Apple In-Depth Financial Analysis

I. Introduction

A. Objective of paper.

The objective of this paper is thoroughly analyze Apple's financial statements for performance. Also, Apple's operations, executives, and future outlook will be examined.

B. Summary of findings.

Throughout the paper are significant examples that display the state of growth that Apple is currently in. From 2001 - 2005, Apple has experienced notable growth which is evident especially in the analysis of its financial ratios.

A. Chapter I

1. Briefly summarize the business description.

Apple Computer Inc. designs, markets, and develops personal computers and related software, services, peripherals, and networking solutions. Additionally, Apple has entered the digital music sector and designs, markets, and develops a line of portable digital music players along with related accessories and services including the online distribution of third party music, audio books, short films, and television shows. The company sells its products online and through its own retail stores.

2. What is the industry?

Primary SIC code: Electronic computers

3. What is the sector?

Primary NAICS: 334111 Electronic computer manufacturing

4. Select a number of analysts' ratings. What is your opinion of those ratings? Are they too high or too low?

Throughout the month of October, the consensus has been to hold the stock (Prudential and Banc of America). I believe this opinion to be fairly accurate. They are in a spot for potential growth, but at the same time are towards the higher end of their 52-week high.

5. Review and comment on the three most recent news headlines.

From the Associated Press Financial Wire on October 31, 2006

Apple most recently released a $79 1GB iPod shuffle capable of holding up to 250 songs. This product is an addition to the already extremely popular portable digital music player line that Apple produces.

Small in size and extremely affordable, the Apple shuffle is marketed to all sorts of consumers - those on a budget and those wanting a smaller player. As Apple continues to creatively augment its product line with innovative ideas, it will stay at the head of the portable digital music market.

From bellweatherreport.com on October 19, 2006

The bellweatherreport.com article wants the public to focus its attention on the rapidly growing company, Apple. It too focuses on innovative products including, iPhone, iTV, iPod, and the iMac. It comments on the 4th quarter earning of 2006 and expects an acceleration in 2007 with the launch of these products currently in the works.

From the Associated Press Worldstream on October 16, 2006

Steve Jobs apologizes for Apple Computer's past stock option practices. Following internal investigation of practices between 1997 and 2002, there were concerns about the way in which stock options were being handled.

Concerns arise when such news arise in the wake of company fraud scandals, Enron and WorldComm. As the financial world is still recovering from those devastations, many investors are still sensitive to such news and accusations.

6. List the peer companies.

International Business Machines Corp.

Hewlett-Packard Co.

Dell Inc.

Sun Microsystems Inc.

Unisys Corp.

Gateway Inc.

7. For your company and each peer company, list the current sales.

International Business Machines Corp. $91,134,000,000

Hewlett-Packard Co. 86,696,000,000

Dell Inc. 55,908,000,000

Apple Computer, Inc. 13,931,000,000

Sun Microsystems Inc. 13,068,000,000

Unisys Corp. 5,758, 700,000

Gateway Inc. 3,854,061,000

8. For current sales, select the peer weight for your company.

5.00%

9. For current sales, select the peer aggregate.

$270,349,000,000

10. For current sales, select the peer mean.

$38,621,394,000

11. For current sales, select the peer median.

$13,931,000

12. Comment on how dominant your company appears to be in relation to the peer set of companies.

Apple falls in the middle of these peer companies selected. However, their sales are significantly lower than IBM, HP, and Dell, and yet they lead Sun Microsystems, Unisys, Gateway. Apple is active in several different markets ranging from desktop computer, to peripherals, to digital portable music player and thus, it is often difficult to select proper peer groups.

13. Who are the external auditors? What is the date and opinion on the last statement?

KPMG are the external auditors. The last statement was given an unqualified opinion on November 29, 2005.

B. Chapter 2

Review directors for name, principal occupation, or other employment/business affiliation, age, and director service.

The following is the list of board of directors:

Fred. D. Anderson, 61 (as of 2006, not currently a director)

Partner, Elevation Partners

Former CFO, Apple Computer, Inc.

Board of Director, ebay Inc.

Bill Campbell, 65 Compensation Committee, Finance and Audit Committee

Chairman and former CEO, Intuit

Board of Director, Opsware Inc.

Millard Drexler, 61 Compensation Committee, Nominating Committee

Chairman