The total growth in assets and liabilities in 2008 as compared to 2004 was of 391.57%.

Increases have also occurred in terms of net income, but their growth rate has been reduced in comparison to the growth of assets and liabilities. In this order of ideas, the net income in 2008 was 38.27% higher than the net income in 2007. Compared to 2004, the net income of 2008 was 1651.44%. This then means that while the year to year increases are not as spectaculars, the overall growth in the registered net income is tremendous. This tendency is similar with the situation of the outstanding shares, which increased by 1.83% in 2008 compared to 2007, but by 127.10% when compared to 2004. Shareholder equity is also included in the ascendant trend revealed by Apple for all financial highlights. By 2008, it had increased by 314.30% relative to 2004. Compared to the previous year, the growth was of 44.71%.

The final row of the table deals with the net cash provisions used by the investing operations. These do not reveal a trend, increasing in some years and decreasing throughout others. They however show that Apple has been active in seizing investment opportunities, and that, while some project have returned a significant return on investment, in other cases, the benefits have yet to materialize. In 2008 as compared to 2007, the cash provisions used by the investment operations met an increase of 152.04%. This is the single sign in the financial analysis which may suggest that Apple should not invest any more for the time being, but strive to generate a return on their already existent projects.

Aside the financial resources used to finance new investments, all the other financial highlights reveal a constant and sustained ascendant trend. Through the lenses of financial highlights, the Cupertino-based organization seems strong and proves its past managerial abilities to identify and take on the most profitable investment opportunities. The final decision on whether to further invest at this moment or not cannot however be made without an analysis of the Apple financial ratios. The table below reveals some of the most relevant rations for Apple and the industry average.

Apple 2008

Apple 2007

Apple 2006

Industry Average (2008)

Quick Ratio

Current Ratio

Gross Profit Margin

Operating Margin

Pretax Margin

Net Margin

Inventory Turnover

4. Conclusions

The it industry is extremely dynamic and evolves at a rapid pace. The players within this sector have learnt to adapt to the changing requirements of the market. Three notable representatives of the it industry are Apple Inc., Del Inc. And the IBM Corporation. The question that is being set here is whether Apple Inc. should consider further investing with the aim of expanding its operations. The financial analysis reveals a strong company which would be able to generate additional incomes from its investments. However, there are few indicators that the potential investment opportunities should not yet be taken. Foremost, in the globalized context of an economic crisis, it would be advisable for Apple to take a more protectionist approach and strive to further consolidate its current position, rather than engage in risky operations.