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    Apple Apple Presentation Transcript

    • Apple ComputersJessica BourgoinAmy KakukBeth Theriault04/25/2005
    • Outline• Brief History of HD• Where we are now• Vision and Mission• External Analysis– CPM– EFE– Summary• Internal Analysis– IFE– Financial ratio analysis– Net Worth Analysis– Summary• Strategic Analysis– SWOT Matrix– SPACE– Grand Strategy Matrix– IE matrix– BCG– Summary• Possible strategies– QSPM• Recommendations– Strategic implementationand desired results– Objectives & Goals
    • History 1976-1978• Wozniak and Jobs form the Apple Computer Company on April FoolsDay.• Wozniak and Jobs finish work on a preassembled computer circuitboard. It has no keyboard, case, sound or graphics. They call it theApple® I.• The Apple I board is released for sale to hobbyists and electronicsenthusiasts at the price of $666.66.• Apples first formal business plan sets a goal for sales to grow to $500million in ten years. As it turns out, the company will pass that mark inhalf the time.• Apple I computer boards are sold through 10 retail stores in the U.S.• Apple moves from Jobs garage to a building on Stevens CreekBoulevard in Cupertino, California.• The new Apple® II is unveiled at the first West Coast Computer Fair. Itis the first personal computer able to generate color graphics andincludes a keyboard, power supply and attractive case.• The Apple logo as seen today is designed by Rob Janoff, art directorfor Regis McKenna Advertising.• Regis McKenna Advertising launches its first ad campaign for Apple.Although advertising is initially aimed at electronics enthusiasts,Apple will soon become the first company to advertise personalcomputers in consumer magazines.• Monthly orders reach a $1 million annual sales rate.http://www.apple-history.com/frames/?
    • History 1978• Apple introduces various interface cards for connectingto most printers.• Apples Disk II® is introduced at the ConsumerElectronics Show. It is the easiest to use, lowest priced,and fastest mini-floppy disk drive ever offered by acomputer manufacturer. It will make possible thedevelopment of serious software. Production at first ishandled by just two employees, turning out 30 drives aday.• In only its second year, Apple is one of the fastestgrowing companies in America. Sales have increased,and its dealer network has grown to over 300.
    • History 1979-1981• Apples first printer, the Silentype®, is introduced.• Apple opens a manufacturing plant in Carrollton, TX. Apple facilitiesnow occupy more than half a million square feet of floor space in theU.S. and Europe.• Apple goes public. Morgan Stanley and Co. and Hambrecht & Quistunderwrite an initial public offering of 4.6 million shares of Applecommon stock at a price of $22 per share. Every share is boughtwithin minutes of the offering, making this the largest public offeringsince Ford went public in 1956.• Apples employee count breaks 1,000.• Apples distribution network is the largest in the industry-800independent retailers in the U.S. and Canada, plus 1,000 outletsabroad.• Apples first mass storage system, the 5MB ProFile(tm) hard disk isintroduced, priced at $3,499.• Apple becomes a household name. Surveys show that publicawareness rose from 10 percent to 80 percent in 1981.
    • History 1982-1985• Apple Dot Matrix printer introduced for $2,195.• Apple becomes the first personal computer company to reach$1 billion annual sales rate. It throws a "Billion Dollar Party" foremployees.• Apple University founded to provide employee trainingprograms.• Apple enters the Fortune 500 at number 411 in under five years.• EVA (Employee Volunteer Action) is created to match the skillsof Apple employees with community needs.• Apple is elected to the Consumers Digest Hall of Fame forresponsiveness to consumer needs.• Apple II receives the 1984 Industrial Design Excellence Award(IDEA) sponsored by the Product Industrial Designers Societyof America.• Apple announces a computer training scholarship program forelementary and secondary school educators.
