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Apple Inc. is one of the largest corporations in the United States today. It describes itself as “a multinational corporation with a focus on designing and manufacturing consumer electronics and closely related software products” (www.apple.com). Apple Inc. was originally founded in 1976 as Apple Computer, Inc. but recently changed its name to Apple Inc. in January of 2007. The company's headquarters are located in Cupertino, California and as of March 9th, 2007 they currently have 173 retail locations and more than 20,000 employees in the United States, Canada, Japan and the United Kingdom (http://finance.yahoo.com/q/pr?s=aapl).
Apple Inc. is consistently introducing new technology with an array of electronic products available. The majority of Apple's consumers consist of students, business professionals and government employees. Many of their most recognizable products include the Macintosh desktops and portable computers, Mac OS X operating systems, the iPod line, as well as the iTunes store, the iPhone and additional professional software applications. In addition to the 173 retail locations, Apple Inc. also has an online store for purchasing hardware and software. As well as the iTunes online store where consumers can download and purchase music, movies, TV shows and games for their iPods. Apple also sells third party products that can be used with their Macintosh and iPod product lines. These products include printers, printing supplies, storage units, memory cards; digital video camera's, still cameras, and iPod accessories. (www.apple.com)
Section II: Industry structure and competitors
Apple Inc. is considered part of the technology sector and the personal computer industry. This industry would be considered an oligopoly because it is dominated by a few different companies. Apple has begun however to branch out from the personal computer products and with the addition of the iPod and iPhone are turning more towards personal electronics. The industry can be very competitive and some of Apple's main competitors include Microsoft Corporation, Dell Inc., and Palm Inc.
Microsoft Corporation provides software products worldwide including the Windows operating system. They are a huge competitor with Apple in the software area. Microsoft has a large share of the consumer population that currently choose Microsoft Windows vs. the Apple Macintosh programs. Microsoft also introduced their version of Apples iPod, the Zune. In this area of the market Apple is more successful in sales with the iPod growing larger revenue than the Zune. (http://finance.yahoo.com/q/pr?s=MSFT)
Dell Inc. is another major competitor of Apple Inc. They offer a wide range of products including desktop computer systems, notebook computers, mobile programs and MP3 players. (www.dell.com) The Dell computer systems are compatible with Microsoft Windows, but not with the Apple Macintosh programs. Dell has larger revenue than Apple, however the version of MP3 player they provide does not sell has successfully as the iPod. (http://finance.yahoo.com/q/pr?s=DELL)
Palm was founded in 1997 and describes themselves as “a leader in mobile computing.” Palm provides mobile computing systems worldwide. Some of their products available include the Treo smart phones, handheld computers and software. The Treo smart phone is a huge competitor with Apple's new iPhone. Both products combine use of a cell phone, MP3 player and computer in one small device. Palm products are compatible with Microsoft windows applications, but not with Apple's Macintosh programs. (www.palm.com)
Section III: Demand:
Apple Inc. has been a world leader as well as an innovator in the technology sector of the market. Since its inception, the demand for its products by consumers has been stagnant. In recent years, the company has seen a dramatic increase over a spread of ten years in demand for Apple's products and services. Apple's total revenue rose from $9.8 million in 1996 to above 19.3 million in 2006, which is a substantial increase of 96.43 percent. The 9.4 million dollars increase is an indicator that the company has a strong demand for its products, which is but not limited to: personal computers, “iPods, iPhones, digital video and still cameras, televisions,
There are numerous factors which cause shifts in the demand for Apple's computers and digital products. The company was able to gain a substantial increase for its products in recent years by the introduction of new electrical device, such as iPhone and iPod, which created a new market and increase the demand for Apple's newest products. Apple's iPod is seen as a product that has the ability to cause a shift in demand since the product established a new segment in the entertainment industry. The iPod altered the size of the market to a demographic within the age range of thirteen to twenty-five. In terms of net sales, the iPod was able to receive a rate of return of 997.90 percent, which is approximately 1.4 million dollars over a period of five years.
