5. Sector:Technology
Industry: Computer Hardware
Market capitalization: $523.85B
Fiscal year: 09/27
Founded: 1976, by Steve Jobs,
SteveWozniak and Ronald
Wayne
Employees: 110,000 full-time
employees
Players’ characteristics
Sector:Technology
Industry: Business Software and
services
Market capitalization:$ 419.19B
Fiscal year: 06/30
Founded: 1980, Paul Allen and Bill
Gates
Employees: 118,000 full-time
employees
×1,25
6. Apple & Microsoft:
“Friendly Competitors”
According to Microsoft ex-CEO, Ballmer:
“Nobody is really trying to compete with [Apple]. Who’s really going after the mac, who’s really going after the IPad?”
Microsoft is the only REAL competitor!
Apple Hardware
Microsoft Software
& Cloud Service
”Real Magic Happens”
"I believe that in a perfect world, an organization or user has Microsoft
applications and backend services running on Apple endpoints."
Chip PEARSON,
former CEO of
JAMF Software
9. The usual game Being the fastest
to introduce
technologies!!!
Gain competitive advantage
Gain market share
Partnership losses
Useless Intellectual property
Waste of R&D
If you are the
first to
introduce the
technology.. If you are
late to the
game…
But guess
what?
Apple
does not
care!!
Why?
Opening weekend sales
Apple always breaks
records.
10. If they were a country they would be…
Belgium
GDP= $523B
Iran
GDP=$419B
http://databank.worldbank.org/data/download/GDP.pdf
11. Opportunities
Source: Pew Research Center survey conducted March 17-April 12, 2015. Smartphones data based in Pew Reasearch survey
conducted June 10-July 12, 2015.Trend data are from previous Pew Research surveys.
51% 23%29%42%
Delivering new
productivity (work,
play,
communicate)
Building and
running cloud
based services
Developing new
technologies to
increase
interactivity
Making
technology more
intuitive to attrack
a wider range of
customers Huge opportunities
to seize because of a
growing demand
12. Potential threats
People want easy
access to every
software
Many people
complain about the
slowness of updates
Customers are
attracted by design
and ergonomics
Many competitors
have the same
suppliers =>shortage
Issues with currency
fluctuations
The company needs
to keep innovating
and patenting to keep
its competitive
advantage
Apple orders raw
materials based on
projected demand
Apple’s reputation
could be damaged by
lawsuits
Apple is subject to
many different laws
that could prevent its
development
Apple could suffer from
more choices from
competitors
From the
market point
of view
Competitors’
broader
product lines
Outsourcing
in developing
and unstable
countries
(currencies)
Expiring
patents
Competitors’
low pricing
Resselers’
cutting orders
when low
economic
conditions
Orders of raw
materials
Litigation of
patent
infringement
International
law
From the
customer’s
point of view
Bad product
design
Products non
compatible
withWindows
Reduce
frequency of
introduction
of products
Lack of
innovation
Issues with
updates
Forgetting
the Apple
community
Apple customers like
new technologies and
want to be amazed
There is a strong feeling
of identity among Apple
users that needs to be
maintained
People need to be
attracted to the
products constantly
Competitors cut
prices and have low
margins to attract
customers
In bad economic
conditions ressellers
may find it no longer
profitable to sellApple
products
13. Potential threats
Microsoft may not
earn the expected
revenues from its
intellectual property
rights.
Microsoft has lost
market share because
of underperforming
software
(WindowsVista)
For example: Microsoft
targets the « gamer
community »
Acquisitions and joint
ventures may have an
adverse effect on
their business.
From the
market point
of view
Acquiring new
companies
Outsourcing
in developing
and unstable
countries
(currencies)
Intellectual
property
rights
Competittion
Resselers’
cutting orders
when low
economic
conditions
Orders of raw
materials
International
law
Lawsuits
From the
customer’s
point of view
Bad product
design
High prices
Issues with
software
Forgeting
about the
wide range
of customers
14. Strategies
Apple Microsoft
• User experience / Ease-of use
• Design
• Innovation
• “Once your in, you’re LOCKED IN”
• Mobile-first & Cloud-firstWorld
• Best in class platforms
• Productivity services
Individuals & Organizations
Marketing and
Advertisement
Service: before & after sale
Knowledge
R&D
15. How does Apple invest overall?
R&D Marketing Advertising
Develop and sell innovative products and technologies
Cash used in investingactivities 2015 2014 2013
$ in millions 56,274 22,579 33,774
Purchase of
marketable
securities – net
of sales and
maturities
($44.4B)
Purchase of
PP&E
($11.12B)
What
for ?
×2.49
×1.67
Outside
×4 more
than
inside
16. How does Microsoft
invest overall?
Cash used in investing activities 2015 2014 2013
$ in millions 23,001 18,833 23,811
R&D Marketing Advertising
Nokia $9.6B
Cash used in
investment
purchases,
sales, and
maturities $23B
Developing new devices that have increasingly natural ways to
interact with them.
Applying machine learning to make technology more intuitive.
×1.22
×0.97
18. SWOT Analysis-Apple
• Price competition
• Rapid changes in technologies
• Intellectual Property Rights
• Regulations
• Economic conditions ..
• TV
• Companies
• Developing countries
• Apple Pay
• Chargers
• Lack of renewal
• Lack of memory
• High prices set = lose
some customers
• Customers are locked in
• Foreign manufacturers
• Customer service
• Diverse products and
services offering
• High profit and
GROWTH
Strengths Weaknesses
ThreatsOpportunities
19. SWOT Analysis Microsoft
• Computer Market
shrinking
• Competition
• New technologies
• Cloud
• Windows Phone and
Surface
=>Increase market
share
• Still high prices
compared to
competitors
• Problems with old
versions
• Integrated services
and products
• Premium software
used worldwide
• High profit
Strengths Weaknesses
ThreatsOpportunities
20. Who has more land ?
MANUFACTURING FACILITIES
OPERATION CENTERS
Ireland Vietnam
USA (e.g. California) Ireland & Singapore
USA (e.g. California) China & India
OVERALL LEASED
BUILDING SPACE
Europe, China, Singapore and
Japan
China; Finland; Germany;
India; Japan; and UK
R&D
STORES
22. Net Sales by Operating Segment (2013 to 2015)
45%
16%
44%
17%
40%
25%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Americas Europe Greater China Japan Rest of Asia Pacific
Evolution of Sales per Country
2013 2014 2015
Total Net Sales in
2015: $234 billion
23. Product life cycle - iPhone
Starting price in 2007: $599
Starting price today: $649
~38% depreciation/product the first year
Then, ~20%/year.
Steps:
1 – Introduction
2 – Growth
3 – Maturity
4 – Decline
5 – New model
New strategy: launch
2 products/year
Breaking News! Apple
just launched an iPhone
SE It is more affordable
and answers demand for
smaller screen
customers.
The iPhone 6 (September 2014)
and its mega-zoom camera was
launched right after the apparition
of the new Galaxy S5 (April 2014);
people were amazed of the quality
of such big picture!
24. Product life cycle - iPod
First launch in
2001.
Low source of income:
categorized in “other
products” in the Annual
Report
Why is it still on the
market ?
Because it brings in
very young
consumers that will
be quickly locked in
and will choose the
iPhone later.
Various
models
The most
accessible
product:
cheap
Different
renewal pattern
than the iPhone
25. Product life cycle - iMac
The oldest product. The one that broughtApple’s notoriety. Still alive. Still growing.
An example of hope for the iPod’s future?
26. Product life cycle - iPad
2010/2013: iPad 1;2;3;4.
Display: 9.7 inches
2013/2014: iPad air 1 and 2
Display: 9.7 inches
2012/2015: iPad mini 1;2;3;4
Display: 7.9 inches
2015: iPad pro
Display: 12.9 inches
Apple is losing
its monopoly on
tablets since
share of
shipments is
decreasing
since 2011.
Analysts expect Apple to stagnate in this market, whileWindows
is supposed to grab 8% of market shares in the next 4 years.
ALSO:
Tablets is a very important
segment because it locks
customers in with apps, just
swipe and pay! Main targets
are children. 1 child out of 3
knows how to use a tablet
before learning to speak
Since October 2015, Microsoft is
the top-selling tablet maker with
45% of all tablets sales, thanks to
its surface pro at the average price
tag of $844.The average price tag
of Apple iPad, in the meantime, is
only at $392.
27. iTunes
Centralizes all
customers data:
- Devices
- Purchases (Apps,
music, movies,
podcasts)
- - Back-ups
- Pictures
iTunes store sells or
rents:
-45,000 movies
- 43,000,000 songs
- 190,000TV show
episodes
2011 2016
Song’s price €0.99 €1.29
App’s price €0.79 €0.99
Since the euro got weaker:
25 billion songs
sold worldwide!
Also known as: the padlock
that locks customers in
32. Operating system market shares: iOS v.Windows Phone
Apple is currently selling
6 devices. Microsoft has
31 which involves higher
manufacturing costs! It
also means that MSFT
has 0.05% of market
share/phone in 2014,
while 9.5% for Apple.
Microsoft
offers more
diversity
with its
Lumias
(price
ranges,
storage,
customers
age) while
Apple has
clearly
defined
products
Windows Phone
struggles to
enter the
market due to
its late arrival
while Apple
struggle in
conquering
emerging
markets to the
benefit of
Android phones
(Google)
It cost $9.4Bto enter
this market to Microsoft
by acquiring Nokia
which generated only
$1.2B in NI in 2015
Apple’s in the market
since 2007.
Microsoft since
2011 when it
bought Nokia.
33. Microsoft likes gaming
2001 2005 2013
20.4M units sold78.2M units sold24M units sold
Main competitor is Sony
and they sold 35.9M of
PS4, 1.75 times more sales
than the XBOXOne.
They sold the same
amount of their old gen
engine.
Gaming
revenue
grew 6% in
2015
There are over 40M
XBOX live users
paying a $50 annual
subscription. It
generates stable
cash flow for MSFT.
XBOX Sales decline since
MSFT gave up on XBOX360,
but software sales are up
57% mainly due to Halo 5
sales, and the apparition of
Minecraft on the platform
(which MSFT acquired).
34. Operating system market shares: OS X v.Windows
y= 0.0044x+0.0635 y=-0.007x+0.9271
OS X is only dedicated to Apple, whileWindows englobes all the others brands.
In addition, OS X market share is increasing
35. Advertising
Advertising expense 2015 2014 2013
In billion $ 1.9 2.3 2.6
Advertising expense 2015 2014 2013
In billion $ 1.8 1.2 1.1
Advertising
includes Bing,
BingAds, MSN,
and Xbox ads.
They have a
partnership
withYahoo.
A big part of their
advertising is done
by the retailers.
Apple
advertises on
TV through
movies
In June 2015, MSFT
entered into
agreements with
AOL and AppNexus
to outsource their
sales efforts.