    • History 1986-1990• Apple announces plans to create an independent software company,to be known later as Claris.• For the first time, Apple uses its HyperCard technology to distribute a1987 HyperCard supplement on diskette for Macintosh personalcomputers.• Apple files suit against Microsoft and Hewlett-Packard to protect itsMacintosh audio visual display. The lawsuit is seen as having industrywide implications regarding copyright laws.• Apple reports first billion dollar quarter in its history as netincome rises 108 percent.• Apple reports net sales of $4.07 billion and net income of $400.3million for fiscal year 1988.• Apple acquires Coral Software Corp., which markets programminglanguages and artificial intelligence tools for Macintosh computers.• Apple introduces 32-Bit QuickDraw(tm) that allows Macintoshpersonal computers to process and display photo-quality documents,images and visualizations with exceptional color clarity.• Apple donates $2 million in computers to 23 schools to help at-riskstudents.• Fiscal 1990 revenues surpass $5.5 billion.
    • History 1991-1995• Apple announces it will restructure the company over the next12 months to reduce operating expenses. Apples workforce isreduced approximately 10 percent.• Apple and IBM sign a letter of intent to cooperate on majortechnology initiatives for the 1990s.• Apple, IBM, and Motorola finalize milestone technologyalliance.• Apple announces a new Token Ring 4/16 NB Card, for theMacintosh product line. It is the first product to emerge fromApple and IBM alliance.• Apple and Kodak announce that they are working together tointegrate support for Photo CD images into future versions ofQuickTime.• The U.S. Environmental Protection Agency officially releasesthe Energy Star emblem for display with energy-efficientcomputers and peripherals. Apple has more than 20 productsthat meet the EPAs the technical requirements.• Apples Macintosh celebrates 10th birthday!
    • As of January 2005 Apple has introduced the MiniMac and the iPod Shuffle.Apple in 2005
    • • The Apple Mini Mac is acompact desktopcomputer. It is 2 inchestall and weights 2.9lbs.The Mini Mac starts at$499 and comesstandard with iChat AVdesktop videoconferencing, Mail,Address Book,QuickTime®, iSync, anda DVD Player.http://www.apple.com/pr/library/2005/jan/index.htmlGraphics from: http://www.apple.com/macmini/Mini Mac
    • iPod Shuffle• The iPod shuffle is asmaller version of theoriginal iPod. It is muchsmaller and lighter andcan double as a portableUSB flash drive with up to1GB of storage space toback up personal filesand exchange thembetween computers. For$99 you can purchase the512MB holding up to 120songs or the 1GB holdingup to 240 songs for just$149.Graphics from: http://www.apple.com/ipodshuffle/http://www.apple.com/pr/library/2005/jan/index.html
    • Mac OS X Tiger• On April 29, 2005, theMac OS X Tiger will bereleased. This is anadvanced operatingsystem that requires aMacintosh computer witha PowerPC G3, G4 or G5processor, Built-inFireWire, 256MB of RAM,and 3GB of availablehard disk space. It cost$129 for a single userand $199 for a 5 licensefamily packhttp://www.apple.com/macosx/newfeatures/over200.html
    • Apple in the Market (as of 4/22/05)Last Trade: 35.5052 Week Low: 12.7552 Week High: 45.44Apple had a 2:1 Stock split on02/28/05
    • Vision Statement(proposed)To become the world wide leader incomputer and mp3 player sales.
    • Mission Statement (actual)Apple ignited the personal computer revolution inthe 1970s with the Apple II and reinvented thepersonal computer in the 1980s with theMacintosh. Apple is committed to bringing thebest personal computing experience to students,educators, creative professionals and consumersaround the world through its innovative hardware,software and Internet offerings.
    • The Apple commitment to excellence is its mission to providecomputers and service (2) for people (1) that meet the higheststandards of value and reliability. Apple is one of leaders in thecomputer industry and makes the best-selling computers in the world(7) (3). Apple provides the highest level of quality and value for ourcustomers. Those are timeless fundamentals. We also apply innovativetechnology to our core business (4) to differentiate ourselves and makeour products irresistible to our customers, beneficial to society, andprofitable to our company (5). We strive to provide additionalopportunities for growth and enrichment of company personnel whilemaintaining a work environment for all employees (9) that encouragespersonal commitment and participation in support of achievingexcellence. We are committed to being a good corporate citizen, andbeing openly honest with all of our stakeholders (6). We supportactivities that help to build common understanding, enhanceexcellence, and enable people to improve their lives and reinforce theircommitment to society (8).Mission Statement (Proposed)
    • External AuditOpportunities• Increase in worms andviruses on PCs.• Large population (Gen X&Y)which are extremelyindividualistic and namebrand conscious.• Weak ties with Microsoftproducts.• Downloadable music andMP3 players are highlymarketable.• Increase sales of computersonline by 25 percent.• Increase sales of laptops by20 percent.Threats• Companies not seeing Appleas compatible with theirsoftware.• Dell and HP are majorcompetitors.• Increasing competition withmusic downloads.• Dell does not invent butprovides computers at a morecost effective rate forcustomers.• Recession—price of Applecomputers are higher.• Intel’s future Pentium release.
