finance
Corporate Finance Final Apple vs. Dell
By: Stacy Simmerman
Apple Inc.
Industry - Information Tech, Computing and Smartphones
Founders - Stephen Wozniak and Steven Jobs in 1976
First Successful personal computer company
Popularized the graphical user interface
Headquarters - Cupertino, California
Employees - 137,000+
Main Markets - USA and China
Net Revenue - $260B
Net Income - $552561M
Employees
(CNN Business, 2020)
Apple Management
CEO - Tim Cook
Senior VP of Operations - Sabih Khan
Senior VP of General Counsel - Katherine Adams
Senior VP Software Engineering - Craig Federighi
Senior VP and Chief Financial Officer - Luca Maestr
Chief Operating Officer - Jeff Williams
| Other institutional | 32.93% |
| Mutual fund holders | 28.80% |
| Individual stakeholders | 1.09% |
Shareholders
(CNN Business, 2020)
Values and Culture
Excellence - reinforces a corporate culture that promotes, appreciates, and expects top-notch excellence among employees (Meyer, P., 2019).
Innovation - trains and motivates employees to innovate in terms of individual work performance and contributions to product development processes (Meyer, P., 2019).
Creativity - Utilizes employees’ abilities, knowledge, and skillsets.
Accessibility
Education
Inclusion and Diversity Privacy
Environment
Supplier Responsibility
Labor and Environment
In 2018, Apple was under fire for labor violations.
Improper provision of wages, benefits, and working hours.
700 Filipino workers were forced to pay $1 million to their employers.
Apple discovered three bonded labor violations in 2017.
Bonded labor - when labor is a condition of repayment for debt.
Another 38 violations were found including: working hours falsification, access restriction, and underage labor.
Apple’s average environmental score was 91% while their health and safety was 90%.
Apple had many environmental violations as well, including: hazardous substance management, permits, improper waste disposal, and air emissions.
Apple’s Income Statement
Apple’s Assets
Apple’s Liabilities
2017-2019
Apple Financial Overview
| 2017 | 2018 | 2019 | |
| Total Revenue | $229,234,000 | $265,595,000 | $260,174,000 |
| Gross Profit | $88,186,000 | $101,839,000 | $98,392,000 |
| Operating Expenses | $26,842,000 | $30,941,000 | $34,462,000 |
| Operating Income/Loss | $61,344,000 | $70,898,000 | $63,930,000 |
| Net Income | $48,351,000 | $59,531,000 | $55,256,000 |
Apple has had fluctuations in all areas of their business, but are performing very well in comparison to industry competitors.
Apple Short Term Liquidity
| Apple | 2017 | 2018 | 2019 |
| Current Ratio | 1.5 | 1.7 | 2.8 |
| Quick Ratio | 1.4 | 1.6 | 2.7 |
| Cash Ratio | 2.1 | 1.5 | 1.8 |
| Dell | 2017 | 2018 | 2019 |
| Current Ratio | 1.6 | 1.6 | 1.3 |
| Quick Ratio | 1.4 | 1.5 | 1.1 |
| Cash Ratio | .6 | .6 | .1 |
Apple Ratios
| Ratios | 2017 | 2018 | 2019 |
| Gross Profit | 38% | 38% | 38% |
| Return on Asset | 41% | 44% | 35% |
| Return on Equity | 36% | 54% | 63% |
| Times Interest Earned | 26 | 22 | 19 |
| Inventory Turnover | 108 | 67 | 63 |
| Operating Profit Margin | 27% | 27% | 25% |
| Net Profit Margin | 21% | 22% | 22% |
| Debt to Asset Ratio | .5 | .4 | .3 |
| Average Collection Period | 25 | 32 | 32 |
| Total Asset Turnover | 2 | 2 | 2 |
| Price/Book Ratio | 19.70 | 21.98 | 16.44 |
| PE Ratio | 211.63 | 125.99 | 77.53 |
Common Size Income Statement Apple
| Income Statement | 2017 % | 2018 % | 2019 % |
| Sales | 100 | 100 | 100 |
| Cost of Goods Sold | 62 | 62 | 62 |
| Gross Profit | 38 | 38 | 38 |
| Selling and Admin. Exp. | 7 | 6 | 7 |
| Depreciation Exp. | 0 | 0 | 0 |
| Operating Income | 27 | 27 | 24 |
| Interest Exp. | 1 | 1 | 1 |
| Earnings Before Tax | 28 | 27 | 26 |
| Income Taxes | 7 | 5 | 4 |
| Net Income | 21 | 22 | 22 |
| Dividends Paid | 0 | 0 | 0 |
Common Size Income Statement Cont. Apple
| Balance Sheet | 2017 % | 2018 % | 2019 % |
| Cash | 62 | 49 | 61 |
| Accounts Receivable | 13 | 17 | 14 |
| Inventory | 2 | 3 | 2 |
| Plant and Equip. | 51 | 67 | 58 |
| Less Accumulated Depreciation. Gross | 29 | 36 | 36 |
| Plant and Equip. Net | 23 | 31 | 23 |
| Land | 0 | 0 | 0 |
| Accounts Payable | 31 | 41 | 28 |
| Notes Payable | 0 | 0 | 0 |