MSFT
advertises
through
TV shows
Advertises on
TV through
its own ads
just before a
product is
launchedFree
advertisement
from their own
customers and
the press at each
product
introduction
(iMessage…)
The physicalApple
store is a great tool
to appeal to
customers (design,
displays, luxury…)
OPENING
WEEKEND
SALES
36. Products
Direct
Online stores
Apple stores
Big cities
Malls, shopping
districts
Indirect
Carriers
Wholesalers
Retailers
Walmart
Best buy
Fnac
Value-added
resellers
Distribution and Brand Partnership-Apple
After-sale
support
experience
High quality
fixtures
Apple Premium
Reseller Program
Bought
Beats
≈6%
increase
by year Knowledgeable
salespersons
37. Software
OEMs
Direct
OEMs
Hacer, Dell,
Lenovo
HP, Samsung
System
builders
Microsoft distributor
channel
Distributors
and Resellers
Enterprise Agreement
Direct Advisors
License Solutions Partners and
Value-added resellers
Mainly non-exclusive
Retailers
Microsoft
retail stores
Online
Cloud-based
services
MSN, Office
365,
Outlook.com,
Skype, Windows
StoreOnline
Market
Distribution and Brand Partnership-Microsoft
After-sale
support
experience
Training to
retailers
38. Brand Partnerships
Since July 2014
Dec 2015 Reached
100 app milestone goal
Make the iPhone a Business
communication tool
Since Sept 2015
Sell Microsoft’s 2-in-1
device: Surface ProS:Training & Expertise
M: Software
Microsoft Partner
Program
39. Apple’s competitors by sector
Music
Virtual
Stores
ComputersSmartphones
Mobile
payments
Spotify
Tidal
Deezer
Google (YouTube)
Paypal
Google
Lenovo
Microsoft
HP
Dell
Acer
Google (Play store)
Microsoft (Windows phone store)
Google
Samsung
HTC
Huawei
Books
Amazon
Google
40. COMPETITORS (fiscal year) AAPL (09/2015) GOOG (12/2014) MSFT (06/2015) FB (12/15) AMZN (12/15) IBM (12/2014)
Market Cap ($M) 523,850 493,970 419,190 312,740 245,360 119,870
Employees 118,000 61,814 110,000 12,691 230,800 380,000
Revenue 233,715 66,001 93,580 17,928 107,006 92,793
Cost of revenue 140,089 25,691 33,038 2,867 71,651 46,386
Gross Profit 93,626 40,310 60,542 15,061 35,355 46,407
R&D 8,067 9,832 12,046 4,816 9275 5,437
Acquisitions 343 1,448 3,723 313 690 3,300
Net Income 53,394 14,444 12,193 3,669 596 12,022
Total Assets 290,479 131,133 176,223 49,407 65,444 117,532
Inventory 2,349 - 2,902 - 10,243 2,103
Net PPE 22,471 23,883 14,731 5,687 21,838 10,771
Total Liabilities 171,124 26,633 96,140 5,189 52,060 105,664
Long-Term Debt 53,463 3,228 27,808 107 8,235 35,073
Total Equity 119,355 104,500 80,083 44,218 13,384 11,868
Operating Cash Flow 81,266 22,376 29,080 8,599 11,920 16,868
Capital Expenditures (11,247) (10,959) (5,944) (2,523) (4,589) (3,740)
Free Cash Flow 70,019 11,417 23,136 6,076 7,331 13,128
Beta 1.35 0.86 1.02 0.73 1.63 0.66
Gross Margin 40.06% 61.07% 64.70% 84.01% 33.04% 50.01%
ROS 22.85% 21.88% 13.03% 20.47% 0.56% 12.96%
ROE 44.74% 13.82% 15.23% 8.30% 4.45% 101.30%
CCC (in days) (59) (127) 29 (155) (82) (23)
Debt/Assets 58.91% 20.31% 54.56% 10.50% 79.55% 89.90%
Tax rate 26.40% 16.31% 34.00% 40.77% 70.60% 41.27%
EPS $9.28 $23.59 $1.49 $1.29 $1.25 $13.42
P/E 12.24 32.17 29.01 85.22 540.71 10.25
Analysis of theTech GIANTS
Apple clearly leads the
technology industry
Apple is the leader of these GIANT
companies, with revenues 3.54X
higher than Google
Negative CCC: this
means an important
market power
(receive cash from
customers before
paying suppliers)
-> AAPL, FB
Apple has the biggest NI, 337% bigger than
MSFT. AAPL does not seem to struggle to
have positive earnings since it is above the
competiton: high NI due to high selling prices
PPE: FB is the
lowest, no need to
invest in buildings or
stores since
everything needed
is a big computer
and memory !
R&D: for all
companies, R&D
at least 50% of
NI
Except Apple:
R&D 15% of the
NI
AAPL has the first worldwide capitalization. Since all
the competitors of AAPL are giants, they deal with
hundreds of billions.
AAPL has the most assets and resources. HighTA because 71% ofTA
are cash and investment!
AAPL has 2.2x moreTA than GOOG and 1.6x moreTA than MSFT
However, Apple has respectively 6.4 x more and 1.8 x more Liabilities
than Google and MSFT
The riskiest company isAMZN; this can be explained by the fact that
AMZN and FB have two different business models:AMZN is into
everything (pricing issue), FB is into advertising.
AMZN: high P+E, high inventory = high liability =high BETA
FB: no P+E, no inventory+ high GM NI= low liabilities =low BETA
All the companies have high PE: this means investors think they have a high
potential for growth.
Normal PE is around 20: Google and FB are above.
AMZN has an extremely HIGH PE, this means investors believe the company
has a high potential for earnings growth (due to low NI mainly)!
Positive CCC: this
means companies
need to borrow
funds to pay their
suppliers
-> MSFT
COMPETITORS (fiscal year) AAPL (09/2015)
GOOG
(12/2014) MSFT (06/2015) FB (/12/15) AMZN (12/15) IBM (12/2014)
Dividends Paid ($M) 11,561 47 8,882 - - 4,900
Repurchase of CS ($M) 35,253 4,155 14,443 - - 4,600
FCF is positive for all these Giant companies, with AAPL still leading.
This means all these companies succeeded to create opportunities to
grow (new products).
There is a significant difference between AAPL v. AMZN and FB, “the
new companies” : Apple 10X more.
Apple and Microsoft give a
huge part of their FCF to their
shareholders !
Profitability: overall, high profitability,
usually higher for technology
companies (no big investment in
inventories)
Ex: FB: 84% GM ! Huge
R&D
Acquisitions
Acquisitions: MSFT invests a lot in startups and
recently bought Nokia
IBM also buys a lot of cloud companies (eg:
Cleversafe,TheWeather Company)
FB : extremely low
debt ratio! Does not
need to borrow and
has hardly any LT
assets !
AMZN and IBM: above
79%, this make these
companies riskier
41. Growth Rates
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00%
Q4
Q3
Q2
Q1
Total
Apple Quarterly Growth (2014 - 2015)
EPS Net Income Net Sales
-180.00% -130.00% -80.00% -30.00% 20.00%
Q4
Q3
Q2
Q1
Total
Microsoft Quarterly Growth (2014 - 2015)
EPS Net Income Net Sales
EPS: -172%
NI: -170%
What happened in Q4 ??
Q1: Santa Clause is
coming to town!
Overall GR= 34%
43. Net Income comparison, in millions of $
0
10,000
20,000
30,000
40,000
50,000
60,000
2007 2008 2009 2010 2011 2012 2013 2014 2015
Microsoft
Apple
Gross margin remained constant BUT goodwill
impairement rose by 6,193% with the acquisition
of Beats costing $2.6B
Gross margin remained constant BUT impairment
rose by 7,783% because of acquisitions of
companies but mainly Nokia costing $7.9B.
44. Comparing Growth in Operations
Apple sells more
iPhones but
growth rates fell
because sales of
iPads fell due to
harsh competition
!
Apple introduces
iPhone 6 and 6+ that
have a larger screen.
iPhone sales rose by
$53.1b.Total sales rose
by $50.9b
Successful Samsung’s large screen
phone conquers the market and slows
down Apple’s growth.Total sales only
rose 9% while it was 45% the past
year.
45. Comparing Growth in Operation
COGS and especially Operating expense
increased too much compared to the sales
to maintain positive Earnings’ growth.
"And the upcoming release of
Windows 10 will create new
opportunities for Microsoft and
our ecosystem.”
Satya Nadella, chief executive
officer at Microsoft.
Surface revenues
and Xbox UP
Net income includes a
$7.5b of goodwill
impairment because
phone hardware did not
meet its sales volume
goal . Also a $2.5b of
restructuration expenses
that represent 45% of
previous year NI.
Net income decreased
36% because of a $6.2b
goodwill impairment
related to the OSD
business segment that
represents 27% of
previous year NI.
46. ($M) One Day IS Apple One Day IS Microsoft
Period Ending Sept 2015 June 2015
Total Revenue 649 100.0% 260 100.0%
Cost of Revenue 389 59.9% 92 35.3%
Gross Profit 260 40.1% 168 64.7%
Selling General and Administrative 40 6.1% 56 21.7%
Research and Development 22. 3.5% 33 12.9%
Impairment, integration, restructuring 0.00 0.0% 28 10.7%
Operating Income or Loss 198 30.5% 50 19.4%
Total Other Income/Expenses Net 6 0.9% 3.13 1.2%
Earnings Before Interest And Taxes 203 31.3% 54 20.6%
Interest Expense 2 0.3% 2 0.8%
Income Before Tax 201 31.0% 51 19.8%
Income Tax Expense 53 8.2% 18 6.7%
Net Income 148 22.8% 34 13.0%
Comparative one day income statement 2015
4.4x
Apple’s NI is huge
compared to Microsoft ! On
a daily basis, their NI is 4.4
times higher than
Microsoft !
2.5x
649 260
35.3%59.9%
13%22.8%
Apple wants to offer the best to its customers and does not
hesitate to give high warranty on its products and develop
high-tech stores … but at high costs !
Rather low costs comparing to
the overall financial results !
MSFT selling and administrative
costs represent a bigger part of
the total revenue. But MSFT is a
monopoly and must spend cash
to keep its position.
This huge cost is due to impairment,
integration and restructuring costs for
the Phone Hardware business linked to
the acquisition of NDS (write-down of
certain assets, employee severance etc).
Apple’s ROS is bigger on a
daily basis than MSFT!
BUT: if there were no
restructuring costs and
write-offs
-> MSFT’s ROS =
AAPL’s ROS
Even if Apple spends less cash in acquisition
compared to Microsoft, they still KILL the Game !
However, MSFT by acquiring tries to develop the
mobile-first, cloud-first world. It tries to diversify
contrary to Apple and takes risks to attract new
customers through a wide range of services.
Not extremely high Gross
Profit ! (average 50%)
MSFT: High GP
(Monopoly in PC software)
Due to increase in revenues
after the release of Surface 3
and introduction of HoloLens
+ 10%
23%0
47. Comparative IS Horizontal Analysis
($M) APPL MSFT
Period Ending Sept 26, 2015 Sept 27, 2014 V V% June 30, 2015 June 30, 2014 V V%
Total Revenue 233,715 182,795 50,920 27.9% 93,580 86,833 6747 7.8%
Cost of Revenue 140,089 112,258 27,831 24.8% 33,038 27,078 5960 22.0%
Gross Profit 93,626 70,537 23,089 32.7% 60,542 59,755 787 1.3%
Selling General and Administrative 14,329 11,993 2,336 19.5% 20,324 20,488 -164 -0.8%
Research and development 8,067 6,041 2,026 33.5% 12,046 11,381 665 5.8%
Impairment, integrating, restructuring etc. - - - - 10,011 127 9884 7782.7%
Operating Income or Loss 71,230 52,503 18,727 35.7% 18,161 27,759 -9598 -34.6%
Total Other Income/Expenses Net 2,018 1,364 654 47.9% 1,127 658 469 71.3%
Earnings Before Interest And Taxes 73,248 53,867 19,381 36.0% 19,288 28,417 -9129 -32.1%
Interest Expense 733 384 349 90.9% 781 597 184 30.8%
Income Before Tax 72,515 53,483 19,032 35.6% 18,507 27,820 -9313 -33.5%
Income Tax Expense 19,121 13,973 5,148 36.8% 6,314 5,746 568 9.9%
Net Income 53,394 39,510 13,884 35.1% 12,193 22,074 -9881 -44.8%35.1% (44.8%)
×2.5
×4.4
WHY? HOW?