There has been an increasing demand for Apple's iBook, iMac, and PowerBook computers, which was developed to satisfy consumer demand for reliable and inexpensive operating systems. The company's operating systems is demanded more than its competitors. According to Chris Ratcliffe article, “What a difference a decade makes for Apple Inc.”, he states that there is a demand for updated versions of Apple's computer, which is 'winning customers' over its rival (Ratcliffe, 2007). Apple Inc. is able to shift demand relative to substitute products because there are more units sold of Apple products than its competitors. For instance, Chris Ratcliffe states that “last month, Apple passed PC leader Hewlett-Packard Co. in market capitalization for the first time” (Ratcliffe, 2007). In short, there is a higher demand for Apple's products than its competitors substitute products, which is largely due to its product differentiation, a unique product difference.
Additionally, the tastes and preferences are also important factors which can shift the demand for Apple products. Consumers are willing to purchase Apple's personal computers and digital technology because the products are known for its longevity. In general, it seems as though the competitor's products does not have an extended life span, which indirectly forces consumers to demand Apple products. In addition, Apple is able to capture a larger consumer base in the graphic and computer science industry because the computer software is more compatible with Apple's operating system.
In reference to tastes and preference, Apple Inc., has the ability to get more consumers to demand its product because of its array of advertising tools, such as internet ads, magazine advertisement, and corporate sponsorship. Lean Hoffmann's article, “Apple's Iconic Ads” states that, “Apple prides itself on appealing to the discerning customer, the person who, as one slogan famously had it, thought differently. And that message-of creativity, counterculture and good taste-is one that Apple has portrayed consistently” (Hoffmann, 2006). Hoffmann's article concurs that Apple is able to capture its consumer base by offering user friendly and unique products. Thus, Apple Inc. has a high demand for its products in regards to its consumer tastes and for its unique blend of products.
Section IV: Supply
Apple Inc. has faced various shifts in relations to its supply. Government regulations, such as environmental policies by international and local authorities, as well as labor and machinery costs are two important factors that can cause a shift in supply. As companies across the nation are attempting to provide a safer working condition by minimizing environmental impacts by one's business operation, the international and local governments are implementing stricter policy which can have a huge affect on supply. For instance, Ashley Phillips article, “Apple Could Face Suit Over 'Toxic' iPhones”, claims that, “a consumer watchdog group is considering a lawsuit against Apple, after the release of a Greenpeace report that alleges the company's iPhone contains toxic chemicals” (Phillips, 2007). In other words, the Greenpeace report has the ability to cause a shift in supply because if European authorities intervene it can limit the amount of products in circulation.
The costs of labor and machinery can cause a shift in the supply. Any alteration in price that affects personal computers or the raw material market will cause 'ripple effect' on Apple's prices. For instance, if there is an increase in the cost of production or raw material, the cost that can be produced or supplied will be higher which will shift the supply. In other words, Apple Inc. will see a decline in its profit if the cost of production increase, which will cause a shift to the left in the supply curve. The company will always experience a shift in the supply curve when a price change occurs for both raw materials and production.
Section V: Company Strategies
Considering Apple, Inc. ability to address its customer's demands adequately with continuously offering new and updated products it in turn allows them to have a competitive advantage against their competition. Many of Apple's competitors that were previously mentioned only have one or two products per product line in comparison to Apples many. For example, Apple, Inc. offered its customers the first iPod and quickly developed many other types of iPods as consumer needs changed. Their iPod line alone includes five different types of products alone. Dell does not offer any MP3 players that are strictly made by Dell; it seems they have a part or accessory in many other brands. Microsoft only offers one MP3 player that comes in a range of gigabit sizes, rather than a range of features, styles, and actual sizes. It seems that Apple, Inc. has no trouble addressing the demand of its consumers by just looking at what its competitors are doing with their products within the same market.
