Apple Financial Performance
This financial analysis for Apple Inc was carried out for the year 2007.
The first section of the Financial Analysis will detail my preconceived notions of Apple (without the facts in hand). The second part of the Financial Analysis will review Apple's stock performance, various financial ratios, competitors, market segment. Interest coverage ratios, dividend yield ratios, and dividend payout will be discussed as well. The financial analysis will conclude with my opinion of Apple's future prospects, its stocks, and whether it is creating value to its shareholders.
Apple General Information
On January 3, 1977, Apple was officially incorporated in California. Apple's stock is traded under sticker Symbol "AAPL" in NASDAQ stock exchange, and in Frankfurt Stock Exchange, Apples' shares trade under the symbol "APCD". Apple became a public company in 1980, and in its Initial Public Offering (IPOD), Apple's shares were offered for $22.50. On a split-adjusted basis, Apple's Initial Public Offering stock price was $2.75. Apple has no preferred stock outstanding.
Apple, Inc. Dividend Policy
Apple doesn't pay its stockholders any dividends. In fact, the last time Apple paid dividends was in December of 1995. Apple paid dividends from 15 June 1987 to 1995. As Apple does not have an active dividend policy, Dividend Reinvestment Program (DRIP) is also not available to investors. Cash dividends that Apple did pay, ranged from .06$ to .12$. .06$ regular cash was paid from June 15, 1987 to August 14, 1987; .08$ was paid from December 15, 1987 to September 15, 1988. Apple paid dividends each quarter, and in the months of March, June, September, and December. Apple paid .10$ last quarter of 1988, and first 3 quarters of 1989. .11$ was paid last quarter of 1989 and first three quarters of 1990. .12$ was paid from last quarter of 1990 until the end of stocks regular dividend payout. Apple did have a stock dividend in the year of 2000 and 2005. Apple had a 2-for-1 stock split in February 28, 2005, and June 20, 2000. The stock dividend was declared February 11, Recorded of February 18, and was Payable on February 28 for the year of 2005. For the year 2000, 2-for-1 Stock Split was declared on April 19, recorded on May 19, and was Payable on June 20, 2000.
Apple, Inc. Competitor Dividend Policy
Apple's main competitors in "Computer Hardware" include Dell Inc., Hewlett-Packard Co., Microsoft Corp., and Cisco Systems, Inc. Dell Inc. and Cisco Systems, Inc have no dividend policy, thus matching Apple's dividend policy. HP on the other hand pays a dividend of $.08 every quarter. HP has been paying this same dividend since second quarter of 1998. Beginning 2005, Microsoft shifted from its annual dividends to quarterly dividends. And in September of 2006, Microsoft announced that it would increase its quarterly dividends by $.01 and pay $.10 quarterly dividends to its shareholders. The Quarterly Dividend Record date for Microsoft shareholders is November 16, 2006.
Apple, Inc. Key Statistics
As of January 18, 2007, Apple's Current Market Rate is about $76.54 billion (from Yahoo Finance). Apple, Inc. beta is 2.41 on Yahoo, while Reuters shows Apple, Inc. beta as 1.47, I am not sure which of the either is accurate or obsolete. Apple, Inc. has 859.27 million shares outstanding, of which insiders hold institutions hold 4.76% and 77.50%. At 4:01 PM EST, Apple's stock traded at $89.07, down 6.19%.
For 52 weeks Ending 2001-09-29, Apple had $5,363 million in revenues, gross profit of $1,235 million, and a NEGATIVE operating income of $344 million. It incurred a loss of $52 million before tax, and Income after Tax was NEGATIVE $37 million. Apple improved its position in the next year, having revenues of $5,742 million, gross profit of $1,603 million, and a positive income of $17 million. Apple's income after tax for the fiscal year was $65 million. For Fiscal Year ending 2003-09-27, Apple increased its Total revenue and expenses. Apple's total revenues stood at $6,207 million, negative total expenses of $6,208 million. Apple's income after tax stood at $68 million, and a net income of $69 million. The next Fiscal Year - 2004-09-27, saw a considerable rise in Total Operating expenses and revenues. Apple, Inc. net income stood at $266 million - a whopping increase of 285.5% over the previous year. Fiscal years ending in 2005 and 2006 both saw a tremendous rise in Apple's revenues. Apple income after tax for 2005 was $1,328 million an astonishing increase in revenues of 399.24%. For fiscal year ending 2006-09-30, Apples income after tax was $1,989 million, an increase of 49.7%. Apple's earning per share for the fiscal year ending 2006-09-30, was $2.27, the previous year: $1.55, and year the before $.36. Apple has consistently been providing value to its shareholders as one can infer after reading the data. From a loss of $37 million in 2001, Apple increased its revenues after taxes to $1,989 million and earnings per share from negative $.04 to a strong $2.27 EPS.