27.9% 7.8%
24.8% 22.0%
32.7% 1.3%
This is due to Phone Hardware and
the rise in cost of Commercial
Cloud.(datacenters expenses…)
33.5% 5.8%
R&D of Apple is growing by 33.5% which is good because it predicts
good future, but R&D of Microsoft only grows 5.8%. IT should be high as
they are high tech companies. But Microsoft is buying its technology.
10,011 7782.7%
This is due to the acquisition of Nokia.
33.5% (34.6%)
90.9%
Due to higher outstanding long-term debt.
30.8%
48. Operating Leases
-Remain stable over
time
- Leases equipment
and facilities such as
the 463 retail stores
-Decrease over time
-Leases for
international sales
and support offices,
R&D facilities, retail
stores…
Thereafter: AAPL leases more
than Microsoft, proof they
probably want to increase the
number of stores. MSFT will also
follow this strategy but on a
different scale.
49. ($M)
Period Ending Sept 26, 2015 % Sept 27, 2014 % V V% 2 015 % 2 014 % V V%
Cash And Cash Equivalents 21 120 7,3% 13 844 6,0% 7 276 52,6% 5 595 3,2% 8 669 5,0% (3 074) -35,5%
Short Term Investments 20 481 7,1% 11 233 4,8% 9 248 82,3% 90 931 51,6% 77 040 44,7% 13 891 18,0%
Net Receivables 16 849 5,8% 17 460 7,5% 611- -3,5% 17 908 10,2% 19 544 11,3% (1 636) -8,4%
Inventory 2 349 0,8% 2 111 0,9% 238 11,3% 2 902 1,6% 2 660 1,5% 242 9,1%
Defered tax assets 5 546 1,9% 4 318 1,9% 1 228 28,4% 1 915 1,1% 1 941 1,1% (26) -1,3%
Vendor non-trade receivables 13 494 4,6% 9 759 4,2% 3 735 38,3%
Other Current Assets 9 539 3,3% 9 806 4,2% 267- -2,7% 5 461 3,1% 4 392 2,5% 1 069 24,3%
Total Current Assets 89 378 30,8% 68 531 29,6% 20 847 30,4% 124 712 70,8% 114 246 66,3% 10 466 9,2%
LT Marketable Securities 164 065 56,5% 130 162 56,1% 33 903 26,0% 12 053 6,8% 14 597 8,5% (2 544) -17,4%
Property Plant and Equipment 22 471 7,7% 20 624 8,9% 1 847 9,0% 14 731 8,4% 13 011 7,5% 1 720 13,2%
Goodwill 5 116 1,8% 4 616 2,0% 500 10,8% 16 939 9,6% 20 127 11,7% (3 188) -15,8%
Intangible Assets 3 893 1,3% 4 142 1,8% 249- -6,0% 4 835 2,7% 6 981 4,0% (2 146) -30,7%
Other Assets 5 556 1,9% 3 764 1,6% 1 792 47,6% 2 953 1,7% 3 422 2,0% (469) -13,7%
Total Assets 290 479 100,0% 231 839 100,0% 58 640 25,3% 176 223 100,0% 172 384 100,0% 3 839 2,2%
MSFTAPPL
Comparative BS:Total Assets
290 B 231 B 25%
Sales Growth:
28%
176 B 172 B 2%
Sales Growth:
8%
x 1,6
70% ofTA =
Cash + STI + LTI
21 B 13 B 52%
82%
30 %31 %
56 %
11%
6 B 9 B -35%
90 B 77 B 18%
71 % 66 %
-16%
-30%
51 % 44 %BiggestAsset
56 %BiggestAsset 26%
11 B20 B
Small Inventory
They buy RM, and sell it to
manufacturing co.
5%
12B 15B -17%
20B17B
MSFT’s acquisitions
are being written off
Goodwill: Overpaid Nokia
WHY?
To popularize the phone
AAPL is inventing
technology
MSFT is acquiring
technology
50. Accounts Payable 35 490 12,2% 30 196 13,0% 5 294 17,5% 6 591 3,7% 7 432 4,3% (841) -11,3%
Accrued Expense/Compensation 25 181 8,7% 18 453 8,0% 6 728 36,5% 5 096 2,9% 4 797 2,8% 299 6,2%
Unearned/Deferred Revenue 8 940 3,1% 8 491 3,7% 449 5,3% 23 223 13,2% 23 150 13,4% 73 0,3%
ST Debt = Commercial paper 8 499 2,9% 6 308 2,7% 2 191 34,7% 4 985 2,8% 2 000 1,2% 2 985 149,3%
Current Portion of LT Debt 2 500 0,9% - 0,0% 2 500 #DIV/0! 2 499 1,4% - 0,0% 2 499 #DIV/0!
Other Current Liabilities 7 464 4,2% 8 246 4,8% (782) -9,5%
Total Current Liabilities 80 610 27,8% 63 448 27,4% 17 162 27,0% 49 858 28,3% 45 625 26,5% 4 233 9,3%
LT Unearned/Deferred Revenue 3 624 1,2% 3 031 1,3% 593 19,6% 2 095 1,2% 2 008 1,2% 87 4,3%
LT Debt 53 463 18,4% 28 987 12,5% 24 476 84,4% 27 808 15,8% 20 645 12,0% 7 163 34,7%
Other 33 427 11,5% 24 826 10,7% 8 601 34,6% 13 544 7,7% 11 594 6,7% 1 950 16,8%
Deferred income tax 2 835 1,6% 2 728 1,6% 107 3,9%
Total Liabilities 171 124 58,9% 120 292 51,9% 50 832 42,3% 96 140 54,6% 82 600 47,9% 13 540 16,4%
Common Stock 27 416 9,4% 23 313 10,1% 4 103 17,6% 68 465 38,9% 68 366 39,7% 99 0,1%
Retained Earnings 92 284 31,8% 87 152 37,6% 5 132 5,9% 9 096 5,2% 17 710 10,3% (8 614) -48,6%
Other comprehensive Income 345- -0,1% 1 082 0,5% 1 427- -131,9% 2 522 1,4% 3 708 2,2% (1 186) -32,0%
Total Stockholder' Equity 119 355 41,1% 111 547 48,1% 7 808 7,0% 80 083 45,4% 89 784 52,1% (9 701) -10,8%
Comparative BS:Total Liabilities and Owners Equity
42%171 B
-11%
120 B
35%
18 B
60%
40%
50%
50%119 B 112 B
55%
45%
48%
52%
-345M 1B -132%
21 B28 B
9 B
84%
92B 87B
18%
-48%
NO CHANGE
-10%
-32%
7%
16%
($M)
Period Ending Sept 26, 2015 % Sept 27, 2014 % V V% 2 015 % 2 014 % V V%
MSFTAPPL
Change in Capital
Structure
35B
25B
30B
18B
Expense before
cash payment
4%3%
Got the cash, haven’t
performed service yet!
35%
To be paid in the year
1% 1%
LT DEBT! 53B 29B
Foreign currency
adjustments: USD Others
Change in Capital
Structure
83B96B
7B
5B
7B
5B
23 B 13 %
Got the cash, haven’t
performed service yet!
150%5B 2B
Enjoying favorable interest rate
cheap lines of credit to
facilitate further expansion.
1.2 % 1.2 %
90B80B
68B 68B
51. -
5,000
10,000
15,000
20,000
25,000
30,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
InMillion$ APPL - Current Assets
Cash And Cash Equivalents Short Term Investments Net Receivables Inventory
0
20,000
40,000
60,000
80,000
100,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
InMillion$
MSFT - Current Assets
Cash And Cash Equivalents Short Term Investments Net Receivables Inventory
ShortTerm Investments
0
5,000
10,000
15,000
20,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
MSFT - CA (without ST Investments)
Cash And Cash Equivalents Net Receivables Inventory
More Cash than
Receivables
Almost no Inventory
More Receivables
than Cash
In 10 years 770% Increase of CA
In 10 years 160% Increase of CA
52. Capital Structure: Debt/Equity
59%
41%
AAPL 2015 Equity and Debt
52%48%
AAPL 2014 Equity and Debt
40%
60%
AAPL 2013 Equity and Debt
55%
45%
MSFT 2015 Equity and Debt
48%52%
MSFT 2014 Equity and Debt
Inversed their
Capital Structure:
40% 60% Debt
2) KD: 1,85%.As D grows
to 60%Apple’sWACC
falls Cost of Capital
falls
1) Using Domestic Cash
Reinvesting in Itself!
3) Interest Expense is tax deductible
(D) Dividend Payments (E) are not!
Saving more money AGAIN !
45%
55%
MSFT 2013 Equity and Debt
Same story: Inversing their Capital Structure.
Most of IT companies’ cash is overseas:
It looks like their debt is big but in
fact their money is just overseas.
Borrowing money to pay dividend
because it is cheaper than to bring
cash home which is taxed .
53. Debt
Apple believes its
existing balances of
cash will be sufficient
to satisfy its working
capital needs
In 2014, Apple issued
commercial paper in
order to pay for its
dividends and share
repurchases
At the end of Q4 2015,
these commercial
papers represent an
amount of $55.7 billion
Credit rank:
- Apple:AA+
- Microsoft:AAA
Apple’s cost of
debt is 1.47% and
Microsoft’s 2.70%
(and yet, is has the
best rating)
Overseas cash is a risk to
valuations. S&P 500
companies have an
estimated $2.3 trillion in
earnings stashed overseas,
along with $750 billion in
cash.
Why would Apple
need a loan?
It has even more
cash than
Microsoft!
Microsoft has $108.3B of
earnings permanently
reinvested overseas while
Apple has $91.5b
54. ($M) AAPL MSFT
Period Ending Sept 26, 2015 Jun 30 2015
OPERATING CASH FLOW
Net income 53,394 12,193
Depreciation Expense 11,257 5,957
(Increase) Decrease in Asset impairment (500) 3,188
(Increase)Decrease in Account Receivable 611 1,636
(Increase) Decrease in Inventories (238) (242)
Increase in other Current Assets (4,696) (1,043)
(Increase) Decrease in Other Assets (1,792) 469
Increase (Decrease) in Account Payable 5,294 (841)
Increase (Decrease) in Accrued expense 6,728 (17)
Increase (Decrease) in deferred revenue 449 73
Increase (Decrease) in differed revenue non-current 593 87
Increase (Decrease) in other non-current liabilites 8,601 2,057
TOTAL OPERATING CASH FLOW 79,701 23,517
INVESTING CASH FLOW
Capital expenditure (13,104) (7,677)
Purchase of short-term marketable securities (9,248) (13,891)
Purchase of long-term marketable securities (33,903) 2,544
Sales (purchases) intangible asset 249 2,146
Other comprehensive income (1,427) (1,186)
Increase (Decrease) in Security lending payable (466)
TOTAL INVESTING CASH FLOW (57,433) (18,530)
FINANCING CASH FLOW
Dividend paid (48,262) (20,807)
Issuance of long-term debt 24,476 7,163
Increase (Decrease) in commercial paper 2,191
Issuance of common stock and PIC-CS 4,103 99
Increase (Decrease) in current portion of long-term debt 2,500 5,484
Purchase of Treasury Stocks
TOTAL FINANCING CASH FLOW (14,992) (8,061)
CHANGE IN CASH 7,276 (3,074)
Comparative Cash Flow
AAPL 2015
Cash and Cash Equivalents, Beginning of Period 13,844
Cash and Cash Equivalents, End of Period 21,120
MSFT
Cash and Cash Equivalents, Beginning of Period 8,669
Cash and Cash Equivalents, End of Period 5,595
13,844
21,120
7,276
8,669
5,595
(3,074)
79,701
79,701
Apple’s NI was the biggest driver of
OCF (67%)
53,394
23,517
Still
huge
12,193
(57,433)
(33,903)
(13,891)
(18,530)
X3.39
X3.10
3,188
Microsoft’s goodwill impairment
highly increased because of the
purchase of companies such as
Nokia ($5.5B)
611 1,636
(14,992) (8,061)
The biggest driver of FCF are
the dividends paid and share
buybacks which account for
90% of NI for Apple and 171%
for Microsoft
(20,807)(48,262)
So
Both companies do not need
cash:
Apple’s FCF=$67,097M
Microsoft FCF=$12,652M
They take advantage of high
stock price and low IR
They use this cash to pay a part
of the dividends
This includes $12B
of dividends paid
and $36B of share
buybacks
X4.4
AR fell which is incredible as sales
increased.This is due to an
increase in deferred revenues.
