Apple & Dell - Financial Analysis 2008 - 2011

Apple & Dell
Financial Analysis
2008 - 2011
ESDES – School of Management
International Business Program
Fall 2012
Delaiti Simone - Grottanelli Giulia - Serio Francesco -
Skupien Samanta - Stefanski Karol - Tardelli Michele

Table of contents
[APPLE & DELL – COMPANIES FINANCIAL ANALYSIS] . 2
Introduction __________________________________________________________ 4
Companies __________________________________________________________ 4
Market ______________________________________________________________ 4
Industry Overview _________________________________________________________ 4
Smartphone market forecast ________________________________________________ 4
Industry forecast __________________________________________________________ 4
Market Share _____________________________________________________________ 5
Marketing ____________________________________________________________ 5
Marketing environment _____________________________________________________ 5
Marketing Strategy ________________________________________________________ 5
Personal Computer satisfaction _____________________________________________ 6
Advertising Expenses ______________________________________________________ 6
Product Differentiation _____________________________________________________ 7
Net Sales and Income comparison _______________________________________ 8
Net Sales Growth _________________________________________________________ 9
Comparative 4-year Net Income _____________________________________________ 9
Companies’ Balance Sheet and Income Statement ________________________ 11
Balance Sheet Structure ___________________________________________________ 11
Income statement structure ________________________________________________ 14
Trend Analysis – Balance Sheet and Income Statement ____________________ 15
Trend Analysis – Balance Sheet ____________________________________________ 15
Trend Analysis – Income Statement _________________________________________ 18
Growth overview _____________________________________________________ 20
Horizontal Analysis – Income Statement _________________________________ 22
Comparative Balance Sheet ___________________________________________ 24
Cash Flow __________________________________________________________ 30
Obligations _________________________________________________________ 31

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Area and Products ___________________________________________________ 31
Net Sales per Area ________________________________________________________ 32
Net Revenue growth per Area ______________________________________________ 32
Net Sales per Product _____________________________________________________ 33
Main Products Net Sales growth ____________________________________________ 33
Ratios Growth Analysis _______________________________________________ 34
5 - Year Profitability _______________________________________________________ 34
5 - Year Financial Health ___________________________________________________ 34
5 - Year Efficiency ________________________________________________________ 35
DuPont Equation _____________________________________________________ 37
Ratio Comparison ____________________________________________________ 38
Apple – 2 Year Ratios Comparison __________________________________________ 38
Dell – 2 Year Ratio Comparison _____________________________________________ 40
Stock Prices history __________________________________________________ 43
Indicators ___________________________________________________________ 45
Treasury Stock __________________________________________________________ 45
Altman Z Score __________________________________________________________ 45
Bankruptcy ______________________________________________________________ 45
PE/ Ratio ________________________________________________________________ 46
Retirement Plans & ESPP __________________________________________________ 47
Dividend History ________________________________ Errore. Il segnalibro non è definito.
Hot News __________________________________ Errore. Il segnalibro non è definito.
Conclusion ________________________________ Errore. Il segnalibro non è definito.
4 Year Net Income ___________________________ Errore. Il segnalibro non è definito.
5 Year Stock Price __________________________ Errore. Il segnalibro non è definito.
References _________________________________________________________ 48
!!

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Introduction
Presentation
Good morning everyone. It’s very nice to see you all here today.
As you already know we represent the Italian group. My name is
Samanta and together with Karol, Giulia, Simone, Francesco
and Michele we are going to analyze Apple in comparison with
Dell.
Companies
General Information
Let’s start from “General information” about both companies. As
we can see both Apple and Dell belong to the technology sector.
Both are focused mainly on Personal Computers but we cannot
forget that Apple in contrast to Dell produces not only PCs but
also other gadgetry like iPhones, iPods, iPads etc. What’s worth
mentioning is that the Market Capitalization in Apple is much
more impressive and almost 38 times higher than in Dell. It
means that the total market value of all of a company’s
outstanding shares is 639 billion$.
Market
Industry Overview
Let’s move on to the “Industry overview”. As we can see on the
left graph, despite the crisis, the number of PC users has not
decreased but even has been gradually increasing from year to
year. Another feature of this industry is aggressive competition.
It means that the companies are forced to constantly introduce
and launch the new products so as not to go out of the business
and in order to become a leader. Next thing is a patent problem,
a good example of this is when companies patent something
!!
they invented but not for using the right to this but to prevent the
others from using it.
Smartphone market forecast
Now I’d like to draw your attention to this data – Smartphone
market forecast. We can learn from this information that the
number of smartphones sales will be increasing in the future so
maybe that is why Dell wants to launch its own smartphone in
order to join the (smartphone) market.
Smartphone selling prices are expected to be lower over few
years, therefore, it is not surprising that Apple works on creating
cheaper iPhone because of that. Moreover, we can observe that
although the revenues are going to be higher year by year, this
growth pace is expected to slow down.
Industry forecast
Let’s take a look at this graph presented above – Industry
forecast. It shows that overall Personal Computer sale will be
increasing in the next few years but the greatest meaning has a
sale of Portables PC since this one is expected to grow at a
faster rate than Desktop PC sale. It of course does not mean

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that Desktop PCs are going to disappear but just their sale in
fact is expected to grow really slow.
Market Share
Next we have a Smartphone Market Share presented in a pie
chart. We see that it cannot be disputed that the largest share in
the market has Android which is not a surprise since there are
many producers who use this operating system such as
Samsung, HTC, etc.… On the second place we have IOS with
23% of market share which is quiet impressive since this
operating system is used only by iPhones.
Let’s move on to the bar chart which shows the Computer
Market Share. Here we see that the share of Dell is slowly
decreasing in the computer market while Apple’s share is
increasing. It seems like “Apple is taking market share from
Dell”.
Marketing
Marketing environment
In case of this industry Marketing Environment is really highly
competitive. We can say that there are extremely short life-cycle
of products which means that it’s better for companies to sell all
!!
the goods and inventories as soon as possible. This marketing
environment is also very innovative and volatile which means
that they need to innovate and change their products since
customers’ tastes change very often.
Below we can see logos of market leaders like BB, Samsung,
Nokia etc.
Marketing Strategy
Apple Marketing Strategy, as we all know, are: innovative ideas,
high quality, high prices but also as we wrote here: “turning
something ordinary into something beautiful” sine design is the
biggest advantage in case of Apple.
“Non-marketing” marketing strategy, what does it mean? Well,
Apple claims that they don’t spend a lot of money on typical
advertising but theirs products, as we can observe, appear very
often in the movies, TV series, etc. This phenomenon is called
“product placement” which is a form of advertisement, where
branded goods are placed in movies, music videos, the story
line of television shows, or news programs.
Dells Marketing strategy is answering the customer needs; by
understanding theirs needs, by proposing on-line sales,
technical support etc., but really important is financing
availability; which means that every customer, in case it’s
necessary, is provided with kind of loan thanks to which
everyone can afford to buy Dell products.
Moreover when you’re placing your order for computer online, it
is very likely that they start to make it for you since the moment
of your order. (thanks to it Dell is not forced to store much
inventories in theirs storehouses).

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Personal Computer satisfaction
This chart shows that apple has the highest level of satisfaction
above HP, Acer and dell, which basically tend to stay between
75 and 78: dell has a fairly positive rating but still it has earned
lower marks that apple because of the lack of durability of its
product and product support.
instead Apple rules the desktop PCs category, with top marks in
reliability, service, and features (from product design to ports
and connectivity)
Highlighted in this chart below are our survey participants'
ratings of desktop PC manufacturers in the service/support’
area.
Advertising Expenses
APPLE: as we can see apple’s adv. expences from 2007 to
2009 have been relatively low while in 2009 they have started
growing until 2011: from 2008 to 2011 the company has doubled
its advertising expenses.
!!
-Apple has one of the strongest brands around, and its
advertising spend is not even $1 billion. Apple spent less than
1% of sales last year on advertising.
Perché spendono cosi poco
The ads are memorable. Apple spends its money on creative,
producing a few clever ads rather than a lot of forgettable ones.
Those Get-a-Mac ads are marketing events in their own right,
picked up on YouTube and re-played again and again at no
extra cost to Apple.
Looking at dell’s adv. expenses the situation its totally different:
in fact the company has lowered its advertising expenses from
2007 to 2011->lack of cohesion in its approach to marketing
strategies.
-Motivo 132millions risparmiati:
2008-2009: A restructuring of Dell Inc.’s approach to advertising
may have saved the company $132 million during fiscal year
2009: it in fact reduced the amount it spent on advertising by 14
percent during that year. Dell (NASDAQ: DELL) is expected to
reconsider the one-shop ad agency model it established in late
2007, industry.

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-da 836 a 730 e anche meno perché le vendite non ci stavano
dietro:
And last year, sales growth didn’t keep up with the advertising
budget.
-confronto percentuale vendite:
spent $860 million last fiscal year, $730 million in 2011, and
$619 million in 2010. That’s 1.3%, 1.2% and 1.2% of total sales.
20th most recognizable brand name in the world
Apple Stores are their own best advertisement
Product Differentiation
-speaking about product differentiation we all know already that
apple’s product include personal computers, iPhones, iPods and
iPads: every product its characterized by high quality and vey
innovative design.
the latest 2products that have been launched are the iphone5
and the iPad mini.
-speaking about dell’s product differentiation we can see that it
produces personal computers as well but something that might
be unknown by some people it’s the fact that dell also sells
mobile phones. the most sold products by the company are the
pc desktops and the laptops. during fiscal 2011,dell has a new
model of notebook called inspiron duo: a tablet computer that
easily converts to a laptop.
!!

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!!

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Net Sales and Income comparison
Net Sales Growth
In this graph we can see a comparison between apple and dells
net sales growth and at the same time compare them with the
world GDP:
-dell situation its very volatile and there is no continuity among
the 4 years. The -13.4%might be because of the economic crisis
which has started in 2009.
-as we can see there is no link between the world and dell’s
GDP and the one of Apple: from 2008 to 2011 apple’s GDP has
been growing at a very fast speed, this is also due to the launch
in 2010 of the iphone4 and the iPad.
Since we are speaking about the GDP that every country has its
interesting to know that according to numbers from the World
Bank, there are only 18 countries that have a GDP above $500
!!
billion, while Apple’s market cap stands at approximately $506
billion. As you can see from the chart Apple’s total value is
greater than the 2010 nominal GDP of countries like PBaAS.
In fact, if you take the GDP of Poland, you could add the GDP of
Costa Rica and still have a number lower than Apple’s market
capitalization. If Apple’s total market value were ranked among
country GDP, it would be the 18th largest in the world.
Comparative 4-year Net Income
speaking about the comparative 4 year net income we can
easily say that the net income of Apple and Dell goes in
completely different direction. apple has had an incredible
favorable trend which has lead the company to grow its net
income by 436% since 2008;while Dell has lost 11% of its net
income during 2011 if we compare it with 2008.