Apple, Inc continuously looks for ways to improve their products and increase their market share, whereas the competition seems please with one or two products going against Apples five diverse products within the same market. It would be looked at that Apple, Inc. will usually win overall because they listen to what their customers demand and also what their competition is producing. By looking at all different aspects Apple, Inc. is one step ahead of other companies, and always on top of their customer's preference list. In addition to constantly updating their product lines, Apple also offers many different services that are very proactive on their behalf. For example, Apple signed on Disney to sell movies through their iTunes store for people to watch on their iPods. This is proactive because not only does Apple receive the benefits of people using their services but Disney receives higher sales results in turn. (www.seekingalpha.com)
By having Apple, Inc. create partnerships with many different organizations this allows many opportunities for both companies in the long run. This is a major pro for Apple, Inc. Not only are they able to make more profit along with their partnership companies, it also helps to showcase possible product development opportunities as well. For example, a partnership with Disney can relate into Disney themed iPods that are easier to use for children, a market that Apple currently is not involved in.
Another pro for Apple, Inc. in their approach to addressing demand is finally the ability to use Windows operating systems on their computers. This was never an option for Mac lovers until the newest release of Apple software, Leopard. There were patches released in 2006, however prior to the patches Mac users had to strictly use Apple versions of popular Microsoft programs. For example, Microsoft word, excel, and PowerPoint are widely used in the current business world, and until now Apple was unable to support such operations, which in turn led to slower sales for corporations who used those applications regularly. This is a great addition for Apple, Inc.
The only con noticeable to Apple, Inc presently is their inability to touch the gaming network of people within society today. Computer and separate console gaming systems and games are extremely popular currently amongst men and women ages 11-32. Microsoft has adequately addressed the gaming community by not only offering games on one of their website, www.msn.com, but also owns a major player in the gaming industry. Xbox is a widely used game console system that is owned by Microsoft, (www.microsoft.com/games); Apple, Inc. has only small things to offer for competition with in this sector. Currently Apple, Inc. only offers the purchase of games for use strictly on the iPod, no access to free games on their website or any game console systems. For Apple, Inc. to fully embrace all niche markets within the technology sector this is the one market they are definitely lacking presence.
Section VI: Valuation:
The Discounted Cash Flow (DCF) model determines the present value of a company by estimating its future cash flows, discounting those cash flows to present value, and summing these discounted values. The DCF model is very flexible, by employing different growth and discount factors, the model can show a company such as Apple, Inc. going through lifecycle transitions from high growth to average growth. The DCF model relies on stock price and dividend growth forecast that must be in sync to produce accurate results. The calculations in the DCF model that affect the valuation are long term debt and number of shares of stock outstanding as well as the growth rates over the years. The company's Earning per Share (EPS) is 3.94. The long term debt is $0 while the number of shares of stock understanding was 171.63M. Apple, Inc. has no long term debt because they do not borrow any money; Apple simply reinvests its money back into development.
Of all the financial websites visited each had a conflicting Beta; they ranged from 1.1 to 1.0 meaning that the company's stock is a moderately risky investment. For the DCF model represented a Beta of 1.05 was used; which explains that it would be slightly above a neutral investment. The number used in the DCF model is presented in Figure 1.1, located below. The DCF model gives a value per share of $171.63, with a range rising above $312.43 if the Beta was lowered to what Yahoo Finance offered. The value per share is accurate with the actual value per share in Figure 1.2 where on Friday, October 26, 2007 the price closed at $185.40.
1.2
The stock is very appeasing to those market watchers interested and a purchase is not unlikely, however a watchful eye is necessary on it because Apple, Inc. is thriving in today's market, where as this now thriving technology can be obsolete in a few years. Purchasing the stock now is a good idea, yet it will be important to be careful in upcoming years if Apple, Inc. does not remain as one of the world leaders in cutting edge technology. If Apple, Inc. does not continue to morph itself in the ever changing economy, this stock will become an extremely risky investment. The market for Apple, Inc. does not appear to be changing anytime soon based on the demand of their current consumers, it seems they are always expecting the newest technology and features available. Thus far, Apple, Inc. has seamlessly delivered to their customers, and seems to have limited competition. Apple, Inc. also has no debt, which increases the desirability of this investment; all revenue can be continuously cycled back into research, development and expansion. Based on the company's historical and projected future earnings and cash flow growth rates, any person who is looking for a smart short to medium term investment, Apple, Inc. stock would be the right decision. Apple, Inc. can be viewed as having moderate to risky equity due to its steady growth in earnings and dividends, its strong brand name loyalty and non existing debt levels. See figure 1.3.