Apple’s ICF was 74% driven by the
purchase of ST and LT marketable
securities.
These 2 lines are
neither cash in
nor out!
56. Cash FlowTrend
-15000
-5000
5000
15000
25000
35000
45000
55000
65000
75000
85000
20152014201320122011201020092008200720062005
OCF CAP EX FREE CF
-8000
-3000
2000
7000
12000
17000
22000
27000
32000
20152014201320122011201020092008200720062005
2008
crisis
Increasing capital
expenditures but it is
positively correlated with
OCF.This is a good thing. 2008
crisis
Financial focus is long term! Because
there is an increase in CapEx (new
stores, new markets)
BUT, the FCF still shows sustainable
growth.
Microsoft is not as great and stable
as the FCF fluctuates more because
of constant acquisitions of new
companies including a lot of startups.
57. Sept 26, 2015 Sept 27, 2014 B/W A or M June 30 2015 June 30 2014 B/W
Current Ratio 1,11 1,08 B A 2,50 2,50 W
Quick Ratio 1,08 1,05 B A 2,44 2,45 W
Gross Margin 40,06% 38,59% B A 64,70% 68,82% W
ROS 22,85% 21,61% B A 13,03% 25,42% W
ROA 18,38% 17,04% B A 6,92% 12,81% W
ROE 44,74% 35,42% B A 15,21% 24,58% W
DSO (days) 25,95 34,39 B A 68,89 81,03 B
ICD (days) 6,04 6,77 B A 31,62 35,36 B
APD (days) 91,20 96,84 W A 71,82 98,81 W
CCC (days) -59,21 -55,68 B A 28,69 17,58 W
Receivable Turnover 13,87 10,47 B A 5,23 4,44 B
Inventory Turnover 59,64 53,18 B A 11,38 10,18 B
Total Asset Turnover 0,80 0,79 B A 0,53 0,50 B
Equity Multiplier (leverage ratio) 2,43 2,08 W M 2,20 1,92 W
Debt/Assets 58,91% 51,89% W M 54,56% 47,92% W
Debt/Equity 1,43 1,08 W M 1,20 0,92 W
TIE (x) 99,93 140,28 W A 24,70 47,60 W
EPS 9,28$ 6,49$ B A 1,49$ 2,66$ W
Price Earnings 12,24 15,11 W M 29,01 14,96 B
Price to Book 5,31 5,16 B A 4,34 3,65 B
DPS 1,98$ 1,82$ B A 1,24$ 1,12$ B
Dividend yield 1,73% 1,81% W M 2,81% 2,69% B
Divident payout 21,33% 28,03% W M 83,16% 42,11% B
Market Cap (in billions) 633,66$ 575,45$ B A 347,25$ 327,91$ B
AAPL MSFT
RATIOS
APPLEVS MICROSOFT: Ratios
Company is
Growing overall:
Increase in Assets,
Cash, NI, Sales.
Change in
Capital
Structure:
more Debt !
Earning $9,30
for after
paying
dividend !
Not for Risk averse
investors because of
growing debt
Don’t have too much inventory,
& receive cash relatively fast.
Higher cost?
More R&D,
Investment:
Acquisition
x2 ! AAPL could buy 2 MSFTs
Investors like Microsoft!
PE: high potential company;
PtB: assets have a lot of value
67% Better
Apple
March 2016 BIG 4
46% Better
Microsoft
March 2016 BIG 4
CCC is better because
DSO has fallen a lot!
DSO & ICD are falling,
and APD is also falling,
so CCC isWorse.
Small Inventory
& IT corporation
Their Dividend is growing
75% Better than MSFT
Apple
April 2016 BIG 4
The 25% worse comes from DEBT!
Both DSOs are
HUGE: Deferred
Revenue
58. Cash Conversion Cycle Analysis
Buy RM
Receive $:
CASH INSell Product
Pay Suppliers:
CASH OUT
CCC = - 59 days
0Day 6 32 91
APD = 91DSO = 26ICD = 6
59 days to invest money !!
Buy RM
Receive $:
CASH INSell Product
Pay Suppliers:
CASH OUT
CCC = 29 days
APD = 72 DSO = 69ICD = 32
Day 0 72 10132
Have to pay supplier before receiving money Must Borrow (29 days)
59. Comparative Dupont
Higher EM=Higher debts
NI fell while sales
rose
NI rose faster than
stockholder’s equity.
Why? Mostly
because of share
buybacks.
Apple has 2.5 times
more sales than
Microsoft, but only
1.65 times its assets
If Apple had not repurchased 325,032
shares for $36B and had not paid $11.6B of
dividends, OE would have been $194.1B
instead of 119.4B in 2015. And so, ROE
would have been 27.5%.
61. DOL, DFL, DTL
DOL
=Gross Profit/EBIT
DFL
DFL
DTL
=DOL*DFL
DTL
=DOL*DFL
DOL
=Gross Profit/EBIT
EBIT/(EBIT-Interest) EBIT/(EBIT-Interest)
1.28 3.14
1.041.01
3.271.29
Since DFL is close to
1, DOL is close to
DTL
DFL=sensitivity of a
company’s EPS.
DFL=1 means
insensitivity
A high DOL means a
high EBIT volatility
related to a change
in sales
62. Reuters ratios
Apple is 3 times
higher than the
industry
Microsoft’s high
capital spending
growth rate
explained by
acquisitions is
the only growth
rate higher than
its industry.
83% of Apple’s growth rate
are higher than the industry,
while only 17% for Microsoft
Price to
Sales is 66
times higher
in the
industry
than
Microsoft’s
Where are they
competing?
- Apple: Electronic
equipment
- Microsoft: Business
software and
services
63. Reuters ratios
Both companies
are more
profitable than
their industry!
90% of Apple’s
ratio are better
and 82% of
Microsoft’s.They
have locked in
their customers
and are industry
leaders.
Microsoft has
52 times
more LT debt
than equity,
while Apple
has 41.
Apple’s
financial
strength is
100% worse
than its
industry.
64. Reuters ratios
Apple is a top
performer in
Management
effectiveness.
All of its ratios
are twice as
big as the
industry’s
ratio.
Microsoft is
the worst
performer in
efficiency.
NI/employee
is 32 times
better in the
industry!
Overall, Apple is
better compared to
its industry than
Microsoft is. Out of
41 ratios, 68% are
higher than the
industry for Apple,
while 49% for
Microsoft
65. ROA: 17.3% 6.9%. Fell of 10.4% in 10 yearsROE: 25.5% 15.2%. Fell of 10.3% in 10 yearsROS: 30.8% 13%. Fell of 17.8% in 10 years
ROA: 11.5% 18.4%. Rise of 6.9% in 10 yearsROE: 17.8% 44.7%. Rise of 26.9% in 10 yearsROS: 9.5% 22.8%. Rise of 13.3% in 10 years
Assets rose
Sales rose
NI not stable
Assets rose
Sales rose
NI rose
Stockholder’s equity fell due to
share buybacks and dividend paid
NI fell by $4.7B
66. Stock price: analysis over 5 yearsBoth AAPL and
MSFT have
bullish trends
above the 100
and 200 SMAs.
$45.75
$24.05 $55.91
$132.54
From $46 to $104 in 5y : +126%
From $25 to $54 in 5y : +116%
QE3 was announced.
$40 billion/month
purchase by the Fed
Xbox one
announcement. NI
beats analysts and
rose by 19%
AppStore sales rose
50%. App pricing
increased.
Disappointing
keynote.
Announcement of
AppleMusic and iOS9
Stock fell 10 percent
sales slumped in
China and Japan.
Stronger U.S. dollar
that curbed sales
New Lumia
expectations. Ambitious
goal of 1 billion
Windows 10 active
devices by 2018: major
turnaround from failed
purchase of Nokia.
67. Stock price: analysis over 5 years
More globally:
In June 2014, Apple
did a 7:1 stock split
that boosted the
price of its stock. It
became more
affordable by smaller
investors.
In March 2015, Apple
also kicked outAT&T
and joined MSFT in the
prestigious Dow Jones.
The stock price rose 2%
on the announcement
day!
AT&T was the logic loser
since they are competing
in the same sector and
Apple is killing them with
their innovations.
(unlocked phones)
68. Analysts’ Opinion
Current month 3 months ago
8 8 6 6
14 28 13 26
10 30 11 33
1 4 2 8
2 10 2 10
35 80 34 83
2,29 2,44
Strong Buy 1
Buy 2
Hold 3
Underperform 4
Sell 5
Total
Current month 3 months ago
16 16 16 16
24 48 22 44
9 27 11 33
0 0 1 4
0 0 0 0
49 91 50 97
1,86 1,94
-4,27% -6,37%
Apple is more
attractive to investors !
Microsoft is falling fast, so seems
to be becoming interesting!
70. Beta Comparison
Yahoo 1.35566
Reuters 0.94
Yahoo 1.0436
Reuters 0.96
BUSINESS RISK
Foreign currencies
Intense competition=> possible
decrease in operating margin
BUT strong business model
Acquisitions, joint ventures,
stratregic alliances lead to
diversification
FINANCIAL RISK
Microsoft has less cash
and more debt in
2015=> risky
MARKET RISK
Highly competitive market
WillApple be able to continue to
manage frequent product
introductions?
Dependance on suppliers
Currency fluctuations
FINANCIAL RISK
Apple has a lot of cash but has
$53B of debt!!Why?
-93% of cash is overseas
-need to pay dividends and
share buybacks
«We plan to be very active
in the U.S. and international
debt markets in 2016 in
order to fund our capital
return activities »Tim Cook
High betas may mean
price volatility over the
near term, but they
don't always rule out
long-term
opportunities.
Yahoo shows
higher risk
level compared
to Reuters
(they use
different time
horizons)
Deferred revenues are great( 4% of
Apple’s revenues and 25% of
Microsoft’s revenues) because the
company receives cash before it
performs the service!
It drives down the Beta because it
diminishes the overall risk if the
company.