| Accrued Expenses | 22 | 0 | 0 |
| Bonds Payable | 0 | 0 | 0 |
| Common Stock | 30 | 30 | 27 |
| Retained Earnings | 83 | 52 | 28 |
Competitor: Dell
Industry - Information Tech, Computing
Founder/CEO - Michael S. Dell in 1984
Headquarters - Round Rock, Texas
Market - USA, North America, Global
Employees - 157,000+
Revenue - $90M
Net Income - $-2.31M
Dell Financial Overview
| 2017 | 2018 | 2019 | |
| Total Revenue | $61,642,000 | $78,660,000 | $90,621,000 |
| Gross Profit | $12,959,000 | $20,054,000 | $25,053,000 |
| Operating Expenses | $16,211,000 | $23,387,000 | $25,244,000 |
| Operating Income/Loss | $-3,252,000 | $-3,333,000 | $-191,000 |
| Net Income | $-1,672,000 | $-3,728,000 | $-2,310,000 |
Dell’s Revenue and Gross profit are increasing throughout the past 3 years,
Their operating expenses are increasing causing them lose money.
Their Operating Income Loss is decreasing, but still too high.
Net Income is becoming increasingly worse over the last 3 years.
Dell Ratios
| Ratios | 2017 | 2018 | 2019 |
| Gross Profit | 21% | 25% | 28% |
| Return on Asset | -6% | -11% | -7% |
| Return on Equity | -11% | -35.5% | 44% |
| Times Interest Earned | 9 | 10 | 10 |
| Inventory Turnover | 24 | 29 | 25 |
| Operating Profit Margin | 26% | 30% | 28% |
| Net Profit Margin | -3% | -5% | -3% |
| Debt to Asset Ratio | .5 | .5 | .6 |
| Avg. Collection Pd. | 56 | 52 | 50 |
| Total Asset Turnover | 2 | 2 | 3 |
| PE Ratio | 0 | 0 | 8.36 |
| Price/Book Ratio | 3.17 | 3.97 | -10.70 |
Common Size Income Statement Dell
| Income Statement | 2017 % | 2018 % | 2019 % |
| Sales | 100 | 100 | 100 |
| Cost of Goods Sold | 79 | 75 | 72 |
| Gross Profit | 21 | 25 | 28 |
| Selling and Admin. Exp. | 22 | 24 | 23 |
| Depreciation Exp. | 0 | 0 | 0 |
| Operating Income | 26 | 30 | 28 |
| Interest Exp. | 3 | 3 | 3 |
| Earnings Before Tax | -9 | -7 | -3 |
| Income Taxes | -3 | -2 | 0 |
| Net Income | -3 | -5 | -3 |
| Dividends Paid | 0 | 0 | 0 |
Common Size Income Statement Dell
| Balance Sheet | 2017 % | 2018 % | 2019 % |
| Cash | 39 | 46 | 31 |
| Accounts Receivable | 32 | 32 | 40 |
| Inventory | 9 | 8 | 12 |
| Plant and Equip. | 45 | 38 | 44 |
| Less Accumulated Depreciation. Gross | 26 | 22 | 27 |
| Plant and Equip. Net | 19 | 15 | 17 |
| Land | 0 | 0 | 0 |
| Accounts Payable | 50 | 52 | 62 |
| Notes Payable | 0 | 0 | 0 |
| Accrued Expenses | 1 | 1 | 1 |
| Bonds Payable | 0 | 0 | 0 |
| Common Stock | 70 | 56 | 52 |
| Retained Earnings | -19 | -26 | -69 |
Apple Capital Structure
2014-2018: Total Debt has grown 73B
2015-2019: Dividends/Share Repurchases increased 34B
2016-2019: Debt to Equity Ratio has risen from 50% to 112%
2016-2019: Total Liabilities increased 63%
Low interest rates combined with debt is funding a growing capital return program
Apple is worth $1.12T
Apple SWOT
| Brand Recognition - valuable Advance Technology Sustainability Proficient Quality products and services Expanding Services International Presence Innovative | Expensive Fluctuating Sales Incompatibility with competitor software Limited Marketing Campaigns Expanding into non-competency areas - streaming networks |
| Customer Growth Expanding teams of qualified professionals Network Expansion Recycled or Environmentally friendly technology Artificial Intelligence and Smart Technology Advancement | Coronavirus Pandemic Knockoff Products Competition Tariffs overseas Pending Litigations Market Saturation Economic Fluctuations Regulations |
Strengths
Weaknesses
Threats
Opportunities
Dell SWOT
| Largest PC creator in the world Brand Recognition - market presence Loyal Customer Following - direct relationship Low Operating Costs Excellent Customer Service Technologically Advanced Customizable Technology Wide variety of products and services | Privately Owned Research and Development Lacking Relationships with Educational Institutions High Operating Expenses Lack of Individuality |
| Growth in Big Data Entering Other Markets - cloud computing and Artificial Intelligence Pacific Markets Diversity Online Retail Presence | Competition Fading PC Market Regulations Customer Prices |
Strengths
Weaknesses
Opportunities
Threats
Conclusion
Apple is more financially stable than Dell.