1.3
1.1
Part of attachment
Section VII: Conclusion
In conclusion, Apple, Inc. is a remarkable company in many different facets. It is a corporation that has been around for many years and understands the meaning of listening to their customers. They have continuously updated and re-invented their product lines as well as their overall image. Ten years ago only graphically inclined people would consider Apple for their main computer. Today Apple is a household name due to the inception of iPods, iTunes, bigger and better computers and now the iPhone.
Their ability to in a sense “out-smart” or “out-wit” their competition is something that Apple can truly be thankful for. The companies Apple considers competition, have products that do not create the same buzz as an Apple product. This in turn, is great for Apple in the current society of today. Every consumer is constantly waiting for the newest release of the iPod, other products, or even accessories. Although Apple, Inc. may have some troubles in the future in regards to their product demands, it would be a problem for all corporations within the same market. Technology is ever changing and companies today need to constantly be ready to change their products with the current demand presented.
For investors, Apple, Inc. is a great stock due to the company's thriving profits and constant demand for all their current products. Apple, Inc. shows no long-term debt which is an extremely admirable trait for a company of such magnitude. This allows Apple, Inc. to have more opportunities than its competitors to invest in new technology or in research and development. There will be no worry regarding lack of capital for funding projects, whereas other competitors may have long-term debt that can potentially slow their process in research and development.
Bibliography
Apple Inc. (2007). Retrieved October 20, 2007, www.apple.com
Bajaj, Vikas. (2006, April 5). Apple Allows Windows on Its Machines. Retrieved October 29, 2007, http://www.nytimes.com/2006/04/05/technology/05cnd-apple.html?ex=1301889600&en=80facc113fd32072&ei=5088&partner=rssnyt&emc=rss
Dell Inc. (2007). Retrieved October 20, 2007, www.dell.com,
Hoffmann, L. (2006, March 31). Apple's Iconic Ads. Retrieved October 28, 2007, http://www.forbes.com/2006/03/30/apple-ipod-ads_cx_lh_0331APPLEAD.html
Howe, Carl. (2006, September 20). Disney and Apple's Movie Success Means Competitors Must Get With the Program. Retrieved October 26, 2007, http://seekingalpha.com/article/17257-disney-and-apple-s-movie-success-means-competitors-must-get-with-the-program
Microsoft Corporation. (2007). Retrieved October 20, 2007, from www.microsoft.com
Palm Inc. (2007). Retrieved October 20, 2007, from www.palm.com
Phillips, A. (2007, October 16). Apple Could Face Suit Over 'Toxic' iPhones. Retrieved 28 2007, 2007, from http://www.abcnews.go.com/Technology/story?id=3736524&page=1
Ratcliffe, C. (2007, October 21). What a difference a decade makes for Apple Inc. Retrieved October 26, 2007, from http://www.dallasnews.com/sharedcontent/dws/bus/ptech/stories/DN-apple_21bus.ART0.State.Edition1.35adc11.html
Summary of APPLE INC. (2007, August 8). Retrieved October 26, 2007, http://biz.yahoo.com/e/070808/aapl10-q.html
Yahoo Finance. (2007). Retrieved October 20, 2007, from http://finance.yahoo.com/q/pr?s=aapl
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Laptop adapter question , please read?
I have a compaq presario v2000. The factory adapter/charger broke so i bought a new one and it is a aftermarket china one but it is for that computer model.
MY question is..
The original factory compaq adapter has a 3rd prong on the outlet for the ground(its a 3 prong plug).
The china one has only 2 prongs and no ground plug.
Will it still be safe for my computer…and work properly
thanks
As long as the adaptor has the words “Class II”, “Class 2″ or “Double Insulated” written on it, or the double insulated symbol (a square inside of another square) on it, it will work fine and be perfectly safe. As laptops are Extra Low Voltage devices (Most adaptors provide about 19V DC into them) they do not require grounding. The power supply would only need the extra ground pin if any of the outside of it was metal, or if there was a danger of a user being electrocuted, but no laptop supplies are. If the supply needed it, then by most (if not all) countries laws they would require a ground to be provided, and would not be able to be sold.
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