71. Correlation coefficient over 1 year
Correlation
Coefficient
S&P 500 Apple Microsoft
S&P 500 1.00 - -
Apple 0.87 1.00 -
Microsoft 0.23 -0.08 1.00
y = 1.7216x + 0.0036
R² = 0.4777
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
-6.00% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00%
Characteristic Line Microsofty = 1.1946x - 0.0033
R² = 0.433
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
-5.00% -4.00% -3.00% -2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00%
Characteristic Line Apple
Apple Microsoft
Alpha -0.0033 0.0036
Beta 1.19 1.72
CC 0.66 0.69
72. Real Risk Free Rate = 0.33%
Average return on the market =
8.7%
Apple Beta = 1.36
RRR= 11.71%
DividendYield = 1.91%
ERR for the year = 0.41%
ERR for next year= 12.31%
$2.08/$108.99
ERR v. RRR
73. Real Risk Free Rate = 0.33%
Average return on the market =
8.7%
Microsoft Beta = 1.04
RRR=9.03%
DividendYield = 2.61%
ERR for the year = 14.81%
ERR for next year= 13.51%
$1.44/$55.23
ERR v. RRR
Y=8.37×β+0.0033
1.04
9.03%
1.36
11.71%
14.81%
0.41%
BUY
SELL
74. -100%
-80%
-60%
-40%
-20%
0%
20%
40%
60%
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
ROS ROA ROE
-40%
-20%
0%
20%
40%
60%
80%
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
SALES GROWTH
-0.5
0
0.5
1
1.5
2
2.5
0
20
40
60
80
100
120
1995 2000 2005 2010 2015 2020
PRICE/SHARE ($) DIVIDEND (per yr)
-10000
0
10000
20000
30000
40000
50000
60000
70000
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Debt
Let’s buy back
shares
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
TL/TA TE/TA
Buy back as
many shares as
possible to have
more ownership Sales growth is
almost always
positive but very
volatile due to
product launches
7 for 1
stock split
50%
First iPod
introduction
Internet
bubble
burst
First iPhone
introduction
Financial
crisis:Apple
was not hit
20-year History – Apple Cannibalization:
when sales go
down they
launch and the
old product
becomes
obsolete
-50,000
-
50,000
100,000
150,000
200,000
250,000
20152014201320122011201020092008200720062005200420032002200120001999199819971996
OCF
CASH+STI+LTI
SALES
NI
Death of Steve
Jobs=> new
leadership
-10000
10000
30000
50000
70000
90000
110000
130000
150000
170000
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Cash STI LTI
Apple has a lot
of cash. So
imagine the
scale of LTI
75. -
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
20152014201320122011201020092008200720062005200420032002200120001999199819971996
Million$
Cash, ST & LT Investments
Cash STI LTI
Gaming NokiaBillGates steps down
0
5
10
15
20
25
30
35
40
45
20152014201320122011201020092008200720062005200420032002200120001999199819971996
$
Price/Share & Dividend
PRICE/SHARE ($) DIVIDEND
Gaming NokiaBillGates steps down
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Sales Growth
Gaming NokiaBillGates steps down
20Year History – Microsoft
0%
10%
20%
30%
40%
50%
60%
20152014201320122011201020092008200720062005200420032002200120001999199819971996
ROS, ROA & ROE
ROS ROA ROE
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
20152014201320122011201020092008200720062005200420032002200120001999199819971996
Capital Structure
TL/TA TE/TA
Few Competitors:
Sales Skyrocket
StabilizationInternet Bubble
Financial Crisis
More STI:
R&D,
Acquisitions…
Keeping Cash
relatively low
Need to compete!
So: INVEST!
STI = Acquisitions
Windows 98 is
launched
BillGates no longer
CEO Steve
Ballmer
Windows XP
& Gaming
WindowsVista &
Office 2007
BillGates leaves
Microsoft to focus
on his foundation.
MSFT + APPLE
Office for MAC
D: 25%
E: 75%
D: 50%
E: 50%
Financing their
company mostly
through Stock
Because
earnings have
increased
Exceptional dividend
paid: Strong Earnings.
Resulted in Change in
Cap Structure
1998 & 1999:
2:1 Stock Split
Price is
Rising
-
20,000
40,000
60,000
80,000
100,000
120,000
20152014201320122011201020092008200720062005200420032002200120001999199819971996
SALES NI OCF CASH+STI+LTI
Gaming NokiaBill Gates steps down
No dividend
before 2003
STI fluctuations
76. S&P Assigns 'AA+'
Rating to Apple
because of
Unsecured Notes
Offering
Microsoft is assignedAAA
by Moody’s. Only Exxon
and J&J have this privilege!
Moody’s projects a $7B
capital expenditures, $11B
of dividend payments, and
$18B of free cash flow.
Credit rating
77. Weighted Average Cost of Capital
KM = 8.70%
Issued $55.7B Debt in 2015 Issued $30.5B Debt in 2015
WACC = 5.73% WACC = 9.71%
Issuing more Debt, and
lowering cost of debt
Benefitting from Low IR
Growth rate is high (12%)
Smaller Debt compared to AAPL
78. Reputation:
Damaged by
breaking news:
decision not to
help the
government to
find terrorists.
Competition
Google, MSFT,
Sony, Samsung …
Need R&D:
new innovative
products.
Popularity:
Redundant look and feel
of the Smartphone.
New products aren’t
extremely new.
People are questioning
the iPhone’s retail
performance).
Fashionable
luxurious products
or useful products ?
Chinese market:
Devaluation ofYuan
(lower margins).
Disastrous
performance of
stock market.
Acquisitions and Joint
Ventures: NOKIA
Having an adverse effect on
their business: Reputation
& Sales are falling!
Competition
Google DocsVS Office
Popularity
Tablets: Surface Pro
Microsoft 10
(offering for free for
users of 7 & 8)
Piracy
Some organizations use a
large proportion of pirated
software.
Important in Emerging
markets (China)
79. 0.00
0.50
1.00
1.50
2.00
2.50
3.00
20152014201320122011201020092008200720062005
Current ratio Quick ratio
0.00
0.50
1.00
1.50
2.00
2.50
3.00
20152014201320122011201020092008200720062005
Current ratio Quick ratio
Both Companies have small Inventories
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
20152014201320122011201020092008200720062005
Gross margin COGS % of sales
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
20152014201320122011201020092008200720062005
Gross margin COGS % of sales
0.00
0.50
1.00
1.50
2.00
2.50
20152014201320122011201020092008200720062005
Financial Leverage DEBT/Equity
0.00
0.50
1.00
1.50
2.00
2.50
20152014201320122011201020092008200720062005
Financial Leverage DEBT/Equity
Excess liquidity:
(STI 51%TA)
Change in Capital
Structure: CL rising
Software: low cost, but rising:
new products: phone, tablet.
High GM: companies are retaining money to
service other costs; R&D, interest, taxes…2,43
AAPL changing
capital structure
Ratio usually around 1.
Both companies are
taking on more debt!
80. InsiderTransactions
Breakdown Apple Microsoft
% of Shares Held by All Insider and 5% Owners: 0% 4%
% of Shares Held by Institutional & Mutual Fund Owners: 60% 73%
% of Float Held by Institutional & Mutual Fund Owners: 60% 75%
Number of Institutions Holding Shares: 2,440 2,202
Microsoft
Holder % Out
Vanguard Group, Inc. (The) 6.14
Capital World Investors 4.52
State Street Corporation 3.87
BlackRock Institutional Trust Company, N.A. 2.61
Price (T.Rowe) Associate Inc. 2.16
FMR, LLC 1.98
Wellington Management Company, LLP 1.93
Bank of New York Mellon Corporation 1.58
JP Morgan Chase & Company 1.41
BlackRock Fund Advisors 1.33
Apple
Holder % Out
Vanguard Group, Inc. (The) 5.82
State Street Corporation 3.92
FMR, LLC 2.82
BlackRock Institutional Trust Company, N.A. 2.65
BlackRock Fund Advisors 1.30
Bank of New York Mellon Corporation 1.28
Northern Trust Corporation 1.28
JP Morgan Chase and Company 1.11
Invesco Ltd. 1.10
Morgan Stanley 0.93
7 of the major
instititutional holders
detain 19% of the
shares of both
companies.
APPLE
BUY SHORT TOTAL
Last 3 months
NB of transactions 13 9 22
NB of shares 1,890,703 1,341,969 3,232,672
Last 6 months
NB of transactions 25 39 64
NB of shares 2,589,563 2,143,616 4,733,179
Last 12 months
NB of transactions 46 94 140
NB of shares 4,657,899 3,634,687 8,292,586
46% of the transactions took place in the
second half of the year.
57% of the total shares were traded in
the second half.
Most transactions were shorted
BUT
More shares were bought in total. (56%)
48% of the transactions took place in the
second half of the year.
67% of the total shares were traded in
the second half.
Most transactions were shorted
AND
More shares were shorted (99%)
MICROSOFT
BUY SHORT TOTAL
Last 3 months
NB of transactions 7 19 26
NB of shares 6,354 8,040,055 8,046,409
Last 6 months
NB of transactions 13 35 48
NB of shares 10,428 34,924,831 34,935,259
Last 12 months
NB of transactions 34 66 100
NB of shares 764,028 51,527,062 52,291,090
Carl Icahn forced
Tim Cook to
change the
Capital structure
81. The ambushed acquisition road1997:WebTV networks for $425M. “BetterTV
for customers”.The beginning of web videos.
2008: Powerset for $100M: Developed a language
search engine that is now found in Bing.
May 2011: acquisition of Skype from Ebay for $8.5B:
Huge hit! It is now integrated on the XBOX platform
and ditched Windows Messenger. The acquisitions
represented 45% of previous year’s NI. Solid growth.
International calls increased 25% since the acquisitions
and sales went from $800M to $2B in 2 years
June 2012:Yammer for
$1.2B: Microsoft saw an
opportunity in enterprise
social networking. It has
around 4M users and 20%
pay for the service.
Sept. 2013: Nokia for $9.4B
Acquisition cost 55% of last
year’s net income. Most
unsuccessful investment
since MSFT wrote off $7.6B
in 2015
Sept. 2014: Mojang for
$2.5B in cash. Mostly
known its iconic
“Minecraft” franchise that
has more than 23M loyal
users!
Feb. 2016: SwiftKey for
$250M in cash. It shares
strong vision for personal
computing experiences
with MSFT and more than
300M users
Apple has fewer acquisitions.
Only 2 in 2015 that cost a cheap
amount of $20M.The most
important Apple’s acquisition is
Beats Music and Beats Electronic
for a total amount of $3B in 2014.
Aug. 2007: aQuantive for $6.7B. Worst
acquisition ever. MSFT tried to compete
with Google in the online advertising
business. In 2012, it wrote off $6.2B
which represents 93% of its original
value.
In 1997, Microsoft invested
$150M in Apple preferred stock
shares. Redmond’s firm had sold
its entire stake in Apple by 2003.
Today, it would be worth
$21.9B!! What a miss. In
exchange to this investment,
Apple promised to use Internet
Explorer at its main web engine.
“It’s up to products whether Sony
can survive in the wireless
industry.”
“Sony Ericsson has turned to
smartphones based on Android
to lessen market share losses
amid competition from Apple
Inc’s iPhone” Bloomberg
82. Research and DevelopmentApple -Years 2015 2014 2013
R&D expenses
($B)
8.1 6.0 4.5
Growth over
years
35.0% 33.3%
AAPL:
3.5% of total
revenues
extremely
low!!
MSFT -Years 2015 2014 2013
R&D expenses
($B)
12.0 11.4 10.4
Growth over
years
5.3% 9.6%
R&D costs are relatively low ! R&D is
necessary for future growth, therefore it
should be higher.
In addition, MSFT is a monopoly and must
fight to keep its position, R&D is the only
way to keep away competition.
BUT, a huge part of MSFT’s R&D is not
recorded in the I/S! MSFT buys companies to
get their R&D.This only appears in the B/S
when goodwill is written off.