Apple Stock History
Apple's history over the course of 5 years, Apple closed from $21.82 on January 22, 2002 to $89.07 on January 18, 2007. Apple's stock average over the 5 years was $ 39.88, its stock closed as high as 97.1. Over the course of last year, Apple's stock averaged $71.34. The stock's average is counted from January 18 2006 to January 18 2007.The rise in stock price is an increase of 7.96%. Over the same period, Microsoft's increase in its stock price was over 15.53%, Hewlett-Packard Company over 33.60%, and Cisco 41.21%. Clearly, Apple's major competitors outperformed Apple's stock performance. The Graph Below illustrates Apple, its major competitors and S&P 500.
During the last one year, the Computer Hardware industry decreased by .77%, while S&P 500 increased 11.61%. The graph below illustrates the industry Apple, Inc. is competing and S&P 500:
Important Events Affecting Apple, Inc. Stock
There have been numerous events that affected Apple Stock. The events will be detailed below, and how much a particular event affected Apple, Inc. stock. Events that affected Apple stock could range from unveiling of a new and a promising innovative product or disappointing earnings. The following briefs important events affecting Apple stock over 1 year.
- April 19, 2006: Apple Computer, Inc. announced that it expected its third quarter revenues to be around $4.2-$4.4 billion, GAAP earnings of $.39-$.43 per share, translating to non-GAAP earnings of $.43-$.47 per share. Analysts expect non-GAAP earnings of $0.47 per share on revenues of $4.72 billion in the same period.
- May 8, 2006: Apple Computer, Inc. won a lawsuit against Beatles. The London Court ruled that Apple Computer, Inc. was not liable for trademark infringement against Apple Corps.
- May 19, 2006: Apple Computer, Inc. filed a counter-suit against Creative Technology for dispute over patent rights over rival digital music players.
- June 29, 2006: Apple Computer, Inc discovered irregularities related to the issuance of certain stock option grants made between 1997 and 2001, Apple investigates the issue.
- July 6, 2006: Two lawsuits have been filed against Apple for its irregularities in its Stock Options grants.
- August 3, 2006: Apple delayed filing of its Form 10-Q for the quarter ended July 1, 2006 as it investigated its stock option irregularities. Apple appointed an independent counsel to perform the investigation.
- August 6, 2006: Wall Street Journal reported several irregularities in Apple's stock option grants between 1997 and 2001. Apple mentioned that one of the awards involved Steve Jobs.
- August 11, 2006: NASDAQ Staff Determination issues Apple Computer, Inc. for not complying with filing requirements. Apple Computer, Inc. announced that the Company would request a hearing before the NASDAQ Listing Qualifications Panel.
- October 4, 2006: The special committee appointed by Apple Computer, Inc. found no misconduct by any member of Apple's current management team. The committee did find evidence of irregularities related to a January 2002 grant.
- December 27, 2006: Federal Officials investigated whether former Apple Computer Inc. officials forged documents to maximize executives' profit from stock options.
- January 9, 2007: Apple, Inc. unveiled Apple TV and IPHONE TV to conquer new technology markets since the company launched the original iPod in October 2001. Apple's stock increased by $7.10 a share, or 8.3%, to an all-time closing high of $92.57.
I do not believe that Apple is doing a splendid job in regards to its competitors. Over the course of one year, Apple's stock performance was lower than Microsoft, HP, and Cisco.
Although, there has been a great euphoria over Apple's Iphone, I personally believe that it is quite exaggerated. For $599, it is an expensive phone and is tied to Cingular. As a subscriber of Sprint, and whose contract is about to expire, I see no reason in switching to Cingular to adopt Iphone when it arrives. I am quite a fan of latest gadgets - I bought Microsoft Zune the day it came out just to see how it works in comparison to Ipod. I am pretty sure that there will be numerous competitors to Apple who will deliver products just as good as Iphone, and and at a much cheaper price. More importantly, one that is not tied to a wireless provider. Apple is calling it simply an innovation in phones. I am not sure how it will stand against Sprint's Wimax (when it launches) and its phones, which I am looking much more forward to, compared to the over-hyped Apple Iphone.
KEY:Author Name: Bhaskar Chitraju