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Quarterly loading sales as % of total year
as Samanta already told us the fiscal year begins at different
time for the 2companies:as we can see from the chart Q1of
apple and Q4ofdell both refers to the same period which
comprehends Christmas: this means that the largest amount of
sales for both has been sold in this part of the year.
Quarterly Net Income as % of Sales
we are going to speak more about profitability later on but in this
chart its interesting to underline in which quarters the companies
has been more profitable since it basically shows what is the
ROS of the two companies during the 4quarters of both years:
while dell has the higher ROS during the last quarter of 2011,
apple highest ROS its in the second quarter of 2011 with a
percentage of 25,6%. As you can see the situation between the
2companies its totally different, that’s because we are making a
!!
confront with the most profitable company in high tech in the
world.
From 2010 to 2011 apple and dell’s NI has increased greatly
(A:+85%-D: +84%).

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Companies’ Balance Sheet and Income Statement
Balance Sheet Structure
5-year Apple's Balance Sheet Structure – Asset
Let’s have now have a closer look at the balance sheet structure
of Apple starting with the assets:
-from 2007 to 2011 Apple reduced the cash of 38.4% using that
money basically to set up new investments and buy patents
-another highlight is the inventories; we can see how, as a
percentage of the total assets, the inventories for Apple
!!
constitutes just a small percentage (from 0.67% to 1.37%). This
reflects the view of the inventory manager Tim Cook “inventory
is evil” which we are going to talk about later.
5-year Dell's Balance Sheet Structure – Asset
Year 2012 2011 2010 2009 2008
Assets
Current assets
Cash 33.27% 37.22% 32.71% 34.31% 28.92%
Receivables 14.54% 16.82% 17.35% 17.85% 21.63%
Inventories 3.15% 3.37% 3.12% 3.27% 4.28%
Other current assets 15.16% 17.78% 18.87% 20.61% 17.30%
Total current assets 66.13% 75.19% 72.05% 76.04% 72.13%
Non-current assets
Net property plant and
equipment 4.77% 5.06% 6.48% 8.59% 9.68%
Equity and other investments 7.64% 1.82% 2.32% - -
Goodwill 13.11% 11.31% 12.11% 6.55% 5.98%
Intangible assets 4.17% 3.87% 5.03% 2.73% 2.83%
Other long-term assets 4.18% 2.75% 2.01% 6.08% 9.38%
Total non-current assets 33.87% 24.81% 27.95% 23.96% 27.87%
Total assets 100.00% 100.00% 100.00% 100.00% 100.00%
Moving on to the assets of Dell the first impressive thing that we
can notice is the high percentage of total assets constituted by
receivables. Basically Dell offers a wide range of solutions for
financing the needs of its customers.
Indeed in 1997 they founded DFS (that stands for Dell Financial
Services) with this mission “To deliver financing solutions that
Year 2011 2010 2009 2008 2007
Assets
Current assets
Cash 22.30% 34.08% 49.40% 61.89% 60.70%
Receivables 4.61% 7.33% 7.08% 6.12% 6.46%
Inventories 0.67% 1.40% 0.96% 1.29% 1.37%
Deferred income taxes 1.73% 2.18% 2.39% 3.66% 3.09%
Prepaid expenses - - 0.65% 1.20% 1.65%
Other current assets 9.35% 10.46% 5.96% 13.51% 13.37%
Total current assets 38.66% 55.44% 66.43% 87.66% 86.62%
Non-current assets
equipment 6.68% 6.34% 6.22% 6.20% 7.23%
Equity and other investments 47.79% 33.77% 22.16% - -
Goodwill 0.77% 0.99% 0.43% 0.52% 0.15%
Intangible assets 3.04% 0.45% 0.74% 0.72% 1.51%
Deferred income taxes - - 0.34% - 0.35%
Other long-term assets 3.06% 3.01% 3.67% 4.89% 4.15%
Total non-current assets 61.34% 44.56% 33.57% 12.34% 13.38%
Total assets 100.00% 100.00% 100.00% 100.00% 100.00%

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enable and enrich the Dell Customer experience.” Essentially
this facilitate financing products and services sold by Dell
through consumer and small business revolving loans and fixed-term
!!
business loan and lease financings in the U.S. and Canada
I would like to draw your attention also to the “goodwill” that as
we can see has been increasing year by year reflecting the
acquisition policies of Dell. A remarkable fact: the acquisition of
Perot Systems Corporation (an information technology services
provider) in the Fiscal year 2010.
5-year Apple's Balance Sheet Structure - Liabilities & OE
Here we have instead the Liabilities & OE for Apple.
Focusing on the Retained Earnings line: from 2007 Apple kept
on increasing its retained earnings; one of the reasons of this
growth is the fact that it has never paid a dividend to the
stockholder until 2012 as we know.
Liabilities and stockholders'
equity 2011 2010 2009 2008 2007
Current liabilities
Accounts payable 12.57% 15.98% 11.79% 13.95% 19.61%
Taxes payable 0.98% 0.28% 0.91% - -
Accrued liabilities 6.97% 2.12% 7.20% 9.40% 4.97%
Deferred revenues 3.52% 3.97% 4.32% 12.26% 5.56%
Other current liabilities - 5.21% - - 6.55%
Total current liabilities 24.04% 27.56% 24.22% 35.61% 36.69%
Non-current liabilities
Deferred taxes liabilities - 5.72% 4.67% 1.71% 2.44%
Deferred revenues 1.45% 1.51% 1.80% - -
Other long-term liabilities 8.68% 1.64% 2.71% 9.54% 3.54%
Total non-current liabilities 10.13% 8.87% 9.17% 11.25% 5.98%
Total liabilities 34.16% 36.43% 33.39% 46.86% 42.67%
Stockholders' equity
Common stock - - - 18.14% 21.18%
Additional paid-in capital 11.46% 14.19% 17.28% - -
Retained earnings 54.00% 49.44% 49.16% 34.99% 35.91%
Accumulated other comprehensive
income 0.38% -0.06% 0.16% 0.02% 0.25%
Total stockholders' equity 65.84% 63.57% 66.61% 53.14% 57.33%
Total liabilities and stockholders'
equity 100.00% 100.00% 100.00% 100.00% 100.00%

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5-year Dell's Balance Sheet Structure - Liabilities & OE
With Dell I would like to talk about the treasury stock line that
presents negative values every year. In particular I would like to
focus on a fact that happened on the 13th September 2011
when Dell authorized a $5 billion stock buyback (19% of the
company's market value at that time).
As we can see from the graph, the result of this action was the
growth of the price of the stock of Dell.
Liabilities and stockholders'
equity 2012 2011 2010 2009 2008
!!
Current liabilities
Short-term debt 6.44% 2.20% 1.97% 0.43% 0.82%
Accounts payable 26.17% 29.26% 33.80% 31.35% 41.70%
Taxes payable 0.97% 1.37% - - -
Accrued liabilities 3.60% 9.46% 11.54% 5.83% 6.97%
Deferred revenues 7.96% 8.18% 9.03% 10.00% 9.02%
Other current liabilities 4.26% - - 8.47% 8.72%
Total current liabilities 49.40% 50.48% 56.34% 56.07% 67.22%
Long-term debt 14.34% 13.33% 10.15% 7.16% 1.31%
Deferred revenues 8.61% 9.11% 9.00% - -
Other long-term liabilities 7.62% 6.96% 7.74% 20.65% 17.92%
Total non-current liabilities 30.57% 29.40% 26.90% 27.81% 19.23%
Total liabilities 79.98% 79.88% 83.24% 83.88% 86.45%
Common stock 27.37% 30.56% 34.09% 42.22% 38.42%
Retained earnings 63.40% 64.11% 65.70% 78.03% 66.03%
Treasury stock -70.61% -74.36% -82.92% -
105.30% -90.84%
Accumulated other
comprehensive income -0.14% -0.18% -0.11% 1.17% -0.06%
Total stockholders' equity 20.02% 20.12% 16.76% 16.12% 13.55%
Total liabilities and
stockholders' equity 100.00% 100.00% 100.00% 100.00% 100.00%

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Income statement structure
5-year apple's income statement structure
Year 2011 2010 2009 2008 2007
Revenue 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of revenue 59.52% 60.62% 59.86% 65.69% 66.03%
Gross profit 40.48% 39.38% 40.14% 34.31% 33.97%
Operating expenses
Research and development 2.24% 2.73% 3.11% 3.41% 3.26%
Sales 7.02% 8.46% 9.67% 11.58% 12.34%
Total operating expenses 9.26% 11.19% 12.78% 14.99% 15.60%
Operating income 31.22% 28.19% 27.36% 19.32% 18.37%
Other income (expense) 0.38% 0.24% 0.76% 1.91% 2.50%
Income before taxes 31.60% 28.42% 28.12% 21.23% 20.86%
Provision for income taxes 7.65% 6.94% 8.93% 6.35% 6.30%
Net income from continuing
operations 23.95% 21.48% 19.19% 14.88% 14.56%
Net income 23.95% 21.48% 19.19% 14.88% 14.56%
Let’s analyze now the Apple’s Income Statement structure:
-the first evidence is the percentage of the gross profit that
except for the first two years (2007 and 2008) where it’s around
33% and 34% in the last period increased
-the gross margin percentage in 2010 was 39.38% compared to
40.14% in 2009. This year-over-year decline in gross margin
was primarily attributable to new products that had higher cost
structures, including iPad, partially offset by a more favorable
!!
sales mix of iPhone, which had a higher gross margin than the
Company average
-the Company anyway expects to experience decreases in its
gross margin percentage in future periods, as compared to
levels achieved during 2011, largely due to a higher mix of new
and innovative products with flat or reduced pricing that have
higher cost structures
-last point is the net income that as we can see in a 5 years time
has increased of 9.4%
5-year Dell's Income Statement Structure
Year 2012 2011 2010 2009 2008
Revenue 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of revenue 77.75% 81.47% 82.49% 82.07% 80.91%
Gross profit 22.25% 18.53% 17.51% 17.93% 19.09%
Operating expenses
Research and
development 1.38% 1.07% 1.18% 1.09% 1.00%
Sales 13.73% 11.87% 12.22% 11.62% 12.33%
Other operating
expenses - - - 0.00% 0.14%
Total operating
expenses 15.11% 12.95% 13.40% 12.71% 13.46%
Operating income 7.14% 5.58% 4.11% 5.22% 5.63%
Interest Expense 0.45% 0.32% 0.30% 0.15% 0.07%
Other income
(expense) 0.14% 0.19% 0.02% 0.37% 0.71%
Income before taxes 6.83% 5.45% 3.83% 5.44% 6.26%
Provision for income
taxes 1.21% 1.16% 1.12% 1.38% 1.44%
Net income from
continuing operations 5.63% 4.28% 2.71% 4.06% 4.82%
Net income 5.63% 4.28% 2.71% 4.06% 4.82%