MSFT:
13% of total
revenues
83. Goodwill
Goodwill is intangible and records:
- Brand recognition
- Intellectual property
- Reputation
It is subject to amortization or
impairment test to accurately reflect
the goodwill asset on the balance
sheet
Friday the 8th of April
Wait, you said
impairment? I
don’t get it.
Well, It’s very
easy. Let’s take
the example of
Microsoft!
Another example: in 2013, it acquired Nokia for $9.4B (that includes a high goodwill of
$5.4B to buy intellectual property as well) to enter the Phone Hardware Business. But in
Q4 2015 it recorded a $7.5B charge for goodwill impairment because the business was
not successful.
In 2007, it acquired
aQuantive for $6B to
improve its online
service division
(OSD). In 2012 the
goodwill was
determined to be
impaired because the
OSD suffered from a
competitive market
and a slow revenue
growth. And so, the
company recorded a
$6.2B charge for
goodwill impairment.
Thank you,
this is so clear
now!
84. Share Repurchases – Retired stocks
Apple
2015 2014
Nb of shares O/S beginning of the year (M) 5,866 6,294
Number of shares (M) 255 287
% of the O/S shares acquired 4% 5%
Amount ($M) 30,026 24,000
Microsoft
2015 2014
Nb of shares O/S beginning of the year (M) 8,239 8,328
Number of shares (M) 295 175
% of the O/S shares acquired 4% 2%
Amount ($M) 13,209 6,409
X1.3
X2.1
Apple has entered
into accelerated
share repurchase
arrangements
(“ASRs”) with
financial
institutions.
March 2014-July
2015: 437M ASR
shares repurchase
for $39M.
MSFT
2008: Repurchase program
(expired 2013)
September 2013: Board of
Director approved a share
repurchase program up to
$40B.(no expiration date)
ALL REPURCHASESWERE
MADE USING CASH
RESOURCES
AAPL
Repurchase program:
2012: $10B -> $60B ->
$90B
3rd quarter 2015:
Board of Director increased
share repurchase
authorization to $140 B.
Shares may be repurchased
in privetely negociated
and/or open market
transactions.
Why ?
MSFT: Because it has cash but cannot expand
since the government stops them since it is
already a monopoly.
For both: the interest rates are low so borrow
as much as you can, as long as you can.
For Apple, paying dividends has become too
expensive and they want to decrease dividends
paid by buying back shares.They issue debt to
buy back share. (IR low)
85. 70% ofTA = Cash + STI + LTI
56%TA: LT Marketable securities
Cash & Investments composed of:
Derivatives & Hedges:
to protect themselves
from IR risk and
Foreign currency risk
(a sort of Insurance).
Market value
of it’s
marketable
securities is
DECREASING
R&D expense:
R&D, licensing of intellectual property, and
acquisition of third-party businesses and technology
2014 2015
$6.0B $8.1B
CS:
57%
Cash:
6%
Mortgage &
asset-backed:
8%
USTreasury
securities:
16%
2014 (July, 31)
Acquisitions of Beats Music $2.6B
5.1 million shares of its common stock
Debt to
third party
creditors:
$295M
Net
Liabilities:
$258M
Intangible
Assets:
$636M
Goodwill:
$2.2B
Dividend and Interest Income as
% of STI + LTI:
• 2% in 2015
• 1.2% in 2014
Net LOSS during years
• 2014: 382
• 2015: 93
Unrealized capital LOSS: 0.06%
BUT with Dividend yield: net
Gain: 1.8%
86. 51%TA: ST Investments
Investment:
Cash & ST & LT I: $10B
2014 2015
$85.7B $96.5B
US Gov
securities:
67%
CS & PS:
11%
Corporate
notes and
bonds:
7%
“We invest in a range of emerging technology trends and breakthroughs that we believe offer
significant opportunities to deliver value to our customers and growth for the company.”
STI: $90B
Facilitate liquidity and for capital preservation
Liquid investment
Diversified among industries and individual issuers.
U.S. dollar-denominated securities, but also include foreign currency-denominated
securities in order to diversify risk.
$94.4 billion held by foreign subsidiaries, subject to material repatriation tax effects.
R&D = 13% Revenue
2015 $12B
2015: 16 Acquisitions.
April 25, 2014: Nokia Corporation’s
November 2014: Mojang Synergies AB
2013 to 2014 $995M increase (4%)
2014 to 2015 $9.6B decrease (35%)
Goodwill and asset impairment of
Nokia ($7.5B) & restructuring expenses
($10B)
Dividend and Interest Income as % of STI + LTI:
• 0.8% in 2015
• 1.0% in 2014
Unrealized CapitalGAIN: 5.9% & w/ div: 6.63%
87. Apple’s lock in process
Few early adopters
realized the
commitment they
were making
Once people pay for
the music they want
to listen to it on their
phone as well.
People have
to use the
AppStore
At this point, people
naturally buy a Mac
because they can
use the iCloud and
have access to all
their data.
For more
convenience,
people buy
iPad and
AppleTV
Genius
model
iOS is a new learning system.
Individuals and businesses tend
to choose Microsoft’ s software
(Pack Office), which they
already know how to use.
88. S
A
L
E
S
M
I
X
C
O
M
P
A
R
I
S
O
N
Net sales by product ($M) Revenue 2015 Sales Mix Revenue 2014 Sales Mix V$2015-2014 V% 2015-2014 Sales Mix %
iPhone 157,800 67.16% 122,900 61.50% 34,900 28.40% 5.66%
iPad 21,930 9.33% 29,240 14.63% (7,310) -25.00% -5.30%
Mac 33,610 14.31% 34,390 17.21% (780) -2.27% -2.90%
iPod 1,200 0.51% 2,210 1.11% (1,010) -45.70% -0.60%
Watch 5,200 2.21% - 0.00% 5,200 - 2.21%
iTunes and iOS 14,170 6.03% 10,400 5.20% 3,770 36.25% 0.83%
Apple TV 1,040 0.44% 700 0.35% 340 48.57% 0.09%
Total 234,950 100% 199,840 100% 35,110 17.57%
Net sales by product ($M) Revenue 2015 Sales Mix Revenue 2014 Sales Mix V$2015-2014 V% 2015-2014 Sales Mix %
Devices and Consumer
Licensing 14,969 16.00% 19,528 22.49% (4,559) -23.35% -6.49%
Hardware:
Computing and gaming hardware 10,183 10.88% 9,093 10.47% 1,090 11.99% 0.41%
Phone hardware 7,524 8.04% 1,982 2.28% 5,542 279.62% 5.76%
Others 8,825 9.43% 7,014 8.08% 1,811 25.82% 1.35%
Commercial
Licensing 41,039 43.85% 42,085 48.47% (1,046) -2.49% -4.61%
Others 10,836 11.58% 7,546 8.69% 3,290 43.60% 2.89%
Corporate and other 204 0.22% (415) -0.48% 619 149.16% 0.70%
Total 93,580 100% 86,833 100% 6,747 7.77%
×2.5 ×2.3 ×5.2
iPhone is a key product. More than a phone, a way
of life with an increase in sales 10 pt higher than
the total increase in sales.
This is the future of Apple!These products are
attractive. Excellent business plan
iPad: sales decreased the product is losing fame
and the tablet market is saturated (Surface 3)
But it is still a good way to lock in young customers
« Swipe » trend makes buying apps so easy.
iPod: Apple stopped developing it. Cannibalization
by other products.
It looks like the
iPhone is eating
the sales of
other products.
You can see
why. Nokia’s acquisition and Lumia phone
Decline in the business and consumer PC market.
Expiration of licenses 2014.The decrease in price of Xbox one from 2014 to
2015 was offset by the release of the Surface Pro 3
Office Consumer revenue declined reflecting the
transition of customers to Office 365 Consumer
Subscriber growth
Higher commercial cloud revenues due to
subscriber growth and higher premium mix of
Office 365 Commercial
Increase due to timing of deferred revenues
compared to prior years. (Presale to OEMs)
Even if the Mac represents a bigger part in
the sales mix than the iPad, Apple sold 231M
iPhones, 55M iPads and 21M Macs
89. APPLE
Operating Operating Operating Operating V$ V% Operating
Margin $ Margin Mix Margin $ Margin Mix Mix
iPhone 74,127 78.07% 57,991 73.49% 16,137 27.83% 4.58%
iPad 4,035 4.25% 5,816 7.37% (1,780) -30.61% -3.12%
Mac 10,634 11.20% 11,600 14.70% (965) -8.32% -3.50%
iPod 275 0.29% 529 0.67% (253) -47.92% -0.38%
Watch 1,823 1.92% - 1,823 1.92%
iTunes and iOS 3,760 3.96% 2,778 3.52% 982 35.37% 0.44%
Apple TV 294 0.31% 197 0.25% 97 49.21% 0.06%
Total 94,950 100.00% 78,910 100.00% 16,040 20.33% 0.00%
MICROSOFT
Operating Operating Operating Operating V$ V% Operating
Margin $ Margin Mix Margin $ Margin Mix Mix
Devices and Consumer
Licensing 13,870 22.91% 17,439 29.18% (3,569) -20.47% -6.27%
Hardware:
Computing and gaming
hardware 1,788 2.95% 892 1.49% 896 100.45% 1.46%
Phone hardware 701 1.16% 54 0.09% 647 1198.15% 1.07%
Others 2,022 3.34% 1,393 2.33% 629 45.15% 1.01%
Commercial
Licensing 37,830 62.49% 38,615 64.62% (785) -2.03% -2.14%
Others 4,199 6.94% 1,855 3.10% 2,344 126.36% 3.83%
Corporate and other 132 0.22% (493) -0.83% 625 126.77% 1.04%
Total 60,542 100% 59,755 100% 787 1.32% 0.00%
O
P
E
R
A
T
I
N
G
M
I
X
The iPhone makes up more than 78% of the operating
margin of Apple.This is incredible ! But what happens if
people do not like the new iPhone SE?
The iPhone is clearly the product that drives up the
Operating Margin
v
Even though the iWatch’s part in Operating Mix
increased compared to Mac’s, let’s not forget that
Mac still represent 11% of the Operating Margin.
Apple makes 2% of its profit out of the iWatch.
It only takes into account 5
months of sales for the iWatch (released inApril
2015)
Apple keeps selling iPads even though they do not
make a lot of money on it.
×1.6 ×1.3
Easy margin. Not too much effort ($1 applications)
Microsoft makes no profit on phones. So why buy
Nokia? Not to make profit but to face Apple and
expand their business while spending their extra cash.
Microsoft is profitable in B2B.They sell everything to
other companies in order for them to develop their
own businesses. (Office, Exchange, Skype, etc.)Its second most profitable piece is related to licenses
sold to customers. (MicrosoftOffice,Windows phone
operating system) However, it decreased in the mix
because royalties fell as a result of lower sales by the
licensees.
Microsoft is changing its business plan focusing more in
cloud services and gaming.This leads to a richer mix.
20.33%
1.32%
Overall, Apple’s profitability increased tremendously
compared to Microsoft’s.
90. APPLE
2015
Operating
2014
Operating
2015 v.
2014
Margin % Margin %
iPhone 46.95% 47.17% -0.22%
iPad 18.40% 19.94% -1.53%
Mac 31.65% 33.75% -2.11%
iPod 22.97% 23.84% -0.86%
Watch 35.26% 35.26%
iTunes and iOS 26.53% 26.68% -0.15%
Apple TV 28.47% 28.21% 0.26%
Total 40.40% 39.49% 0.91%
MICROSOFT
2015
Operating
2014
Operating
2015 v. 2014
Margin % Margin %
Devices and Consumer
Licensing 92.66% 89.30% 3.36%
Hardware:
Computing and gaming
hardware 17.56% 9.81% 7.75%
Phone hardware 9.32% 2.72% 6.59%
Others 22.91% 19.86% 3.05%
Commercial
Licensing 92.18% 91.75% 0.43%
Others 38.75% 24.58% 14.17%
Corporate and other 64.71% 118.80% -54.09%
Total 64.70% 68.82% -4.12%
These are the products in which the
companies want to invest in.