    • CPM – Competitive Profile MatrixApple Computer Market DellCritical SuccessFactorsWeight Rating WeightedScoreRating WeightedScoreRating WeightedScoreMarket SharePriceFinancial PositionProduct QualityConsumer LoyaltyAdvertisingManagementGlobal ExpansionInnovationWeb Development0.100.100.150.150.150.040.060.060.140.0512334242430.100.200.450.450.600.080.240.120.560.1533222332220.300.300.300.300.300.120.180.120.280.1044343333230.400.400.450.600.450.120.180.180.280.15Total 1.00 2.95 2.30 3.21
    • External Factor Evaluation (EFE) MatrixKey External Factors Weight RatingWeightedScoreOpportunitiesIncrease in worms and virus on PCs. 0.15 4 0.60Downloadable music and MP3 players are highly marketable. 0.6 3 0.18Large population (Gen X & Y) which are extremely individualistic and namebrand conscious.0.15 4 0.60Increase in sales of laptops by 20 percent. 0.04 3 0.12Increasing sales of computers online by 25 percent. 0.05 3 0.15Creating more ties with Microsoft products. 0.10 4 0.40ThreatsIncreasing competition with music downloads. 0.07 2 0.14Intel’s future Pentium release. 0.03 3 0.09Dell and HP are major competitors. 0.10 4 0.40Dell does not invent but provides computers at a more cost effective rate forcustomers.0.06 3 0.18Recession—price of Apple computers are higher. 0.04 2 0.08Companies not seeing Apple as compatible with their software. 0.15 2 0.30TOTAL 1.00 3.24
    • External Summary• Apple has rated the Increase in worms andvirus on PCs, Large population (Gen X & Y)which are extremely individualistic and namebrand conscious, and the Creating more tieswith Microsoft products as their three highestopportunities.• Apple has rated that the fact of Dell and HPbeing such huge competitors as their topthreat.
    • Internal AuditStrengths• iTunes Music Store is a goodsource of revenue, especiallywith the iPod and the availabilityon Windows platform.• Developing own software andhardware.• Apple’s niche audience providesthe company with someinsulation from the direct pricecompetition.• Revamping desktop andnotebook lines.• Web technology can be used toimprove product awareness andsales.• Low debt—more maneuverable.• Good brand loyalty.Weaknesses• Weak relationship with Intel andMicrosoft.• Weak presence in business arena.• Dependency on new productlaunches.• Weak presence in markets otherthan education and publishing.• Slow turn around on high demandproducts.
