Financial Analysis on Apple（对苹果公司的财务分析）

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Financial Analysis on Apple Company

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ABSTRACT

The Company designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications. The Company sells its products worldwide through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers.

The Company’s customers are primarily in the consumer, education, enterprise and government markets. The Company sells its products and resells third-party products in most of its major markets directly to consumers through its retail and online stores and its direct sales force. The Company also employs a variety of indirect distribution channels, such as third-party cellular network carriers, wholesalers, retailers, and value-added resellers. During 2013, the Company’s net sales through its direct and indirect distribution channels accounted for 30% and 70%, respectively, of total net sales.

I will introduce about the financial status with two aspects in 2013, and the financial analysis is my importance in my following contents. Key words: Financial Status; Net Sales; Gross Margin

Content

1、Fiscal 2013 Highlights .................................................................. 4 2、Financial Status and Analysis ....................................................... 5 （1）Product Performance .......................................................... 5 （2）Segment Operating Performance ........................................ 6 3、View on Gross Margin .................................................................. 7 4、Conclusion .................................................................................... 8 Reference ............................................................................................ 9

Financial Analysis on Apple Company

1、Fiscal 2013 Highlights

Net sales rose 9% or $14.4 billion during 2013 compared to 2012. This resulted from growth in net sales of iPhone; iTunes, software, and services; and iPad. Growth in 2013 reflects strong sales of iPhone 5, strong continuing sales of iPhone 4 and 4s, the introduction of iPhone 5c and 5s, strong performance of the iPad Mini and fourth generation iPad, and continued growth in the Company’s online sales of apps, digital content, and services. Growth in these areas was partially offset by declines in net sales of Mac and iPod. All of the Company’s operating segments experienced increased net sales in 2013, with net sales growth being particularly strong in the Americas, Greater China and Japan operating segments. Similar to 2012, growth in total net sales was higher during the first half of 2013, rising $12.6 billion or 14.7% over the same period in 2012. First half growth in 2013 was driven by iPhone and iPad introductions at or near the beginning of 2013.

In April 2013 the Company announced a significant increase to its program to return capital to shareholders by raising the total amount it expected to utilize for the program through December 2015 to $100 billion. This included increasing its share repurchase authorization to $60 billion and raising its quarterly dividend to $3.05 per common share beginning in May 2013. During 2013, the Company utilized $23.0 billion to repurchase common shares and paid dividends of $10.5 billion or $11.40 per common share. In conjunction with its capital return program, in May 2013 the Company issued $17.0 billion of notes with varying maturities through 2043.

2、Financial Status and Analysis

（1）Product Performance

When it comes to the iPhone, the growth in iPhone net sales and unit sales during 2013 resulted from increased demand for iPhone in all of the Company’s operating segments primarily due to the launch of iPhone 5 beginning in September 2012 and strong ongoing demand for iPhone 4 and 4s. All of the Company’s operating segments experienced increases in net sales and unit sales of iPhone during 2013 compared to 2012. The year-over-year impact of higher iPhone unit sales in 2013 was partially offset by a 3% decline in iPhone average selling prices in 2013 compared to 2012 primarily as a result of a shift in product mix towards lower-priced iPhone models, particularly iPhone 4. All of the Company’s geographic operating segments experienced a decline in iPhone ASPs during 2013.

Of course, the growth in net sales and unit sales of iPad during 2013 resulted from growth in iPad unit sales in all of the Company’s operating segments. This growth was driven by the launch of iPad mini and the fourth generation iPad beginning in the first quarter of 2013. The year-over-year growth rate of total iPad unit sales was significantly higher than the growth rate of total iPad net sales for 2013 due to a reduction in iPad ASPs of 15% in 2013 compared to 2012. This decline resulted primarily from introduction of the lower priced iPad mini and the full year impact of the price reduction on iPad 2 made in 2012. The decline in iPad ASPs was experienced to various degrees by all of the Company’s operating segments.

In addition, the increase in net sales of iTunes, software and services in 2013 compared to 2012 was primarily due to growth in net sales from the iTunes Store and so on. The iTunes Store generated a total of $9.3 billion in net sales during 2013, a 24% increase from 2012. Growth in the iTunes Store, which includes the App Store, the Mac App Store and the iBooks Store, reflects

continued growth in the installed base of iOS devices, expanded offerings of iOS apps and related in-App purchases, and expanded offerings of iTunes digital content.