Look at the game between Apple and
Microsoft in the phone industy
47% for the iPhone versus 9% for
Microsoft’s phone
Yes but overall Microsoft is doing
better than Apple.
46.95%
9.32%
This is due to Licensing.
40.40% 39.49% 0.91%
64.70% 68.82% -4.12%
92.66%
92.18%
However, Apple’s ROS increased in
2015 whereas Microsoft’s ROS declined
0.91%
-4.12%
The 28% increase in sales of the
iPhone is due to a 37% incease in units
sold maintaining the same operating
margin.
Wow !That’s genius.They did not have
to drop their price.Walmart, BestBuy,
AT&T did it for them.
The future of Microsoft is gaming.That
was their most useful investment.
This is because the gaming industry
has a new target market with not only
geeks playing but a wide range of the
adult population.
91. 67.19%
9.33%
14.30%
0.51%
2.20% 6.03% 0.44%
Sales Mix
iPhone
iPad
Mac
iPod
Watch
iTunes and iOS
Apple TV
16.00%
10.88%
8.04%
9.43%
43.85%
11.58% 0.22%
Licensing
Computing and
gaming hardware
Phone hardware
Others
Licensing
Others
Sales impact and GP% impact
78.07%
4.25%
11.20%
0.29%
1.92%
3.96%
0.31%
22.91%
2.95%
1.16%
3.34%
62.49%
6.94% 0.22%
Operating Margin Mix
-3,000
2,000
7,000
12,000
17,000
iPhone iPad Mac iPod Watch iTunes
and iOS
Apple TV
Sales impact
GP%impact
V$
-5,000.00
-4,000.00
-3,000.00
-2,000.00
-1,000.00
-
1,000.00
2,000.00
3,000.00
The iPad change in OM$ is
decreasing due majorly to
a decrease of 25% in sales
linked to a 19% decrease in
units sold. Apple has no
interest in selling more
since the OM% is falling by
1.5%
Computing & Gaming Hardware is mainly
impacted by GP% which rose by 8%.
In fact, this is due to the decrease in price
of the Xbox outweighted by the release of
the Surface Pro 3.
92. Altman Z-Score
Apple Microsoft
$M 2015 2014 2015 2014
Current assets 89,378 68,531 124,712 114,246
Current Liabilities 80,610 63,448 49,858 45,625
Total assets 290,479 231,839 176,223 172,384
Total Liabilities 171,124 120,292 96,140 82,600
Working capital 8,768 5,083 74,854 68,621
EBIT 73,248 53,867 19,288 28,417
Retained earnings 92,284 87,152 9,096 17,710
Market cap 653,541 596,939 353,737 330,300
Sales 233,715 182,795 93,580 86,833
Altman Z Score 4.41 5.08 3.68 4.07
Distress zone Grey zone Safe zone
1.8 3
0 1 2 3 4 5 6
Working capital/TA
RE/TA
EBIT/TA
Mkt cap/ TL
Sales/TA
Ratio breakdown Altman Z-score
MSFT 2014
MSFT 2015
AAPL 2014
AAPL 2015
0 1 2 3 4 5 6
Working capital/TA
RE/TA
EBIT/TA
Mkt cap/ TL
Sales/TA
Weighted Ratio Breakdown
Altman Z-Score
Watch out!You
may loose your
AAA.The Z score
decreases
Microsoft: safe zone
no risk of
bankruptcy
However, loss of
efficiency: even
though sales rise,
Total Liabilities rise
by 16% and
Retained Earnings
decreased by 49%
Of course = MSFT
rated AAA
Apple: safe zone
no risk of
bankruptcy
But Apple has a
better score than
Microsoft even if in
2015 it decreased by
0.67 pt
Even if sales rose by
28%Total Liabilities
rose faster at 42%
How about a tripleA
for Apple? No,
they plan to increase
their debt
-0.39-0.67
“You have a company that’s in a
highly volatile industry that could
have up to $50 billion of debt five
or six years down the line, just
based on that, it didn’t smell like a
triple-A.” Bloomberg.com
93. Item Coefficient B/S value 2015 B/S value 2014 Bankruptcy 2015 Bankruptcy 2014 B/S value 2015 B/S value 2014 Bankruptcy 2015 Bankruptcy 2014
Cash And Cash Equivalents 1.00 21,120 13,844 21,120 13,844 5,595 8,669 5,595 8,669
Short Term Investments 0.80 20,481 11,233 16,385 8,986 90,931 77,040 72,745 61,632
Net Receivables 0.60 16,849 17,460 10,109 10,476 17,908 19,544 10,745 11,726
Inventory 0.30 2,349 2,111 705 633 2,902 2,660 871 798
Deferred Income taxes 0.00 5,546 4,318 - - 1,915 1,941 - -
Other Current Assets 0.30 23,033 19,565 6,910 5,870 5,461 4,392 1,638 1,318
LT Marketable Securities 0.80 164,065 130,162 131,252 104,130 12,053 14,597 9,642 11,678
Property Plant and Equipment 0.90 22,471 20,624 20,224 18,562 14,731 13,011 13,258 11,710
Goodwill 0.00 5,116 4,616 - - 16,939 20,127 - -
Intangible Assets 0.40 3,893 4,142 1,557 1,657 4,835 6,981 1,934 2,792
Other Assets 0.50 5,556 3,764 2,778 1,882 2,953 3,422 1,477 1,711
Total Assets 290,479 231,839 211,040 166,039 176,223 172,384 117,904 112,034
Total Current Liabilities 1.00 80,610 63,448 80,610 63,448 49,858 45,625 49,858 45,625
Net Cash 130,430 102,591 68,046 66,409
Total Non-Current Liabilities 1.00 90,514 56,844 90,514 56,844 46,282 36,975 46,282 36,975
Net liquidation for Bondholders 144% 180% 147% 180%
Liquidation Value 39,916 45,747 21,764 29,434
Common Share Outstanding 5,753 6,085 8,177 8,299
Net Liquidation Share $111.36 $98.10 6.94 7.52 $43.26 $39.80 2.66 3.55
Comparative Bankruptcy
Comparative Bankruptcy
Of course, cash is KING
STI are easily convertible into cash
LTI are highly liquid (mutual funds etc)
High value of property (Cupertino,
California) that can be sold quickly at a
small discount.
Goodwill: no one cares! Big hit on
Microsoft as they acquired many
companies over the years. On the
contrary, it does not hurt Apple.
It has high value to the competition but
becomes quickly obsolete.
100% 100% 100% 100%
Apple and Microsoft have enough cash to
cover non current liabilities so the
bondholder will receive 100% of their
principal back.
7.67%6.23% 8.92%6.15%
94. Employees’ compensation
- 401(k) retirement
investment plan
- 2014 Employee stock plan:
equity grants to
employees such as stocks
- Performance based award
- Share based
compensation expenses
are $3.8b
- Employee stock purchase
plan: share can be bought
at 85% of their fair value
- 401(k) retirement
investment plan
- Stock based
compensation:
estimation of the fair
value of the award
- Performance based
award
- Employee stock
purchase plan: shares
can be bought at 90% of
their fair value
95. Litigation
AppleVS Microsoft
Apple:
o Apple refunded $32.5M to customers whose
children made unauthorized in-app purchases.
o Lawsuit over IOS8: “devouring storage space”
o May 2014: Samsung and Apple agreed to scale
down their international legal war.
Withdrawal of patent lawsuits in 9 countries.
Had been going on for 3 years: “accusing each
other of infringing patents in their popular
handsets and other mobile devices”.
In May: total damages Samsung to pay Apple:
$119.6 million: was found to have infringed three
Apple patents.
Microsoft VS Health Problems
Nokia & other handset manufacturers and network
operators: defendant in 19 lawsuits
Radio emissions from cellular handsets caused their brain
tumors and other adverse health effects.
Assumed responsibility for these claims.
MSFTVS EU commission
€899M fine for failing to comply to the 2004 decision regarding
Microsoft withholding information for rival companies
OVERALL
As of June 30, 2015, MSFT accrued aggregate legal liabilities of
$614 million in other current liabilities and $20 million in other
long-term liabilities.
Estimate: $1.6 billion in aggregate
1988 (lasted 4 years): GUI lawsuit (Graphical User Interface)
MacintoshVSWindows.
Court decision was in favor ofWindows.
Impact:
• Apple agreed to make Internet Explorer their default browser.
• Microsoft agreed to continue developing Microsoft Office and other
software for the Mac over the next five years.
• Both parties entered into a patent cross-licensing agreement
Apple & FBI facingTerrorism:
- High-profile legal battle between the FBI and
Apple over efforts to gain access to an iPhone that
belonged to one of the San Bernardino shooting
terrorists.
- Looking for remaining terrorist threats related to
the San Bernardino shooters.
- FBI accuses Apple of putting its reputation and
brand marketing over national security or the lives
lost in that shooting, and has essentially painted
Apple as unpatriotic.
- Tim Cook “I don’t think that something so
important to this country should be handled in
this way.”
96. Hot news: Foxconn acquires 66% of Sharp for $3.5b
Does not sell under its own name
Provides chips for Apple and Microsoft
Japanese
Foxconn's purchase
was primarily
motivated by Apple's
need to prevent a
disruption of the
supply of LCD screens
for its products.
Sells LCD screens under its own name
Biggest mobile phone brand in Japan until 2010
1.3M employees 50,000 employees
Foxconn tries to
become a more
attractive partner for
Apple since it uses
Sharp screens. It could
give Foxconn added
leverage in dealings
between the two.
“It will take
considerable money
and effort to turn Sharp
around” Analyst says. It
is not clear Sharp’s
economics make sense.
Taiwanese
97. But then who came
up with this crazy
idea?Why
downgrade a
product?
Are you ready to give
up your big screen?
Léonore added “THE
AUDIENCE” to the
conversation.
Tim Cook sees high potential for
targeting India.
iPhone SE is smaller = cheaper
Tim Cook knows that soon
Indians will be able to afford the
higher-end products.
Remember = he
wants to lock
customers in
Long run
foresight
Does the process of
cornering the market
seem familiar to you ?
Let me give you some
clues!
People are always criticizing
Apple’s new products, but in the
end, each product launched broke
the sales records!
98. Cross gaming field?
It was a BIG failure.
The account started
to insult people.
But who really
cares?
Microsoft
always tries
new things!
“You renew
yourself everyday.
Sometimes you’re
successful,
sometimes you’re
not, but it’s the
average that
counts.” Satya
Nadella
Cloud
Azure’s explosive
growth = reason of
bullishness of the stock
120,000 new
customers per month
Microsoft creates
partnerships with
countries to develop the
cloud Sigfox (french
company)
Sigfox will analyze air
pollution in Lyon “Projet
Lyon air” and the data
recorded will be stored
on Microsoft’s cloud
“We are the
company that
enables people to
do more, to play,
have more fun,
create more. So, in
some sense we refer
to ourselves as the
do more company”
Satya Nadella
99. Producers
Brun-Cosme Léonore
Domenjoud Quentin
Magand Julie
Robert Zoé
A big thanks to Mary !