    • Internal Factor Evaluation (IFE) MatrixKey Internal Factors Weight Rating WeightedScoreStrengthsiTunes Music Store is a good source of revenue, especially with the iPod and theavailability on Windows platform.0.15 4 0.60Apple’s niche audience provides the company with some insulation from thedirect price competition.0.10 3 0.30Revamping desktop and notebook lines. 0.10 3 0.30Low debt—more maneuverable. 0.06 4 0.24Developing own software and hardware. 0.14 3 0.42Good brand loyalty. 0.05 3 0.15Web technology can be used to improve product awareness and sales. 0.10 4 0.40WeaknessesDependency on new product launches. 0.06 1 0.06Weak presence in business arena. 0.07 1 0.07Slow turn around on high demand products. 0.03 2 0.06Weak relationship with Intel and Microsoft. 0.10 1 0.10Weak presence in markets other than education and publishing. 0.04 2 0.08Total 1.00 2.78
    • Financial Ratio Analysis (March 2004)Company Industry Sector S&P 500Valuation RatiosP/E Ratio (TTM) 69.70 26.87 33.52 24.01P/E High - Last 5 Yrs 277.96 54.58 64.14 45.41P/E Low - Last 5 Yrs 6.84 17.34 19.55 16.26Beta 1.75 1.60 1.91 1.00Price to Sales (TTM) 1.41 1.84 5.08 3.33Price to Book (MRQ) 2.20 7.56 4.78 4.29Price to Tangible Book (MRQ) 2.26 8.77 6.53 7.56Price to Cash Flow (TTM) 37.64 19.69 25.48 17.32Price to Free Cash Flow (TTM) 45.13 23.77 28.26 28.97% Owned Institutions 63.21 50.31 48.14 64.19DividendsDividend Yield N/A 0.70 0.75 2.04Dividend Yield - 5 Yr Avg 0.00 0.34 0.27 1.48Dividend 5 Yr Growth Rate NM 7.94 1.50 6.48Payout Ratio (TTM) 0.00 7.99 9.34 26.78www.investor.stockpoint.com
    • Growth Rates % Company Industry Sector S&P 500Sales (MRQ) vs Qtr 1 Yr Ago 36.28 12.54 18.89 13.40Sales (TTM) vs TTM 1 Yr Ago 15.45 10.97 11.78 11.90Sales - 5 Yr Growth Rate 0.88 7.09 14.52 9.30EPS (MRQ) vs Qtr 1 Yr Ago N/A 34.00 35.07 28.69EPS (TTM) vs TTM 1 Yr Ago 587.04 35.55 41.74 21.92EPS - 5 Yr Growth Rate -29.16 6.85 13.18 12.15Capital Spending - 5 Yr Growth Rate 28.95 2.65 1.99 4.06Financial StrengthQuick Ratio (MRQ) 2.26 1.02 2.54 1.26Current Ratio (MRQ) 2.53 1.25 3.02 1.76LT Debt to Equity (MRQ) 0.00 0.38 0.23 0.68Total Debt to Equity (MRQ) 0.07 0.52 0.29 0.85Interest Coverage (TTM) 13.75 11.34 9.81 11.86Profitability Ratios %Gross Margin (TTM) 27.27 30.60 51.71 47.32Gross Margin - 5 Yr Avg 26.65 31.08 51.13 47.01EBITD Margin (TTM) 3.34 12.43 18.41 20.79Financial Ratios (cont)
    • EBITD - 5 Yr Avg 2.87 12.18 16.18 20.82Operating Margin (TTM) 1.63 8.70 13.63 20.33Operating Margin - 5 Yr Avg 1.25 8.28 11.62 18.35Pre-Tax Margin (TTM) 2.77 9.47 15.96 17.27Pre-Tax Margin - 5 Yr Avg 5.34 9.76 14.77 17.54Net Profit Margin (TTM) 2.03 6.02 9.90 13.12Net Profit Margin - 5 Yr Avg 4.24 6.55 8.67 11.59Effective Tax Rate (TTM) 26.74 29.57 27.57 31.31Effective Tax Rate - 5 Yr Avg 22.62 30.59 32.39 34.20Management Effectiveness %Return on Assets (TTM) 2.09 8.44 6.07 6.40Return on Assets - 5 Yr Avg 5.47 9.25 5.79 6.79Return on Investment (TTM) 3.05 16.54 8.75 9.97Return on Investment - 5 Yr Avg 7.90 17.57 9.30 10.93Return on Equity (TTM) 3.26 30.10 12.17 18.71Return on Equity - 5 Yr Avg 10.37 31.78 13.11 19.22EfficiencyRevenue/Employee (TTM) 617,760 568,624 401,787 622,866Net Income/Employee (TTM) 12,555 37,722 65,474 81,707Receivable Turnover (TTM) 11.59 7.25 7.64 9.76Inventory Turnover (TTM) 91.47 20.93 9.64 10.46Asset Turnover (TTM 1.03 1.45 0.77 0.92Financial Ratios (cont)
    • Net Worth AnalysisSE + Additional paid in capital + retained earnings 4,095M + 119M +2,325= 6.5B9/28/02 Net income x 565M x 5 = 325MShare price (10/17/03)/ EPS (10/17/03) x avg. net income (3years)[22.75/ 0.49] x 275M =12.7BNumber of shares outstanding x share price358,958,989 x 22.75 = 8.1BMethod average = 6.9B
    • Internal SummaryApple has rated their iTunes Music Store being a good source ofrevenue, especially with the iPod and the availability on Windowsplatform, their low debt—more maneuverable, and their Webtechnology being used to improve product awareness and sales astheir 3 highest strengths.Apple did not rate any of their weaknesses higher than a 2. theyshould work on being able to direct more attention to those areasand especially concentrate on the two areas of dependency on newproduct launches and the weak presence in business arena.