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Here I would like to talk about the gross profit of Dell: in the
financial report they specify that their vendor rebate programs
are based on the volumes and generally they are not long-term
in nature but instead are typically negotiated at the beginning of
each quarter. Because of the nature of these ongoing
negotiations, which reflect changes in the competitive
environment, the timing and amount of rebates and other
discounts they receive under the programs may change from
period to period.
From 2009 to 2010 we can see a slight reduction attributable to
softer demand, change in sales mix, and lower average selling
prices and due to the impact by component cost pressures.
From 2010 to 2011 the decreasing component costs, improved
pricing discipline, better sales and supply chain execution
contributed to the year- over-year increase in product gross
margin percentage.
Trend Analysis – Balance Sheet and Income Statement
Trend Analysis – Balance Sheet
Apple's assets trend analysis
Year 2011 2010 2009 2008 2007
Current assets
Cash 169 167 153 159 100
Receivables 328 337 205 148 100
Inventories 224 304 132 147 100
Deferred income taxes 258 209 145 185 100
Prepaid expenses N/A N/A 74 114 100
Other current assets 321 232 84 158 100
!!
Total current assets 205 190 144 158 100
Non-current assets
equipment 425 260 161 134 100
Equity and other
investments 528 241 100 N/A N/A
Goodwill 2358 1950 542 545 100
Intangible assets 926 90 92 75 100
Deferred income taxes N/A N/A 185 N/A 100
Other long-term assets 338 215 166 184 100
Total non-current assets 2105 988 470 144 100
Total assets 459 297 187 156 100
Let’s go on now with the trend analysis for the assets of Apple.
-Apple’s receivables, especially during the last 3 years, are
outstanding. They generally do not require collateral from their
customers; except in certain instances to limit credit risk. In
addition, when possible, Apple attempts to limit credit risk on
trade receivables with credit insurance for certain customers or
by requiring third-party financing, loans or leases to support
credit exposure
- another highlight is the growth of “Net property plant and
equipment” also due to the opening of new retail stores during
2011. This graphs shows the opening of the Apple Stores during
the last 8 years, as we can see only between 2010 and 2011
they opened 40 new stores.
-moving on to the goodwill we can see that Apple reports an
outstanding goodwill during 2010 and 2011, this is due to
various business acquisitions Samantha is going to talk about
later

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-thanks to all this reasons we can see that the non current
assets in a 5 year increased of 21 times: that’s OUTSTANDING
Dell's assets trend analysis
Year 2012 2011 2010 2009 2008
Current assets
Cash 186 180 138 114 100
Receivables 109 109 98 79 100
Inventories 119 110 89 73 100
Other current assets 142 144 133 115 100
Total current assets 148 146 122 101 100
Non-current assets
equipment 80 73 82 85 100
Equity and other
investments 436 90 100 N/A N/A
Goodwill 354 265 247 105 100
!!
Intangible assets 238 192 217 93 100
Other long-term assets 72 41 26 62 100
Total non-current assets 196 125 122 83 100
Total assets 162 140 122 96 100
Here there is Dell.
First I want to talk about “Net property plant and equipment”
because especially during the last years Dell faced some
changings with the property.
In 2011 they closed a manufacturing plant in Winston-Salem,
North Carolina consolidated space on Austin, Texas campus
and sold the fulfillment center in Nashville, Tennessee.
Currently, a business center in Coimbatore, India and a data
center in Washington are under construction. They also
announced the sale of our Lodz, Poland manufacturing facility.
They may continue to sell, close, and consolidate additional
facilities depending on a number of factors, including end-user
demand and progress in our continuous evaluation of our overall
cost structure.
Apple's Liabilities and Stockholders' Equity Trend Analysis
Year 2011 2010 2009 2008 2007
Current liabilities
Accounts payable 294 242 113 111 100
Taxes payable 265 49 100 N/A N/A
Accrued liabilities 643 126 272 295 100
Deferred revenues 290 212 146 344 100
Other current liabilities N/A 236 N/A N/A 100
Total current liabilities 301 223 124 152 100

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Deferred taxes liabilities N/A 695 358 109 100
Deferred revenues 198 134 100 N/A N/A
Other long-term liabilities 1126 137 143 421 100
Total non-current
liabilities 777 440 287 294 100
Total liabilities 368 253 147 171 100
Common stock N/A N/A N/A 134 100
Additional paid-in capital 162 130 100 N/A N/A
Retained earnings 690 408 257 152 100
Accumulated other
comprehensive income 703 -73 122 13 100
Total stockholders' equity 527 329 218 145 100
stockholders' equity 459 297 187 156 100
We now look at the Apple’s liabilities and owner’s equity trend
analysis from 2007 to 2011.We might try to look at the accounts
that can better mirror, through their percentage changes, the
outstanding growth in net sales, net income and cash availability
occurred in this time span. Starting from Accrued liabilities, we
see how much they have increased, and this is basically due to
the boom in sales of iPhone and iPads of this period In fact,
These are the Company’s warranty liabilities linked to products
(such as cost of repair, replacement..) and thus they have
increased in magnitude just because loads of iPhones have
been sold . Another account related to sales is Other long-term
liabilities (it’s not debt but..), since are basically long term
prepayments of inventory components to Apple’s suppliers, and
!!
other sort of purchasing commitments: So growing Sales during
this period have meant higher production and thus higher
purchasing from suppliers.
A cash related account is Accumulated other comprehensive
income (we know that it contains unrealized gains and losses
related to changes in the fair value of securities):so this account
mirrors the growth value of available-for-sale securities that
Apple has been purchasing
The point is that this rise in value is not much explainable
through the high profitability of Apple’s investments (that in the
quarter ending 31 Dec 2011 was only 0.6%,so much below the
inflation rate) ,BUT to the increase in the size of the portfolio as
a whole. So this is a sign of how much extra cash Apple had!
Finally, Retained Earnings growth that is basically related to the
accumulation of net income occurred during the period, that has
not been distributed through dividends(last dividends
payout..1995).
Dell's Liabilities and Stockholders' Equity Trend Analysis
Year 2012 2011 2010 2009 2008
Current liabilities
Short-term debt 1274 378 295 50 100
Accounts payable 101 98 99 72 100
Taxes payable 82 100 N/A N/A N/A
Accrued liabilities 84 190 202 80 100
Deferred revenues 143 127 122 107 100
Other current liabilities 79 N/A N/A 93 100
Total current liabilities 119 105 102 80 100

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Long-term debt 1764 1422 944 524 100
Deferred revenues 127 116 100 N/A N/A
Other long-term liabilities 69 54 53 111 100
Total non-current
liabilities 257 214 171 139 100
Total liabilities 149 129 118 93 100
Common stock 115 111 108 106 100
Retained earnings 155 136 121 114 100
Treasury stock 126 115 111 111 100
Accumulated other
comprehensive income -381 -444 -231 1931 100
Total stockholders' equity 239 208 151 114 100
stockholders' equity 162 140 122 96 100
We then look at the same chart for Dell, and try to explain
through these figures what happened in the company. We look
at Short-term debt i.e. Commercial papers issued by Dell (cash
used for repay them in 2011 was $496 million) and Long-term
debt remarkable growths: Dell has been using its cash and has
borrowed money to repurchase its own stocks (thus we see the
increase of Treasury stock occurred in the same period) in order
to increase shareholder value mainly because in that period
Dell’s stock price has been decreasing far. We then look at
retained earnings growth, that is basically due to Dell’s non-dividends
!!
policy : so we notice a quite less impressive than
Apple but still steady growth of the account due to the collection
of Net Income.
Trend Analysis – Income Statement
Apple's Income Statement Trend Analysis
Year 2011 2010 2009 2008 2007
Revenue 451 272 179 135 100
Cost of revenue 406 249 162 135 100
Gross profit 537 315 211 137 100
Operating expenses
Research and
development 311 228 170 142 100
Sales General and
administrative 256 186 140 127 100
Total operating expenses 268 195 146 130 100
Operating income 766 417 266 142 100
Other income (expense) 69 26 54 104 100
Income before taxes 683 370 241 138 100
Provision for income taxes 548 299 253 136 100
Net income from
continuing operations 741 401 236 138 100
Net income 741 401 236 138 100
We then look at the trend analysis for Apple’s income
statements: We see that Revenues have increased and at an

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higher pace than CGS: that’s why even gross profit has been
increasing throughout the period. We then look at operating
expenses: R&D overall expense rise is linked to the
development of new and enhanced products occurred in the
years considered (iPhone 3GS,4 IPad 1,2). Being more
specific, the R&D expense increase of 34% ($449 million to
$1.8 billion) in 2010 compared to 2009 was due primarily to an
increase in headcount and related expenses (so Apple hired
new employees to run research) and the capitalization in 2009 of
software development costs of $71 million related to Mac OS X
Snow Leopard(operating system). Sales General and
administrative expense increase was due primarily to the
expansion of its Retail segment (stores) and the related
headcount’s rise, but also marketing and advertising programs
have contributed to it! And then, as a final result of all of this, Net
Income and its extraordinarily/exceptional growth! So the
Company has been able to increase its revenues, taking under
control operating costs and investing in research and assets,
thus increasing its size!
Dell's Income Statement Trend Analysis
Year 2012 2011 2010 2009 2008
Revenue 102 101 87 100 100
Cost of revenue 98 101 88 101 100
Gross profit 118 98 79 94 100
Operating expenses
Research and
development 140 108 102 109 100
Sales General and
administrative 113 97 86 94 100
!!
Other operating expenses N/A N/A N/A 2 100
Total operating expenses 114 97 86 94 100
Operating income 129 100 63 93 100
Interest Expense 620 442 356 207 100
Other income (expense) 20 27 3 53 100
Income before taxes 111 88 53 87 100
Provision for income taxes 85 81 67 96 100
Net income from
continuing operations 118 89 49 84 100
Net income 118 89 49 84 100
We then look at Dell’s I/S: percentage changes are really less
impressive than the ones of Apple. We see a downward trend
for all the figures between 2009 and 2010 and then a slight
bounce (if we still take Apple’s figures as comparison terms). In
this period Dell has been facing a considerable decrease in
customer and consumer’s demand that led to lower average
selling mainly in US and Europe(due to the financial crisis) while
still maintaining good level of revenues (4%increase) in BRIC
countries. As a result, total Revenues have decreased of 13%
,CGS has decreased, as a result of the decline in demand.
Gross profit has decrease of 15% for both product(softer
demand means lower average selling prices) and services
(competitive pricing pressures, hence lower margins), and finally
Net income has been negatively impacted. Another interesting
point we could notice is the Interest Expense remarkable growth
over the all period due to the continuous issuing of borrowing
instruments made by Dell.