Despite having extremely high debt, Apple is able to maintain a positive cash flow.
Apple has a more broad-spectrum of products and has the advantage of being utilized in multiple markets throughout the US and China.
Apple’s brand recognition is more universal than Dell due to their wide variety, store accessibility, online presence, and customer service.
Dell has major room for improvement in their brand approach, product selection, and target market.
Dell may be a name brand; however, their financials fall extremely short in comparison to Apple.
Apple has a positive Net Income; whereas, Dell has a negative Net Income.
Apple seems to be struggling in certain areas but would be a good investment. They are a forward-thinking company that value’s their employees and allows their employees to be a part of their growth and innovation process.
Dell does not appear to be credit worthy. The CEO makes all product decisions and employee’s opinions do not matter in the growth of future product development.
References
Bhasin, H. (2019, January 29). SWOT analysis of DELL - DELL SWOT analysis & Internal analysis. Retrieved April 15, 2020, from https://www.marketing91.com/swot-analysis-of-dell/
Business Strategy Hub. (2020, March 10). Apple SWOT 2020: SWOT Analysis of Apple. Retrieved April 15, 2020, from https://bstrategyhub.com/swot-analysis-of-apple-apple-swot-2018/
Carmichael, C. (2020, January 29). Understanding Apple's Capital Structure. Retrieved April 15, 2020, from https://www.investopedia.com/articles/investing/081716/understanding-apples-capital-structure-aapl.asp
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Ehrenkranz, M. (2018, March 8). Apple Details Alarming Labor Issues In Latest Supply Chain Report. Retrieved April 1, 2020, from https://gizmodo.com/apple-details-alarming-labor-issues-in-latest-supply-ch-1823611397
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References (Cont.)
Hellman, J. (2019, January 30). Value Line - The Most Trusted Name in Investment Research. Retrieved April 15, 2020, from https://www.valueline.com/Stocks/Highlights/Dow_30_Earnings__Apple_Inc___First_Quarter_Fiscal_2019.aspx#.Xpdj5chKjIV
Jurevicius, O. (2017, January 24). Full Analysis of Apple Inc. Competitors. Retrieved April 1, 2020, from https://appleknowledge.xyz/apple-competitors.html
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Macrotrends. (n.d.). Apple: Number of Employees 2006-2019: AAPL. Retrieved April 1, 2020, from https://www.macrotrends.net/stocks/charts/AAPL/apple/number-of-employees
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References (Cont.)
Meyer, P. (2019, February 15). Apple Inc.s Organizational Culture & Its Characteristics (An Analysis). Retrieved April 15, 2020, from http://panmore.com/apple-inc-organizational-culture-features-implications
The Editors of Encyclopedia Britannica. (2019, January 7). Dell Inc. Retrieved April 15, 2020, from https://www.britannica.com/topic/Dell-Inc
Tony Romm, D. P. (2019, January 2). Adding to fears of economic slowdown, Apple warns sales will fall short and cites 'deterioration' in China. Retrieved April 1, 2020, from https://www.washingtonpost.com/business/economy/adding-to-fears-of-economic-slowdown-apple-warns-sales-will-fall-short-and-cites-deterioration-in-china/2019/01/02/75e7653c-0eda-11e9-831f-3aa2c2be4cbd_story.html
Yahoo Finance. (2020, April 15). Apple Inc. (AAPL) Income Statement. Retrieved April 15, 2020, from https://finance.yahoo.com/quote/AAPL/financials?ltr=1
Yahoo Finance . (2020, April 15). Dell Technologies Inc. (DELL) Income Statement. Retrieved April 15, 2020, from https://finance.yahoo.com/quote/DELL/financials?ltr=1