    • SWOT MatrixS-O Strategies• Increase awareness through the webof the immunity of Mac products toworms and viruses. (S5, O1)• Advertise using individuals that willlink Generation X & Y to the iTunesand other related products. (S1, O2,O4, O5, O6)• Using movies and music groups thatare geared towards Gen X and Y topromote computers and laptops.(S3, S5, O2, O5, O6)S-T Strategies• Increase and promote thecompatibility to Window operatingsystem. (S5,T1)• Promote the originality of Applecomputers and the different styleand stable system that is slightlymore but worth the price differencein style, stability and speed. (S2, S5,T2, T4, T5)W-O Strategies• Increase ties with Microsoft andIntel and their products.(W1, W2,W4 O2, O3)• Promote to business the safety ofhaving a worm and virus freecomputer by using Mac. (W2, W4,O1, O5, O6)W-T Strategies• Improve relationship with Microsoftand Intel so that companies willsee them as compatible. (W1, W2T1)• Increase productivity and turnaround of high demand productsto compete with Dell and HP (W5,T2)
    • SPACE MatrixESISCAFSConservativeCompetitiveDefensiveAggressiveSpace MatrixForward IntegrationBackward IntegrationHorizontal IntegrationMarket PenetrationMarket DevelopmentProduct DevelopmentJoint Venture
    • Grand Strategy MatrixRAPID MARKETGROWTHQuadrant II Quadrant IWEAK STRONGCOMPETITIVE COMPETITIVEPOSITION POSITIONQuadrant III Quadrant IVSLOW MARKETGROWTHAppleComputerConcentric DiversificationConglomerateDiversificationHorizontal DiversificationRetrenchmentDivestitureLiquidation
    • The Internal-External (IE) Matrix 1.0 to 1.99 IXVIIIVIILow  2.0 to 2.99 VIVIVMedium 3.0 to 3.99 IIIIIIHigh 1.0 to 1.992.0 to 2.993.0 to 4.0 WeakAverageStrongGrow andBuildSegments Revenue Profit EFE IFEDomestic 54% 52% 3.5 2.6International 46% 48% 3.0 3.0
    • DogsCash CowsMedium 0 Question MarksStarsHigh +20                                           Boston Consulting Group (BCG) MatrixLow -20High 1.0 Medium .50 Low 0.0InternationalDomesticSegments Revenue Profit EFE IFE Growth Rate Relative MarketShareDomestic 54% 52% 3.5 2.6 17 0.3International46% 48% 3.0 3.0 5 0.2Cash need Highvs. cash flow lowMarket PenetrationMarketDevelopmentProductDevelopmentSell
    • Alternative Strategies IE SPACE GRAND COUNTForward Integration * * 2Backward Integration * * 2Horizontal Integration * * 2Market Penetration * * 2Market Development * * 2Product Development * * 2Concentric Diversification * 1Conglomerate Diversification * 1Horizontal Diversification * 1Joint Venture * 1Retrenchment * 1Divestiture * 1Liquidation * 1Matrix Analysis Summary
    • QSPMKey Internal FactorsWeightStartproducingWintelcompatibleExpandproduction intoAsiaStrengths AS TAS AS TASiTunes Music Store is a good source of revenue, especially with the iPod and the availability on Windows platform.0.15 1.00 0.15 3.00 0.45Apple’s niche audience provides the company with some insulation from the direct price competition.0.20 4.00 0.80 3.00 0.60Good brand loyalty. 0.20 4.00 0.80 3.00 0.60Web technology can be used to improve product awareness and sales.0.15 4.00 0.60 3.00 0.45WeaknessesWeak relationship with Intel and Microsoft. 0.15 4.00 0.60 1.00 0.15Weak presence in markets other than education and publishing.0.15 2.00 0.30 4.00 0.60SUBTOTAL 1.00 3.25 2.85