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Growth overview
5 Year Growth
And this is a visual representation of what I’ve said so far. We
clearly see the growth of assets, net income, sales of Apple and
the downturn and slight recover of Dell.
!!
Cash flow - 5 year growth
These two graphs compare 5 years cash flows of the two Cos. :
we see the growth trend of all cash flows for Apple (driven by
increasing operating cash flows and investments and self
financing through retained earnings) and a more variable trend
for Dell’s flows. Interestingly the financing cash flow is
decreasing (weird if we take into account the massive borrowing
policy of Dell!), but actually the final cash balance is decreasing
just because Dell was issuing debt for paying off debt issued in
previous years. So even if in the last year both companies
flows seem to grow sharply, we still need to take into account
the two difference magnitudes of growth involved!

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Balance Sheet - 5 Year Growth
And then again. These two charts mirror the figures I’ve already
commented: Apple: assets growth (retail stores) together with
liabilities (purchasing commitments) and a decreasing trend for
the D/A ratio . Dell: assets growth, but again, not even
comparable with the one of Apple liabilities growth because of
debt and an almost unaltered D/A ratio.
!!

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Horizontal Analysis – Income Statement
Comparative Income Statement - Horizontal analysis
I will start from saying something about Net Sales of both
company which increased comparing year 2010 and 2011 and
Net Income which I find the most crucial. We can see that both
companies generated increasing Net Sales (although Apple has
this increase much more impressive – 66%) and positive and
increasing over 80% Net Income at the end of 2011.
Let’s concentrate on Apple first. Net sales increased about 66%.
It may be because in 2011 the Net Sales increased the most – it
means over 170% - in Asia-Pacific area, where Apple sold at
this time over 300% more iPads than during the previous year
2010. In case of Dell, Net Sales increased ass well at the end of
2011 but they were still almost two times smaller than in Apple.
Summing up, they increased only about 16% in comparison with
year 2010. In 2010 Apple’s Net Sales were slightly higher than
Net Sales of Dell, while in 2011 they were almost twice as big as
at the previous year. It means that the ‘V ratio’ for Apple is about
5 times higher than for Dell.
Both companies’ Cost of Sales were luckily increasing slower
than Net Sales which contributed to growing Gross Margin. In
case of Apple, this year-over-year increase in gross margin was
largely driven by lower commodity and other product costs. Total
gross margin for Fiscal 2011 increased over 70%. In Dell Total
gross margin for Fiscal 2011 increased 23% so 3 times less than
in Apple. It’s worth saying that Dell gross margin for Fiscal 2011
and Fiscal 2010 includes the effects of amortization of intangible
assets, severance and facility action costs, and acquisition-related
!!
charges.
Operating Expenses
Apple spends more on Research & Development than Dell,
mainly because it creates new technologies and patents (so in
2010 Apple spend about 3 times more while in 2011 over 4
times more than Dell). The Company continues to believe that
focused investments in R&D are critical to its future growth and
competitive position in the marketplace. We can notice that both
companies spent similar amount on “Selling, general and
administrative” or Dell spent even more than Apple in 2010,
while it is still
Apple which generated higher Revenue.
Apple: SG&A expense increased by 38% during 2011 compared
to 2010. This increase was due primarily to the Company’s
continued expansion of its Retail segment, increased headcount
and related costs, higher spending on professional services and
marketing and advertising programs, and increased variable
costs associated with the overall growth of the Company’s net
sales. Dell: The increase in SG&A expenses was primarily
attributable to increases in compensation-related expenses and
advertising and promotional expenses.
Interest expenses - Apple does not use external financing while
Dell’s debt increased by 1.9 billion compared with 2010 (so
Dell’s interest expenses increased by 24%).
Other income and expense
In Apple “Other income and expense” grew by 168% while in
Dell grew by 867% what is quiet interesting. What does this
huge percentage result from? It is mainly because Dell
continued to maintain a portfolio of instruments with shorter
maturities.
In Apple the year-over-year increase in other income and
expense during 2011 was due primarily to higher interest income

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and net realized gains on sales of marketable securities.
Net income: As I mentioned at the beginning, in both companies
Net Income increased by the similar percentage but Apple still
!!
has almost 10 times as big Net Income as Dell in each fiscal
year.
In millions ($) Apple Dell
Period ended 24-09-2011 25-09-2010 V V% 28-01-2011 29-01-2010 V V%
Net sales 108 249 65 225 43 024 66,0 61 494 52 902 8 592 16,2
Cost of sales 64 431 39 541 24 890 62,9 50 098 43 641 6 457 14,8
Gross margin 43 818 25 684 18 134 70,6 11 396 9 261 2 135 23,1
Operating expenses:
Research and development 2 429 1 782 647 36,3 661 624 37 5,9
Selling, general and administrative 7 599 5 517 2 082 37,7 7 302 6 465 837 12,9
Total operating expenses 10 028 7 299 2 729 37,4 7 963 7 089 874 12,3
Operating income 33 790 18 385 15 405 83,8 3 433 2 172 1 261 58,1
Interest expense 0 0 0 0 (199) (160) 39 24,4
Other income and expense 415 155 260 167,7 116 12 104 866,7
Income before income tax 34 205 18 540 15 665 84,5 3 350 2 024 1 326 65,5
Income tax 8 283 4 527 3 756 83,0 715 591 124 21,0
Net income 25 922 14 013 11 909 85,0 2 635 1 433 1 202 83,9

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Comparative One Day Income Statement
As we can see in the “Comparative One Day Income Statement”
In Apple, the Gross Margin Percentage in 2011 was 40.5%
while in Dell it reached 18.5%. So in Apple GMP is more than
two times greater than in Dell. Why? It simply because Apple
sells mobile phone – iPhones which assure higher Gross
Margin.
Let’s point that according to “other income and expense” data,
Apple gains on average 1.1 mln dollars per one day while Dell
!!
loses over 0.2 mln dollars daily. We can assume that thanks to
Apple, about 20 mln dollars go to the state budget each day and
Dell pays about 2 mln dollars of taxes each day. Return on
Sales (Net Income/Net Sales) is six times higher in Apple
(almost 24%) than in Dell (4,3%).
Period ended 2011 % 2011 %
Net sales 296,6 100 168,5 100
Cost of sales 176,5 59,5 137,3 81,5
Gross margin 120,0 40,5 31,2 18,5
Operating expenses:
Research and development 6,7 2,2 1,8 1,1
Selling, general and administrative 20,8 7,0 20,0 11,9
Total operating expenses 27,5 9,3 21,8 12,9
Operating income 92,6 31,2 9,4 5,6
Interest Expense 0 0 (0,5) (0,4)
Other income and expense 1,1 0,4 0,3 0,0
Income before income tax 93,7 31,6 9,2 5,4
Income tax 22,7 7,7 2,0 1,2
Net income 71,0 23,9 7,2 4,3

Comparative Balance Sheet
Comparative Balance Sheet – Assets
At the beginning I’d like to draw you attention to the fact that
Apple has its Total Assets about 3 times higher than Dell in
2011 and at the same time its v percentage is also 3.7 times
higher than in Dell. What’s more, Apple’s assets consist mainly
of non-current assets at least in 2011 while Dell’s assets consist
mostly of current assets in both 2010 and 2011. In both
companies we observe the growth of Total Assets which was
due to the growth of Long-term and Short-term Investments
The largest part of current assets in case of Apple is short-term
securities since Apple’s marketable securities investment
portfolio is invested in highly rated securities. Cash, Cash
Equivalents and Marketable Securities of Apple consist mainly of
Corporate Securities, U.S. treasury Securities and U.S. Agency
Securities. In case of Dell the largest part of its current assets is
cash and cash equivalents which primarily consist of
Commercial Papers and U.S. Government and Agencies. It
seems like Apple copes better with the excess of the cash by
investing it, while Dell prefers to maintain a high level of cash.
Speaking about Non-current assets in Apple, we can observe
that the biggest part of them are Long-term Marketable
Securities which increased by 119% from fiscal 2010 to fiscal
2011. Long-term Marketable Securities in Apple primarily consist
of Corporate Securities, U.S. treasury Securities and U.S.
Agency Securities. In Dell the biggest part of Non-current assets
is Goodwill because Dell is trying to takeover other companies in
order to use their technologies, etc. We can see that PPE
increased over 63% which may be because Apple open more
and more retail stores in which they provide their clients with
goods and services.
It’s also quit interesting that Acquired Intangible Assets in Apple
increased by over 930% in comparison with fiscal 2010. It is a
result of acquisition of Nortel Networks Corporation’s patent
portfolio (in 2011) for an overall purchase price of $4.5 billion of
which the Company’s contribution was approximately $2.6
billion.
Period ended 24-09-2011 % 25-09-2010 % V V% 28-01-2011 % 29-01-2010 % V V%
Current assets:
Cash and cash equivalents 9 815 8 11 261 15 - 1 446 -13 13 913 36 10 635 32 3 278 31
Short-term marketable securities 16 137 14 14 359 19 1 778 12 452 1 373 1 79 21
Accounts receivable 5 369 5 5 510 7 - 141 - 3 6 493 17 5 837 17 656 11
Other receivables 6 348 5 4 414 6 1 934 44 3 643 9 2 706 8 937 35
Inventories 776 1 1 051 1 - 275 - 26 1 301 3 1 051 3 250 24
Deferred tax assets 2 014 2 1 636 2 378 23 0 0 0 0 0 0
Other current assets 4 529 4 3 447 5 1 082 31 3 219 8 3 643 11 - 424 -12
Total current assets 44 988 39 41 678 55 3 310 8 29 021 75 24 245 72 4 776 20
Long-term marketable securities 55 618 48 25 391 34 30 227 119 704 2 781 2 - 77 -10
Property, plan and equipment (net) 7 777 7 4 768 6 3 009 63 1 953 5 2 181 6 - 228 -10

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Goodwill 896 1 741 1 155 21 4 365 11 4 074 12 291 7
Acquired intangible assets (net) 3 536 3 342 0 3 194 934 1 495 4 1 694 5 - 199 -12
Other non-current assets 3 556 3 2 263 3 1 293 57 1 061 3 677 2 384 57
Total non-current assets 71 383 61 33 505 45 37 878 113 9 578 25 9 407 28 171 2
Total assets 116 371 100 75 183 100 41 188 55 38 599 100 33 652 100 4 947 15
!!

