Financial analysis of Apple Inc

Financial analysis of Apple Inc

Introduction

Apple Computer Inc is one of the major manufacturers of computers and portable music players with headquarters in California. Apple not only designs, manufacture, but also sell personal computer systems, Tablet PC's, portable music players, smart phones and different software's and networking hardware's to a variety of consumers (LINZMAYER , 2004). Its products are sold in more than 120 countries and Include personal computers, mp3 players, cell phones, software, and networking products.

Steve Jobs and Stephen Wozniak formulated Apple in 1976; initially they manufactured and sold a computer circuit board, which was designed in Jobs' garage in California. Under the leadership of charismatic Steve Jobs and the creative inventor Wozniak, they finally formed the Apple Inc in 1977 (Imbimbo, A. 2009).

Market Analysis

The industry in which Apple operates includes a wide variety of products, from mp3 player to personal computers and from cell phones to tablet computers. Due to the dynamic nature of the industry, most of the companies operating in this industry faces severe competition, but due to the distinctive combination of design and price, Apple Inc has been be able to capture 65% of the market share of the portable music segment. Similarly, in the personal computer market niche it has been able to hold a market share of 2% (O'GRADY, J, 2009).

According to Moore's law, the numbers of transistors per square Inch on integrated circuits will double every 18 months, and prices will be reduced. This can be associated with market in which Apple operates, as the largest firms like Apple and Dell have to continuously redefine the structure of the market.

Competitors

Apple Inc operates in three major market niches namely the portable music players market, the personal computer market and the cell phone industry. The personal computer market is a fairly well developed market with a moderate growth rate. Although, this market sector is highly concentrated as the market is dominated by a few large firms, who have invested a huge capital in this market segment. Companies like Dell, Compaq, Apple and Hp are the major competitors of this industry, which, compete with virtually identical products.

Apple substantial portion of revenue comes from the portable music players and the cell phone industry which Apple Inc produce by the name of iPods and iPhone. Currently, Apple Inc dominates the media industry with about 90% of the market share. Although, it faces severe competition in the cell phone industry particularly in the smart phone segment and only holds 17% of the total markets share. This allows Apple Inc to set and enforce the rules of the industry. This monopolist approach and the product differentiation strategy has enabled iPod to charge twice of the market price for it iPod product (Linden G, et al, 2007).

Performance of the business over the last five year

Analysis of Financial Statements of Apple Inc will Include Vertical and horizontal analysis of financial statements and analysis of financial ratios of Apple Inc during the period of 2007 -2011 (Morningstar, ...