    • Key External FactorsWeightStart producingWintelExpand productioninto AsiaOpportunities AS TAS AS TASIncrease in worms and virus on PCs. 0.15 2 .30 3 .45Downloadable music and MP3 players are highly marketable.0.06 1.00 0.12 4.00 0.48Large population (Gen X & Y) which are extremely individualistic and name brand conscious.0.15 1.00 0.10 4.00 0.40Increase in sales of laptops by 20 percent. 0.08 1.00 0.08 4.00 0.32Creating more ties with Microsoft products. 0.10 4.00 0.12 2.00 0.08ThreatsIntel’s future Pentium release. 0.10 1.00 0.10 3.00 0.30Dell does not invent but provides computers at a more cost effective rate for customers.0.06 1.00 0.06 3.00 0.18Companies not seeing Apple as compatible with their software.0.15 1.00 0.05 3.00 0.15SUBTOTAL 1.00 0.93 2.36SUM TOTAL ATTRACTIVENESS SCORE 4.18 5.21QSPM
    • RecommendationsStrategy 1•Open six computer retail stores (not just peripheral and accessories). Apple currently hasstores opened throughout the United States with only peripheral and accessories for theircomputers. Adding the hardware should generate more hands-on awareness and usealready established locations.•This will increase product accessibility for those who wish to view items other than justaccessories and increase awareness of the originality of Apple’s products.•2 percent increase over the next 2 years in sales representatives for the computerhardware.Strategy 2•Contract music spokesperson to attract the upcoming generation who are attending highschool and college. This will invoke a sense of style and linking apple with a distinctive andmemorable top 10 hit. This will stay in the customer’s awareness and influence futurepurchase decisions.•Contracting one music spokesperson estimated $6 million.Strategy 3•Add more features to current products for greater Wintel compatibility. Features such asiTune software compatible with windows based computers, Office programs loadable fromPC installation disk (This would require a software agreement with Microsoft). In lateOctober 2003 Apple released an iTune software package that is PC ready.•It will increase the United States market share at least 30 percent for the next 2-3years.•$50 million is the estimated cost for Research and Development.
    • Cost of Recommendations• Open 6 computer retail stores (notjust peripheral and accessories)• Contract music spokes person(Sarah McLachlan | 50 cent) for acost of• Start production of Wintelcompatible software for a cost ofTotal expected cost =100M6M50M156M
    • EPS/EBIT AnalysisCommon StockFinancingDebt Financing 50/50 CombinationFinancingHigh Low High Low High LowEBIT 20,000.006,000.00 20,000.006,000.00 20,000.006,000.00Interest (6%) 0.00 0.00 3,900.00 3,900.00 1,950.00 1,950.00EBT 20,000.006,000.00 16,100.002,100.00 18,050.004,050.00Taxes (30%) 6,000.00 1,800.00 4,830.00 630.00 5,415.00 1,215.00EAT 14,000.004,200.00 11,270.001,470.00 12,635.002,835.00# Shares 5,653.00 5,653.00 1,837.00 1,837.00 3,747.00 3,747.00EPS 2.48 0.74 6.14 0.80 3.37 0.76
    • Objectives and Goals• Over the next 3-4 years Apple would liketo increase their product accessibility (newstores).• Increase their market share by 30%• Eliminate the need for new products inorder to raise sales.
    • Apple in the News• April 12, 2005Apple Announces Mac OS X Server “Tiger”• February 23, 2005Apple Unveils New iPod mini Starting at Just $199• February 14, 2005Apple Honors GRAMMY Award Winning Artists• February 11, 2005Apple Announces Two-for-One Stock Split