Comparative Balance Sheet - Liabilities and Owners' Equity
Apple is more than three times bigger than Dell in terms of
Liabilities and Shareholders’ Equity, while in terms of sale it’s
less than 2 times bigger. It’s because huge amount of securities
owned by Apple doesn’t generate sale. The year before the
difference wasn’t so significant, Apple was 2.2 times bigger. The
biggest factor which contributed to that situation was Apple’s
growth in Retained Earnings by 69%. If we take a look at current
liabilities we can see that Apple and Dell have significant amount
of account payable, about 15% and 30% respectively, which
means they use their suppliers money to finance their operations
without paying interest to banks. Dell has relatively more
deferred revenue both current and non-current. Deferred
revenue is typical position for software companies I come from
license fees, that is why I would expect Apple to have it more,
since it has more to do with software than Dell, but it turns out
that Apple’s deferred revenue is mainly composed of sale of gift
cards, while Dell’s revenue comes from extended warranty and
service contracts, so in fact neither company license their
technology out. As for non-current liabilities, Apple doesn’t use
long-term debt, while Dell does, it makes more than 10% of its
balance sheet. Significant number of other non-current liabilities
in both companies is mainly because of deferred income tax.
During 2011 Dell changed it debt structure, now it relies much
more on long-debt, they increase it by 51%, while current
liabilities grew just by 3%. It seemed to be right move because
long-term debt is much more stable source of financing but from
the perspective of time we know they did it to early, because
now they would be able to do it much cheaper because Interest
Rates decreased. Overall in terms of liabilities, Dell is much
riskier, because if financed in 80% by debt, while Apple is
financed by debt only in 35%. If we look at Shareholder’s Equity
we can clearly see that both companies doesn’t like paying
dividends, and keep their earning to finance operations. Dell
seems to believe that better time are coming, because it
extensively deals with buybacks. Lack of treasury stock position
in Apple’s balance sheet doesn’t mean that they don’t deal with
buybacks, they do, but they grant bought shares to employees.
In millions Apple Dell
Period ended 24-09-2011 % 25-09-2010 % V V% 28-01-2011 % 29-01-2010 % V V%
Current liabilities:
Short-term debt 0 0 0 0 0 0 851 2 663 2 188 28
Accounts payable 14 632 13 12 015 16 2 617 22 11 293 29 11 373 34 80 -1
Accrued expenses 9 247 8 5 723 8 3 524 62 4 181 11 3 884 12 297 8
Deferred revenue 4 091 4 2 984 4 1 107 37 3 158 8 3 040 9 118 4
Total current liabilities 27 970 25 20 722 28 7 248 35 19 483 50 18 960 56 523 3
Long-term debt 0 0 0 0 0 0 5 146 13 3 417 10 1 729 51
Deferred revenue - non current 1 686 1 1 139 2 547 48 3 518 9 3 029 9 489 16
Other non-current liabilities 10 100 9 5 531 7 4 569 83 2 686 7 2 605 8 81 3
Total non-current liabilities 11 786 10 6 670 9 5 116 77 11 350 29 9 051 27 2 299 25
Total liabilities 39 756 34 27 392 36 12 364 45 30 833 80 28 011 83 2 822 10
Shareholders' equity:

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Common stock 13 331 11 10 668 14 2 663 25 11 797 31 11 472 34 325 3
Treausury stock 0 0 0 0 0 0 - 28 704 -74 - 27 904 -83 800 3
Retained earnings 62 841 54 37 169 49 25 672 69 24 744 64 22 110 66 2 634 12
Accumulated other comprehensive income (loss) 443 0 - 46 0 489 1063 71 0 37 0 34 -92
Total shareholders' equity 76 615 66 47 791 64 28 824 60 7 766 20 5 641 17 2 125 38
Total liabilities and shareholders' equity 116 371 100 75 183 100 41 188 55 38 599 100 33 652 100 4 947 15
!!

Financial Risk
If we take a look at Betas. We can see that Apple’s beta is rather
untypical for the industry. It’s less than 1, while other companies’
beta are about 1.4 which mean they are considered more risky.
In case of Dell, I don’t really think that it’s considered risky
because of LTD/E ratios, because Dell borrow at average
interest rate below 5%, and it’s simply their way of doing
business. The thing is, that is has its financial arm inside. The
smart thing that Dell do, is that they help their client finance the
purchase of products by sale on credit. Then, Dell Financial
Services which is wholly-owned subsidiary, steps in and transfer
the risk out, thanks to securitization. But the thing is, that since
2008 nobody likes financial engineers who take a group of
people who defaulted in the past, give them loans, transfer risk
out and say that it’s safe because their model says they won’t
default again. That can explain why Dell is considered more
risky.
In Millions ($) 2012 2011 2010 2009 2008
LT Debt 0 0 0 0 0
Equity 118 210 76 615 47 791 31 640 21 030
LTD/E 0,00 0,00 0,00 0,00 0,00
Beta 0,86
In Millions ($) 2012 2011 2010 2009 2008
LT Debt 6 387 5 146 3 417 1 898 362
Equity 8 917 7 766 5 641 4 271 3 735
LTD/E 0,72 0,66 0,61 0,44 0,10
Beta 1,53
In Millions ($) 2012 2011 2010 2009 2008
LT Debt 22 551 15 258 13 908 7 676 4 997
Equity 38 625 40 449 40 517 38 942 38 526
LTD/E 0,58 0,38 0,34 0,20 0,13
Beta 1,33
In Millions ($) 2012 2011 2010 2009 2008
LT Debt 0 0 0 0 7
Equity 13 731 12 875 10 204 8 101 5 532
LTD/E 0,00 0,00 0,00 0,00 0,00
Beta 1,65

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Cash Flow
Comparative Cash Flow
Both companies’ performance in terms of cash flows is rather
good. They generate positive cash flow from operating activities,
which is the most important. Apple has almost 10 times money
from their main field of business, which is not surprising if we
take a look at net income which is almost 10 times bigger too.
For Apple the biggest proportion of cash from operating activities
are accrued expenses ($3.5B). Accrued expenses is cash which
company is planning to spend on warranty and taxes in the
future. It’s planning buy nobody knows whether they will ever
pay it, so it seems that they are hiding the money off the table.
For Dell the biggest position is depreciation expense, which in
fact has not much to do with its current activity but is the result of
past investment in PPE. Growth in other receivables which are
mainly financial receivables negatively affect company’s liquidity
and cash from operating activities, but in the other hand it
means increased sale through its subsidiary Dell Financial
Services. As for cash from investing activity, Apple looks like
company dealing with financial markets rather than IT company.
They invested ($ 30B) on long term marketable securities which
are mainly corporate and U.S treasury securities. Both
companies invest relatively much money in PPE, of Apple invest
6.5 times more and the structure of that expense is different.
Apple open new stores while Dell buys computer equipment.
Overall Apple spent almost 33 times more money on investing.
In terms of financing, both companies obtained additional
financial during 2011, Apple got 4.5 times more than Dell. Apple
got additional financing by growth in other non-current liabilities,
which are mainly deferred taxes. We should keep in mind that in
case of default these liabilities are not due, nobody can force
them to pay it. Dell obtained financing by increasing long term
debt. Overall change in cash for Apple is negative, but there is
!!
nothing be worry about, since it’s the result of spending $ 41B
on investing. Dell increased its cash by more than $ 3B.
Operating
Net income 25 922 2 635
Depreciation expense 1 814 970
Accounts receivable 141 - 656
Other receivables - 1 934 - 937
Inventories 275 - 250
Deferred tax assets - 378 0
Other current assets - 1 082 424
Accounts payable 2 617 - 80
Accrued expenses 3 524 297
Deferred revenue 1 107 118
Deferred revenue non-current 547 489
Cash from operating activities 32 553 3 010
Investing
Marketable securities - 1 778 - 79
Long-term marketable securities - 30 227 77
Property, plant and equipment - 4 823 - 742
Goodwill - 155 - 291
Intangible assets - 3 194 199
Other non current assets - 1 293 - 384
Accumulated other income 489 - 34
Cash from investing activities - 40 981 - 1 254
Financing
Short-term debt 0 188
Long-term debt 0 1 729
Other non-current liabilities 4 569 81
Common stock 2 663 325
Dividend paid (including buybacks) - 250 - 801
Cash from financing activities 6 982 1 522
Cash from all activities - 1 446 3 278