But for Apple, there is no great advantage with Mac. During 2013, Mac net sales and unit sales were down or relatively flat in all of the Company’s operating segments. Mac ASPs increased slightly partially offsetting the impact of lower unit sales on net sales. The decline in Mac unit sales and net sales reflects the overall weakness in the market for personal computers. （2）Segment Operating Performance

The Company manages its business primarily on a geographic basis. Accordingly, the Company determined its reportable operating segments, which are generally based on the nature and location of its customers, to be the Americas, Europe, Greater China, Japan, Rest of Asia Pacific and Retail. The Americas segment includes both North and South America. The Europe segment includes European countries, as well as India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and Asian countries, other than those countries included in the Company’s other operating segments. The Retail segment operates Apple retail stores in 13 countries, including the U.S. The results of the Company’s geographic segments do not include results of the Retail segment. Each operating segment provides similar hardware and software products and similar services. No matter how many the segments are, we can see that they all keep the increasing trend for the net sales.

Here, we just see the result of the Greater China. The growth in net sales in the Greater China segment during 2013 resulted from two major iPhone introductions during the year, iPhone 5 in December 2012 and iPhone 5c and iPhone 5s in September 2013. Further contributing to the growth in 2013 was the introduction of the fourth generation iPad and iPad mini during the second

quarter of 2013 and an increase in iPhone channel inventory as of the end of 2013 compared to the end of 2012. While net sales in the China segment were up 13% for all of 2013, net sales for the second half of 2013 declined 4% compared to the second half of 2012.

3、View on Gross Margin

The gross margin percentage in 2013 was 37.6% compared to 43.9% in 2012. The year-over-year decrease in gross margin in 2013 compared to 2012 was driven by multiple factors including introduction of new versions of existing products with higher cost structures and flat or reduced pricing; a shift in sales mix to products with lower margins; introduction of iPad mini with gross margin significantly below the Company’s average product margins; higher expenses associated with changes to certain of the Company’s service policies and other 32warranty costs; price reductions on certain products, including iPad 2 and iPhone 4; and unfavorable impact from foreign exchange fluctuations.

The Company anticipates gross margin during the first quarter of 2014 to be between 36.5% and 37.5%. The foregoing statement regarding the Company’s expected gross margin percentage in the first quarter of 2014 is forward-looking and could differ from actual results. The Company’s future gross margin can be impacted by multiple factors including, but not limited to those set forth above in Part I, Item 1A of this Form 10-K under the heading “Risk Factors” and those described in this paragraph. In general, gross margins and margins on individual products will remain under downward pressure due to a variety of factors, including continued industry wide global product pricing pressures, increased competition, compressed product life cycles, product transitions, potential increases in the cost of components, and potential strengthening of the U.S. dollar, as well as potential increases in the costs of

outside manufacturing services and a potential shift in the Company’s sales mix towards products with lower gross margins. In response to competitive pressures, the Company expects it will continue to take product pricing actions, which would adversely affect gross margins. Gross margins could also be affected by the Company’s ability to manage product quality and warranty costs effectively and to stimulate demand for certain of its products. Due to the Company’s significant international operations, financial results can be significantly affected in the short-term by fluctuations in exchange rates.

4、Conclusion

, In short-term solvency, whether it's, current ratio, quick ratio, cash ratio is superior to other electronic products industry for the company. In asset operational efficiency index, from inventory turnover, the company turnover is fastest. From this aspect we can see it also reflects the apple products widely recognized by the market, and achieves good sales performance. In the profitability, the company's gross margin and operation profit is the best in the same industry.

There is no doubt that in the capital market or on the sales, Apple has become the measure of the mobile Internet era. Now, its iPad and iPhone 5s is popular in public. The company also plans to launch a series of mid-range apple mobile phones. Results in the above financial reports showed that Apple acquires revenue of $54.5 billion from this quarter, $13.81 earnings per share and net profit of $13.1 billion. Apple take innovation as the core, whether apple's past performance, and future growth, I think we can hold for a long time.

Reference

[1] The Analysis of Financial Reports on Apple, 2013

. [2] 2013 10-K Annual Reports, 2013 .

[3] Xu Shujuan. Discussing with Enterprise financial analysis method, 2005 .

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