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Comparative 4 Year Cash Flow
In this graph we compare the two companies’ cash flows growth
rates: it might be interesting to look at the their opposing trends
between 2009 and 2010. Apple was launching its IPhone 3GS,
with the resulting leap in revenues/net income and operating
cash, while Dell was facing the consequences of the financial
crisis, with shrinking sales of computers in both US and Europe,
that resulted in a drop of Net income and thus cash.
!!
Obligations
Lease Obligations
Apple lease commitments will remain fairly stable for the next 4
years. This is due also to the expansion of apple retail stores
numbers; to give an example of what is the influence of the retail
stores in 2011, the company’s total lease payments were around
3 billion, of which $2.4 billion related to leases for retail space,
which are 245 U.S. retail stores. Dell leases in particular
property and equipment and manufacturing facilities. As we see,
the future trend in Dell lease obligation is going to decrease. We
have also to keep in mind that Dell has a Bank inside. Hence,
Dell not only borrow money, but is also a lender: in particular,
Dell most popular operating lease provided in that case is the
Residual Value-based Lease; briefly is a flexible financing option
that can be used on all types of transactions from the simplest to
the most complex projects;
(millions $) 2012 2013 2014 2015 2016 Thereafter
Lease
Commitments
Apple 338 365 362 345 320 1 302
Dell 106 71 53 44 33 68

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Area and Products
Net Sales per Area
Both companies are American, at obviously that the first reason
their primarily market is the USA one. But while Dell sells more
than an half of its range of product in the USA market, Apple
today refers to its domestic market just for the 35%. And as it’s
shown in its annual report, Apple carefully refers both to the
European market and Asia Pacific market, from which Apple
takes the 26% of its sells. while Dell groups Brazil, Russia, India
and China together and get from that segment only the 12% of
its sales.
!!
Net Revenue growth per Area
These charts show the growth of net revenue in the areas we
saw earlier. Back to what I said before, the 35% of the USA
revenues in 2011 is the result of a revenues’ growth of +56%
compared to the previous year. Maybe is also more interested
that in 3 year Asia-Pacific Apple’ Revenue grew of 414%
matching Europe’s revenue. A positive trend in terms of growth
revenue is seen also for Dell, which for its main market saw a
growth of 42%. In development market the growth is softer, only
of 36%.

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Net Sales per Product
Let’s start analyzing apple’ product % in Net sales. Apple was
born as Apple Computer, so a Computer company; but then,
Apple decided to penetrate in the audio digital devices market
launching the iPod, then in the telephone market creating the
smartphone market with the iPhone and finally creating the
tablet market with the iPad, and as we can see these 3 markets
held the 69% of the Apple net sales. Despite this, for the year
ending in June, Apple computer, the Macs, the 6% in the chart ,
the mac outgrowth the pc market by 7 times; and a key reason
for this is the Mac is consistently named number 1 in customer
satisfaction and reliability. And this led the Mac being the
number 1 US desktop. Looking at Dell, its main market is the
computer one: as we see desktops and laptops represent the
55% of the company’ sales. And it is thanks to its primarily
market that Dell is today ranked n° 3 as Global Pc Market share
in the world after HP and Lenovo.
!!
Main Products Net Sales growth
Here I would like to show the growth of both companies’ main
products; Is clear the growth of the green bar, which represent
iPhone sales: in 3 year iPhone become the most profitable
product with a growth of 261%. The violet bar is the iPad,
launched in 2010 in one year this product had an huge growth of
+311% in sales; focusing on the last year, Apple is selling as
Computer as iPad, and the tablet has just 1 year of life. For Dell,
its main product, the desktop pc, that Dell sells more to
companies that to families, had lost ¼ of its previous sales: I
think this is probably due to the secondary effects of the crisis in
terms of company investments, in this case in new facilities as a
computer could be. To compare both companies, I though
interesting that in 2011 the total iPad sales are the 25% more
that Dell Desktops. This shows the size and market differences
between the two companies.

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Ratios Growth Analysis
5 - Year Profitability
About ROA and ROE, we see two opposite trends: while Apple
is growing, Dell is falling. About the ROE, for Apple that’s
happens because net income growth faster than stakeholder
equity. The opposite is for Dell. Only in 2011 we can see a
recovery in the value of ROE, when Dell Net Income outgrowth
shareholder equity. Since both for Apple and for Dell, ROE is
always greater than ROA, it means that both companies are
borrowing at a rate lower than the rate earned by investors, that
they are using financial leverage in an effectively way and that
they have a strong financial position.
Apple Gross Margin percentage increased from 33% to 40%.
The increase is likely due to the launch of products like iPhone
and iPad with lower cost of production and higher profits: for
both products net sales still growth faster than their cost of
production. Dell Gross Margin percentage, instead, remained
fairly stable. The growth in the last 2 years is mostly due to
decreasing component costs, better sales and improved supply
chain execution. Comparing the companies in 2011, Apple
!!
retained an high percentage of Total Sales revenue after
incurring the direct costs associated.
5 - Year Financial Health
Is interesting to see the Apple Current Ratio fall from 2010: From
2009 Current Liabilities were riding faster than Current Assets.
This Current Ratio reduction might be an unfavorable trend, but
it is not necessarily a bad sign: Apple is getting more obligations
than before but it is still capable to pay its obligations if they
came due at this point using its short term assets. Dell CR rise
instead is a favorable trend for the company, since Dell
increased its short term assets faster than its short term
obligations. In 2011, both companies had a well-balanced
Current Ratio. Since Dell CR is still lower than Apple ones, Dell
will be required to pay higher interest rates when borrowing
money in this year.
For all the period considered, Quick Ratio for both Cos. follows
strictly the Current Ratio related: it means that Apple and Dell
Current Assets are almost independent on Inventory; Apple and
Dell have enough short-term assets to cover their immediate
liabilities without selling inventory.
The graph shows that Dell had an Equity Multiplier 3.3 times

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bigger than Apple. Despite this, Dell Equity Multiplier had a
negative trend which is favorable since Dell is trying to using
less debt to finance its assets and being more attractive is the
company to risk adverse shareholders. Moreover while, Apple
Debt/Equity is less of the normal value (1.00), Dell Debt/Equity
on the contrary is more worrying: although the reduction, in 2011
is still 3.97. Therefore Dell is a highly leveraged company
because the cost of this high debt financing may outweigh the
return that the company generates on the debt through
investment and become too much for the company to handle.
5 - Year Efficiency
From 2010 onwards, Dell Inventory Turnover is fairly stable: in
the whole period, inventory is rising as faster as cost of good
sold. In Apple Case, the Inventory Turnover is rising because
the cost of good sold is rose twice faster than inventory. And this
happens also when Apple starts to sells product like the iPad,
with more than 300thousands devices sold on the first day of
availability. This year Gartner analysts ranked Apple's supply
chain as the best in the world. As we see, Apple Inventory
turnover is 74 days: it means that Apple turns over its inventory
once every 5 days. And it's amazing to think that we are talking
about a company that sells hundreds of millions of devices
!!
worldwide. The only company that turns over its product faster is
McDonald's, which is not exactly in the electronics business.
Dell followed Apple, at the 4th position turning its inventory each
10 days.

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Apple Asset Turnover has a positive trend, and this is favorable
and indicates the effective use of Apple assets to produce net
sales. But despite this, and despite Dell fall in 2010,due to the
faster grew of Asset compared to revenues, in the last year Dell
has a ratio higher than Apple and higher than its industry (1.1)
As wee see, Apple moved from 25 to 39 days to collects its
receivables. However, in 2011, the sales per day outgrowth the
average’s receivables: that led to a contraction of almost the half
of the DSO value from 30 to 18 days. While Apple is increasing
its quickness in receiving cash, this not happened for Dell, which
turned sales into cash just every 35-38 days. In 2010 Dell took
more than one third of the time Apple needs to collect cash and,
compared to Apple, Dell was selling its product to customers
mostly on credit.
!!
Both companies kept high APD values, ever under two months.
For the first three years, Apple kept its cash on average 14 days
more than Dell. In 2010, both increased their payable days.
About Apple, this happened because in this year its Accounts
Payable rose twice faster than CGS/360. In 2011, ratio is almost
the same: Both companies took 82 and 81 days to pay their
suppliers.
Both companies have a Cash Conversion Cycle negative: that
means the companies are receiving the cash from their
customers before they had to pay their suppliers. In the last
year, Apple has 1 month more than Dell to invest the cash it
received from its customers before it had to pay the suppliers.

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DuPont Equation
!!
Apple Dell
in millions $ 2011 2010 2011 2010
Net income 25 922 14 013 2 635 1 433
Sales 108 249 65 225 61 494 52 902
Total Assets 116 371 75 183 38 599 33 652
Owners' Equity 76 615 47 791 7 766 5 641
ROS=NI/Sales 23.9% 21,5% 4.3% 2,7%
TAT=Sales/TA 0.93 0,87 1.59 1,57
ROA=ROS*TAT 22.3% 18,6% 6.8% 4,3%
EM=TA/OE 1,52 1,57 4,97 5,97
ROE=ROS*TAT*EM 33,8% 29,3% 34,0% 25,4%
ROS
Apple’s ROS ratio increased from 2010 to 2011 by 2,4 % while
Dell’s ROS increased slighter by 1,6%.
The ROS ratio for Apple(2010) indicates 23,9% of every sales
dollar resulted in profits(net income), but for Dell only 4,3% of
every sales dollar resulted in profits.
The corporation with the strongest ROS ratio is
Apple(23,9%>4,3%); this means that Apple has better control
over its cost compared to Dell.
Because of its low ROS, Dell needs to have high sales to remain
attractive to investors.
TAT
Apple: the positive trend of Apple asset turnover from 0.87
(2010) to 0.93 (2011) is favorable and indicates that Apple is
using its assets to produce net sales.
Dell: the trend is favorable for Dell too even tough the growth of
the ratio between the two years is not as significant as apple’s
one.
Comparison: The two companies are using their assets in a
favorable way but Dell is the one who is using its assets more
efficiently to produce net sales, since for every $1 of Total
Assets, Dell generated $1.59 in net sales while Apple $1.59.
The TAT ratio gives us information about the pricing strategies:
during 2011 Apple has a high ROS that’s why it has slow asset
turnover (0,93%); on the contrary Dell has a higher asset
turnover than Apple and a very low profit margin(4,3%).
Prof: this is not the why/issue (?).. STI and LTI!!!! ICD is the
same for both companies look at the other income for Apple: it is
VERY small.. yet the assets are VERY big. So it is like the
CASH LTI STINV are getting 0 return ROA.
The rest of the assets (tot assets- LTI-STI) are driving the
sales+NI show this in a chart.
Apple has a lot of lit sti marketable securities which don’t
generate sales: this is why dell has higher tat ratio
EM
Apple: from 2010 to 2011 Apple’s EM decreased slightly by 0.05
points; for every $1 of total equity, Apple owns $1.52 of assets
during 2011.
Dell: from 2010 to 2011 Dell’s EM decreased by 1 point; for
every $1 dollar of total equity, Dell owns $4,97 of assets during
2011. This is a very favorable trend for Dell because its means
that the company is decreasing its financial risk.

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Comparison: during both year 2010 and 2011 Dell has the
highest EM , this means that its using a higher debt to finance its
assets than Apple, as a consequence of this fact Dell takes a
higher financial risk. Since apple has a lower EM ratio it is more
attractive to risk averse stakeholders than Dell.
ROE
Apple: The ROE ratio for Apple rises from 29,3% (2010) to
33,8% (2011); this means that apple increased its cents earned
in profits for each dollar invested by common shareholders of
4,5 cents.
Dell: from 2010 to 2011 the ROE ratio rises by 8,6%; this
means that Dell increased its cents earned in profits for each
dollar invested by common shareholders of 8,6 cents. This is a
favorable trend because the increase of the ROE ratio means
that the company generates more profit with the money that
shareholders have invested.
Comparison: during 2011 both the companies have a favorable
ROE ratios which are similar to each others. The analysis of the
3 different components of the DuPont Equation shows a
remarkable difference; while both ROS and TAT rise in a
favorable way between the two years ( Apple ROS +2,4% TAT
+0,06-Dell ROS 1,6% TAT + 0,02), the EM shows a totally
different situation. EM for Dell is a considerable source of ROE’s
growth:) in fact the company has a ROE ratio similar to Apple
only due to the fact that it is using more debts to finance its
assets . Even tough the Roe are similar, Apple is more attractive
to investors because it is taking a lower financial risk than Dell.
!!
Ratio Comparison
Apple – 2 Year Ratios Comparison
LIQUIDITY
From 2010 to 2011 Apple decreased its capability of paying
obligations and lowered its number of assets to cover its
immediate liabilities without selling the inventory. Despite this
fact Apple still has a favorable current ratio during 2011 because
it remains between 0.7 and 2.0 without having an excess of
liquidity.
The quick ratio is almost at the same level of the current ratio for
both years: this means that current assets are not highly
dependent on inventory.
This happens even though il number di iPhones and iPads sold
among the two years its amazing.
Isn’t that surprising given the number of iPhone and iPads it
sells?????????????
PROFITABILITY
In terms of profitability-from 2010 to 2011- Apple improved its
situation by increasing at the same time ROS,ROA and ROE:
The company has a better control over its costs, and it’s using
its assets in a more efficient way. The ROE shows that the
company’s profitability its grown by 4.5%: Apple is generating
more profit with the money shareholders have invested.
Could u please make this FAR more interesting? You are talking
about apple the most profitable company in high tech in the
world. This profitability ratios are INCREDIBLE: do not bore us
talking about numbers.
ROS measures how much out every dollar of sales a company
actually keeps in earnings, a higher profit margin indicates more
profitable company, so the increment from 21,5 in 2010 to 23,9

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in 2011 is a positive trend. It’s a high data because the average
in USA companies is higher than 15%.
ROA measures how profitable a company is relative to its total
assets, the increment means a positive trend.
ROE measures a corporation's profitability by revealing how
much profit a company generates with the money shareholders
have invested. The average in the industry is 16,63.
CASH MANAGEMENT
The DSO and the ICD are both lower than 2010 which means
that the company is taking less time to collect money from the
customers and that its selling its inventory in less days. As a
consequence the receivable and inventory turnover are better
than 2010 as well.
During 2011 Apple might have lost some of its market power in
the industry because it has been paying its suppliers in a shorter
period of time: 27 days less than 2010; probably as a
consequence of this fact the CCC is still a negative number but
in 2011 its higher than 2010 (+9 days).
How could you miss talking about the ICD for apple?10 days out
to 4 days???in the year of the iPhones and iPads TALK ABOUT
this!!!4days is the lowest of all the companies in the WORLD.
ICD (inventory carrying days) apple took on average 4 days to
convert its raw material into a sale. The lower the number of
days the better as it means that Apple is closer to receiving cash
from customer.
LEVERAGE
The debt to asset ratio decreased in a favorable way from 2010
to 2011 (-2%): this makes Apple even more attractive to risk
averse shareholders, the company is assuming a lower financial
risk.
!!
Why is this?? Because Apple finances its 66% growth rate in
sales with its OWN cash!!!!!!!
Speaking about Debt to equity ratio it is slightly decreased
between the two years(-9% during 2011) and it has an average-between
the two years of 0.54: this means that during both
years Apple D/E is less than the normal value which is 1.0; for
every $1 dollar of Equity the company has on average $0.54 on
debt.
(Apple has no interest expenses to be paid: this is why its TIE is
not applicable either in 2010 or in 2011).
PRODUCTIVITY
Productivity in terms of NI and SALES per Employees shows
that between the two years it increased in a significant way: this
is due to the fact that, first of all Apple has a very low number of
employees (63.300 in 2011) and second but most importantly
the productivity has grown thanks to the growth of NI and
SALES. In fact if we look at the Apple’s Income statement we
can clearly notice that from 2011 to 2010 there has been a
growth in NI of 85% and in SALES of 66%. In addiction to this
we can also say that Apple has such a low number of
employees (in comparison to Dell) also because the company
outsources the manufacturing process only in Asia which is
where its performed the final assembly of almost all Apple’s
hardware products. EXCELLENT.
MARKET VALUE
Speaking about market value, from 2011 to 2010 the company
rose its EPS in a significant way: +82% which is a favorable
trend and this is thanks to the increase of Net income between
the two years( as I said speaking about productivity)it might be
also because the NI is evidently higher than preferred dividends

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because the company doesn’t have any preferred
stock=CANCELLATO.
As I am analyzing the change between the two years its useful
to end this commentary speaking about the Market capitalization
which is the most important ratio that tell us in which year the
company has been more attractive to investors: there has been
an increase of 41% between the two years, this means that,
despite the significantly lower data of APD and CCC, the year
2011 has been a better year than 2010 and that during 2011
investors have considered Apple as an even more good
investment .
Prof: what % better/worst overall (?)
Dell – 2 Year Ratio Comparison
Looking at the liquidity ratios Dell maintains a strong balance
sheet with sufficient liquidity to provide itself with the flexibility to
respond quickly to changes in this dynamic industry. It
maintained its capacity of paying the short terms liabilities with
the short term assets, even without selling inventory.
In terms of profitability there has been a growth actually
significant.
The ROS and the ROA increased by 1.6 times while the ROE by
1.3. This tells that Dell has a higher profit margin with better
control over the costs (higher ROS), a more efficient
management (higher ROA) and is generally more profitable
(higher ROE).
About the turnover the situations remained pretty much the
same, except for the inventory turnover where the speed
decreased a bit.
If we have a look instead at the Cash management the account
payable days and the cash conversion circle tell us that the
!!
situation in 2011 is not as good as 2010. In just one year Dell
has to pay the suppliers 13 days quicker: evidently a sign of
power loosing. Moreover about the cash it received from the
clients, in 2010 it could have invested it for about 45 days before
paying the suppliers, in 2011 “just” for about 34 days, so 11 days
less. This is the consequence of the decreasing of the APD.
Moving on to the leverage Dell is a little bit stronger in covering
the interests expense (if we look at the TIE), even if we have to
highlight the fact that it relies a lot on debt. We can see that from
a really high D/A ratio and also from the debt/equity that usually
should be around 1.
If we look at the liquidity both corporations are able to pay their
short-term obligations using the short term assets, also without
selling the inventory so we can see that this ratios are quite
similar.
Still, considering the ROS and the ROA Apple result to have be
the a way more profitable corporation with a better control over
its costs and a more efficient management.
Apple excels also in terms of receivable turnover meaning that it
collects the cash from it sales really quickly, around two time
faster than Dell.
About the cash management both corporations present the
same APD, so the average to pay the suppliers is around 80
days, talking instead about the CCC, Apple’s CCC is almost two
times lower than Dell (-60 days vs. -34), the difference is 26
days less that’s nearly one month.

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Comparative Ratios 2011
Looking at these ratios we see how far The Leverage strategy of
the two companies differs. Apple has no interest expenses to be
paid (since it has no debt), so that’s why its TIE is Not Applicable
while Dell, as already mentioned, has been issuing billions of
dollars of debt to finance its assets, acquisitions, operating
activities and repurchasing of stocks.
Therefore we see Apple’s Debt to asset ratio 34% that is 2.4
times lower than the one of Dell (D/A 80%), just because the
former doesn’t need debt to finance its assets, but just common
stock and retained earnings. Then we see the Market
Capitalization of Apple that is almost 15 times the one of Dell: a
good measure of how investors feel that Apple will be growing
and generating outstanding cash flows in the future, UNLIKE
DELL.
Productivity in terms of Net Income per Employee is again
more than 15 times different. This is basically due to two main
factors: Apple’s NI is almost 10 times the one of Dell, while Dell
have far more full-time employees than Apple (106700 with
respect to 60400 employees). If we then compare the size of the
companies (through Total Assets for ex), we then realize that
Apple’s number of employees is incredibly low in comparison
with its size and Dell’s one.
We might try to explain this considering the value chain models
of the two: Dell’s manufacturing process covers assembly
(assembly plants & employees in Europe, US, China, India,
Brazil), software installation, functional testing and quality control
while Apple mainly outsources these processes.
If we look at the liquidity both corporations are able to pay their
short-term obligations using the short term assets, also without
selling the inventory.
!!
Still, considering the ROS and the ROA Apple result to be the a
way more profitable corporation with a better control over its
costs and an efficient management.
Apple excels also in terms of receivable turnover meaning that it
collects the cash from it sales really quickly, around two time
faster than Dell.
About the cash management both corporations present the
same APD, so the average to pay the suppliers is around 80
days, Apple present anyway an advantage because it’s faster to
create its products (just 4 days to convert the raw material) and
gets the money from the clients in less time.
MSN Ratios Comparison
We look at Gross margin: the one of Apple is double the one of
Dell. This might be due to a different price strategy (Apple’s
premium price higher margins on CGS) and a different
outsourcing strategy since Dell, keeping in-house assembly,
software installation and testing of products, has got several
property plants and not only in low-cost-of-labor countries like
China but also Europe and US but even the fact that Apple is
selling even through ITunes that means additional revenues but
with a lower CGS. We may then look at Sales growth: Apple’s
incredible sale’s boom of 2011(wrt 2010) is mainly due to the
boom in IPhone and IPad sales (even if the sole Apple’s iPhone
has today higher sales than everything Microsoft has to offer, so
every product it has created since 1975) and more specifically to
the outstanding increase in sales occurred into the Chinese
market. This fact is so incredible if we take into consideration
that Chinese income per capita in urban areas has been on the
rise, but it was still quite low (the average disposable income in
2011 was around 3500$), so many consumers may have still

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preferred to buy the cheaper Google’s Android Smartphone (The
Google’s Android Smartphone market share in Asia has recently
broken the 80% threshold). On the other hand we see Dell’s
sales decrease, mainly due to sluggish sales in the US and
Europe: this has resulted in less revenues in both public and
consumer sectors (this is an expectable consequence of the
financial crisis that has severely hit developed countries’
economies).
Price to Book Value, we see how great (3 times) is the
difference between the two companies. Of course the higher the
ratio the more investors are willing to pay for 1 $ of total equity,
since they think that assets classified on the balance sheet do
not reflect the real value of the company.
In fact assets like human resources, customer relationships,
patents & copyright produced by the company (and not
acquired) are not included into the B/S but are of crucial
importance for the future growth and profitability of any
Company.
Apple’s value related to these three aspects is undoubtedly
extraordinary: we may consider, for instance, the fivefold growth
of utility patents (related to iPhone, iPad, mac..) granted by
Apple (only) in the US from 2006 to 2010: we passed from 110
to 560,only in these two single years. This just to prove how far
Apple’s investing in R&D to continuously innovate its products
having hidden assets!
All these ratios have already been commented by my
colleagues: I just would like to add a little comment about ROA.
Apple’s ROA is exceptional and four times Dell’s one. But the
point is this ratio has been increasing even if total assets of
Apple have soared(through investments in new stores,
patents[intangibles], marketable securities..) and thus Net
income has been increasing even faster.
!!
PRICE RATIOS APPLE INDUSTRY DELL
Current P/E Ratio 14.9 14.6 5.8
P/E Ratio 5-Year High N/A 50.1 N/A
P/E Ratio 5-Year Low N/A 11.9 N/A
Price/Sales Ratio 4 3.9 0.28
Price/Book Value 5.32 5.22 1.74
Price/Cash Flow Ratio 13.8 13.5 4.2
PROFIT MARGINS %
Gross Margin 44.11 43.49 21.66
Pre-Tax Margin 36.06 35.23 5.98
Net Profit Margin 26.97 26.36 5.01
5Yr Gross Margin (5-Year Avg.) 38.8 38.3 19.1
5Yr Pre Tax Margin (5-Year Avg.) 28.3 27.7 5.6
5Yr Net Profit Margin (5-Year Avg.) 20.8 20.3 4.3
GROWTH RATES %
Sales (Qtr vs year ago qtr) 22.6 21.8 -7.5
Net Income (YTD vs YTD) N/A N/A N/A
Net Income (Qtr vs year ago qtr) 20.7 19.6 -17.8
Sales (5-Year Annual Avg.) 41.16 40.06 1.57
Net Income (5-Year Annual Avg.) 67.11 65.43 6.22
Dividends (5-Year Annual Avg.) N/A N/A N/A

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FINANCIAL CONDITION APPLE INDUSTRY DELL
Debt/Equity Ratio 0 0.02 0.87
Current Ratio 1.6 1.6 1.3
Quick Ratio 1.5 1.5 1.2
Interest Coverage N/A 0.6 21.1
Leverage Ratio 1.5 1.6 4.5
Book Value/Share 119.23 116.09 5.62
INVESTMENT RETURNS %
Return On Equity 44.32 44.02 33.45
Return On Assets 29.8 29.2 7.1
Return On Capital 38.3 37.6 13.5
Return On Equity (5-Year Avg.) 36.2 36.5 46.1
Return On Assets (5-Year Avg.) 23 22.6 8
Return On Capital (5-Year Avg.) 31.9 31.5 18.6
MANAGEMENT EFFICIENCY
Income/Employee 664,454 646,856 28,341
Revenue/Employee 2.46 Mil 2.41 Mil 565,145
Receivable Turnover 21.6 21.2 8.9
Inventory Turnover 82.7 81.3 31.9
Asset Turnover 1.1 1.1 1.4
!!
Stock Prices history
5 Year Comparative Stock Price
Before the blue line, Apple and Dell price is pretty much at same
percentage; From 2009 Apple, starts working on the
Smartphone and Tablet market reaching an high position than
Dell.
1 Year Comparative Stock Price
During the last year, the two companies’ prices had a very
different progress: For Apple, as last November the price rose of
60%. About Dell, it was losing the 20% of its value. We see
when Apple issued its dividends, on Aug 9 and Nov 7, the
launch of the new iPhone 5, when apple won the case against
Samsung. The green circle highlights Dell price fall: this is due to
the fact that in May 22 Dell announced expected revenue for the
second quarter of 2013 of 14,4 billion $ that was below analytics
estimates (15,5).

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Example of a Lucrative Night
Here is an example of how volatile stock market can be. Apple’s
shares gained almost 10% during the night after the company
revealed financial report after introduction of iPhone 4S. Such
gap means that nobody expected that phone to be so
successful.
!!

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Indicators
Treasury Stock
Although Apple doesn’t report treasury stock in their balance
sheet it doesn’t mean that they don’t deal with buyback. They
do, but the use them to grant employees who exercise their
options. Dell on the other hand use shares not only to grant
employees but to grant the shareholders. The price of shares is
falling anyway, so imagine what would happen if it hadn’t been
for that buybacks.
Altman Z Score
!!
2010 2011
Apple 8,45 8,51
Dell 3,58 3,43
According to Altman model, both companies are not in danger of
bankruptcy (more than 2.7). Of course Apple had better score,
mostly because its huge Market Capitalization, while Dell’s main
component is Sale. I’m not saying that Dell is going to bankrupt
or so, but we should be careful about interpretation because
model was designed by Altman in 60’s for manufacturing
companies and has relatively not much to do with current IT
companies.
Apple Dell
In millions $ 2011 2010 2011 2010
Working capital 17 018 20 956 9 538 5 285
Total Assets 116 371 75 183 38 599 33 652
EBIT 34 205 18 540 3 549 2 184
RE 62 841 37 169 24 744 22 110
Market
Capitalization 372 079 264 717 25 350 25 011
Total liabilities 39 756 27 392 30 833 28 011
Sales 108 249 65 225 61 494 52 902

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FINANCIAL
ANALYSIS]
46
Bankruptcy
In case of liquidation Apple’s shareholder would receive $36 per
share which is 11 times less then market value of share, but in
stock market nobody buys market sheet value, they buy
expectations. Most of that value comes from marketable
securities, both short and long-term, and relatively low debt. We
should keep in mind that this approach is biased, since it doesn’t
!!
show Apple’s patents which may be worth significant amount of
money. As for Dell, not all lenders would be satisfied in case of
liquidation, since net liquidation value per share is negative. And
this is short and long term debt which causes such situation.
In millions ($)
Coefficient
Apple Dell
Item B/S Value
2011
B/S Value
2010
Bankruptcy
2011
Bankruptcy
2010
B/S Value
2011
B/S Value
2010
Bankruptcy
2011
Bankruptcy
2010
Cash and cash equivalents 1 9 815 11 261 9 815 11 261 13 913 10 635 13 913 10 635
Short-term marketable securities 0,8 16 137 14 359 9 815 11 261 452 373 362 298
Accounts receivable 0,8 5 369 5 510 12 910 11 487 6 493 5 837 5 194 4 670
Other receivables 0,8 6 348 4 414 5 078 3 531 3 643 2 706 2 914 2 165
Inventories 0,8 776 1 051 621 841 1 301 1 051 1 041 841
Deferred tax assets 0,5 2 014 1 636 1 007 818 0 0 0 0
Other current assets 0,8 4 529 3 447 3 623 2 758 3 219 3 643 2 575 2 914
Property, plan and equipment 0,5 7 777 4 768 3 889 2 384 1 953 2 181 977 1 091
Long-term marketable securities 0,5 55 618 25 391 27 809 12 696 704 781 352 391
Other long-term assets 0,5 7 988 3 346 3 994 1 673 6 921 6 445 3 461 3 223
Fire Sale Assets - - - 73 041 51 856 - - 30 788 26 227
Current liabilities 1 27 970 20 722 27 970 20 722 19 483 18 960 19 483 18 960
Net cash - - - 45 071 31 134 - - 11 305 7 267
Long-term liabilities 1 11 786 6 670 11 786 6 670 11 350 9 051 11 350 9 051
Sub Total - - - 33 285 24 464 - - -45 -1 785
P/S - 0 0 0 0 0 0 0 0
Liquidation Value - - - 33 285 24 464 - - -45 -1 785
Common Shares (in millions) - - - 924.258 909.461 - - 1.944 1.954
Net liquidation share (in
dollars) - - - $ 36,01 $ 26,90 - - -$ 0,02 -$ 0,91
Market price per share - - - $ 402,57 $ 291,07 - - $ 13,04 $ 12,80

[APPLE
&
DELL
–
COMPANIES
FINANCIAL
ANALYSIS]
47
PE/ Ratio
As for projected EPS ratios in case of both companies, analysts
believe that earnings will increase. For apple it’s almost 33%
growth, and for Dell just almost 6%.
Other Benefits
Both companies provide various additional benefits, but we have
to clearly state that most of them are designed for key
employees, and very limited for simple sales men. The most
important Apple’s benefit are financial education seminars
during which employees are taught basic of business and
economy and tuition assistance, which help part-time workers to
graduate. Dell has prepared Employee Assistance Program
which includes consultations with specialists such as
psychologists etc. moreover, Dell provides Time Away Program
which help employees to plan their paid holidays.
Retirement Plans & ESPP
Retirement plans of both companies are similar. The thing is that
Apple contribute 100% to that plan only for key employees, and
Dell does it everyone. Both companies have fixed contribution
plans, not fixed benefits, that’s why their Balance Sheets don’t
show retirement plan liabilities.
!!

[APPLE
&
DELL
–
COMPANIES
FINANCIAL
ANALYSIS]
48
References
!!
Ø Apple Annual Reports
Ø Dell Annual Reports
Ø Yahoo Finance
Ø Morningstar.com
Ø MSN Finance

Apple & Dell - Financial Analysis 2008 - 2011

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