Thank you to our families and
friends for having borne with
us during this intense
experience
Thanks to Microsoft for being such
a good competitor
Thank you to:
Yahoo
Reuters
Bloomberg
And finally, thank you Audience!
You have attended a Big 4 production
Notas do Editor
An increase in the supply of money typically lowers interest rates, which in turns generates more investment and puts more money in the hands of consumers, thereby stimulating spending.
JAMF Software, a mobile device management vendor for Apple products
Microsoft "makes many of the tools employees actually need … to get their jobs done," Dawson says. "Apple obviously does make alternatives for some of those tools, but in the vast majority of cases they're either inferior or simply not supported by IT departments."
MacBooks and other Apple devices will be more compelling to enterprises if Microsoft starts treating that hardware as a "first-class citizen" for new Office apps and other software, according to Dawson. However, Apple also needs to continue to make it easier for businesses to deploy those devices at scale along with the Microsoft software they need.
"Except for Windows, Microsoft's elements will increasingly need to run on Apple hardware, so the companies will definitely be working together more," Dawson says. "The good thing is that Microsoft has stopped resisting this inevitable outcome, and is instead embracing a future that's as much about third-party devices as its own devices and operating systems."
Gain cometitive advantage = you reach to your customers first
Knowledgeable sales person & engineers
M: 3 Interconnected Ambitions!
Reinvestment productivity and business processes
Intelligent cloud platform
Personal computing
Locked in: Same for MSFT
Microsoft stores in Puerto Rico, Canada, Australia & US
Apple 270 Stores
Link to currencies!
includes both North and South America. The Europe segment includes European countries, as well as India, the Middle East and Africa. The Greater China segment includes China, Hong Kong and Taiwan. The Rest of Asia Pacific segment includes Australia and those Asian countries not included in the Company’s other reportable operating segments.
P33 ANNUAL REPOR
Our D&C segments develop, manufacture, market, and support products and services designed to entertain and connect people, increase personal productivity, help people simplify tasks and make more informed decisions online, and help advertisers connect with audiences
Our Commercial segments develop, market, and support software and services designed to increase individual, team, and organizational productivity and efficiency, including simplifying everyday tasks through seamless operations across the user’s hardware and software
Corporate and Other revenue comprises certain revenue deferrals (advanced payments of unearned revenue), including those related to product and service upgrade offers and pre-sales of new products to OEMs prior to general availability
The Company has also invested in programs to enhance reseller sales by placing high-quality Apple fixtures, merchandising materials and other resources within selected third-party reseller locations. Through the Apple Premium Reseller Program, certain third-party resellers focus on the Apple platform by providing a high level of product expertise, integration and support services.
The Company is committed to delivering solutions to help educators teach and students learn. The Company believes effective integration of technology into classroom instruction can result in higher levels of student achievement and has designed a range of products, services and programs to address the needs of education customers.
Direct OEMs,” as our relationship with them is managed through a direct agreement between Microsoft and the OEM. We have distribution agreements covering one or more of our products with virtually all of the multinational OEMs, including Acer, ASUSTeK, Dell, Fujitsu, Hewlett-Packard, Lenovo, Samsung, Toshiba, and with many regional and local OEMs.
lower-volume PC manufacturers (also called “system builders”), which source their Microsoft software for pre-installation and local redistribution primarily through the Microsoft distributor channel rather than through a direct agreement or relationship with Microsoft.
M&A: Bing (internet server) on Apple phones & Windows Azure uses Iphone apps (2013)
Apple’s revenue grew 1577.66% and Microsoft’s Revenue grew 135.20%
In 2005, Microsoft’s revenues were 2.85 times bigger than Apple’s
In 2015, Apple’s revenues were 2.50 times bigger than Microsoft’s.
NOT THE SAME SCALE
Put numbers !!!!!
Five years of growth in a row except of Net income in between 2012 and 2013.
Slower growth. Net income struggles to climb up because of goodwill impairments.
Smaller % scale than Apple.
HoloLens : pair of mixed reality head-mounted smartglasses developed and manufactured by Microsoft Corporation. HoloLens gained popularity for being one of the first computers running the Windows Holographic platform under the Windows 10 operating system. It was introduced with operating systems, such as Android, iOS and OS X on April 5, 2016.
The pre-production version of HoloLens, the Development Edition, is expected to ship 30 March 2016, and is targeted to developers in the United States and Canada for a list price of $3,000
announced the restructuring of our Phone Hardware business to run it more effectively near-term while driving reinvention longer term.
We completed 16 acquisitions, including Mojang Synergies AB (“Mojang”), the Swedish video game developer of the Minecraft gaming franchise, and others, to strengthen our cloud platform and invest in mobile applications.
An impaired asset is a company's asset that is worth less on the market than the value listed on the company's balance sheet.
Let’s look at the overall picture:
Total revenues of Apple are 2.5 times bigger than microsoft but Apple’s NI is 4.4 times bigger. How why?
First NI of Apple rose by 35.1% while NI of Microsoft fell 44.8%
Second, Revenues of Apple grew faster than revenues of Microsoft
Third: For Apple CGS rose slower than sales =>good but for Microsoft CGS rose faster than sales because of computer hardware and cost of Commercial Cloud.
R&D for Apple grows by 33.5% => good because it’s done internally But for Microsoft it’s only 5.8% so not great since they are in the same sector and should spend as much.
Microsoft $10B expense for Nokia=> major impact on Operating income
Operating income/ is only logical for both companies. Microsoft pays the price of its acquisition
The interest expense V% is high for both companies. Apple has to borrow to keep its promises to its investors and microsoft needs the cash as well to survive.
The 48% and 32% Decrease (MSFT) is Dividend share buy back (bought back more than NI)
Accrued expense: eg: Warranty
MSFT: big portion of TL is Unearned revenue:
Software updates. They have a post-contract customer support (“PCS”) which records deferred revenue from the implied PCS term.
Technology guarantee programs are received before the service is provided: customers receive free or significantly discounted rights to use upcoming new versions of a software product if they license existing versions of the product during the eligibility period.
Revenue related to phones, Surface devices, Xbox consoles, games published by us, and other hardware components is generally recognized when sale is done. A portion of revenue may be deferred when these products are combined with software elements, and/or services.
When IRs are low, borrow as much as you can for as long as you can
The cash flow of Apple rose by $7.2B whereas microsoft cash flow decrease by $3.1B.
Huge OCF for Apple driven by NI. Less OCF for microsoft but still huge.
Comparison both companies overall.
Apple huge growth rates in OCF followed by huge growth in CAP EX. Some crazy numbers
Year 2010-2011. great year
Microsoft: 2008-2009 badly hit by the crisis so cap ex decreased a lot but not enough to have positive free cash flow
Dividend yield: div per share market proce per share. For every 100$ invested i the co’s stock, the shareholder receive … in div
The earnings yield (which is the inverse of the P/E ratio) shows the percentage of each dollar invested in the stock that was earned by the company.Apple invests $9.6 in the stock
Cash return = annual $ income / total $ investment
The business risk - the risk that the business generates lower than expected profits or loses money (and yours!).
The financial risk - the risk the company has taken on too much debt which it is unable to finance and so goes bust.
The valuation risk - the risk we pay too much for a share, minimizing our returns even if the business performs well.
AAPL=
Financial risk
A lot of cash but the majority of it is overseas so they do not want to bring it back to avoid taxation. As a result, they lack cash in the US where all dividends and buy backs are done. => they have to borrow
Given the data on the graph, Apple should have a higher beta than microsoft because it moves faster than the market whereas microsoft follows the market trend.
Although they are in the same sector, Microsoft and Apple are not correlated.
When the market does not move, Apple loses $$$
03/01/2016 -> 13 weeks rate T-bill
Apple : less buy
Microsoft : More buy
2004: NI 8B; 2005: Ni 12B. From 2005 onward: change in Capital structure.
MSFT’s cash is in STI as they make acquisitions. Whereas Apple keeps it in LTI
!!Change in Capital Structure!!
AAPLE: lower WACC: more profitable (lower cost than return) & lower than Km: better for investors.
MSFT: Higher WACC, but still profitable (growing company)
Low IR:
The stock buyback will serve to reduce Apple's WACC, since it can borrow at better than 2% while the cost of equity exceeds 10%. In addition to a low interest rate environment with which to borrow, the interest paid on its debt to bondholders can be counted against its income taxes, increasing its bottom line.
While a negative interest rate environment would mean that high quality corporations such as Apple will be able to borrow cheaper still, a sufficiently negative interest rate will also prompt the company to begin using its stash of cash as it becomes more "expensive" to carry. In fact, by implication, a negative interest rate means that depositors will have to pay to keep their cash warehoused rather than receiving interest income.
Europe is already charging a negative interest rate on excess reserves in the financial system, and with $200 billion of cash on hand overseas, negative rates may cause this balance sheet item to become a burden rather than a cushion.
Companies like Apple will need to weigh the costs and benefits to keeping cash stored that loses value to negative rates, or if it should take the tax hit and put that cash to use domestically. Issuing corporate debt at very low yields in order to take equity shares off the market will lower a company's cost of capital and improve its profitability. It is a rational action to undertake, although opponents to the tactic question its legality and ethics, while also citing that it incentivizes too much debt-taking which can lead to insolvency in a downturn.
AAPL: Reputation: terrorist story with FBI.
Popularity: iPhones all look alike & are similar to other brands (e.g. Samsung); New iPad pro doesn’t offer anything extremely new./ Neither does the iPhone SE (which is coming at a time when questions are being asked of the iPhone’s retail performance)
Competetion: Apple says that its "ability to compete successfully" is dependent on "its ability to ensure a continuing and timely introduction of innovative new products, services and technologies to the marketplace.“
MSFT:
Competetion:
Threat of Google Docs to Eat Into Office Margins Microsoft Office operating margins were around 64% in 2014. Microsoft released Office 365, a cloud-based software, to compete with Google Apps. Under the cloud-computing model, Microsoft would store Office programs on its own servers and deliver them to customers online. Although this is more cost-effective for its customers, cloud-based Office software will cost Microsoft more when compared to supplying software that is installed on the computers and servers of customers. If Microsoft willingly ends up cannibalizing some of its own business productivity products, it could be due to fears that competition and mobile apps are a serious threat to its business long-term and would pressure margins anyway.
Popularity:
Microsoft faces headwinds in tablet market Microsoft launched the next version of Windows - Windows 10- in July'15 which aims to improve the user experience on notebooks as well as tablets. While company's initial Surface tablet was hit with negative reviews, Surface Pro 3 gained some traction amongst users. However, as the competitive tablet industry has already established products such as the Apple's iPad and Google's Android tablets, Windows tablets faces strong headwinds as it tries to increase market penetration.
To counter this trend Microsoft is offering Windows 10 for free to existing users of Windows 7 & 8 to boost its popularity amongst PC’s and tablet. We expect that this trend will dilute Microsoft's pricing and margins.
Piracy Remains an Issue Piracy is an important issue for Microsoft as software piracy in emerging markets is particularly problematic. The problem is grave in China, as some of its biggest organizations (and some segments within government itself) use a large proportion of pirated software. For example, Microsoft estimates that 84% of the Office software and 97% of Windows server software used at China Railway Construction Inc. is pirated. If the Chinese government fails to crackdown on these piracy issues, Microsoft will be left out of a lucrative Chinese market
Taking on more debt compared to equity & using the debt to finance a big part of assets.
Laurene Powell Job Trust:2011-> 5.5 million shares of Apple stock = $560 million stake at Apple
That's not even one per cent of the $65 billion his original 11 per cent stake at the company -> When Jobs was ousted from the company in 1985, he sold almost all of his 11% share
http://uk.businessinsider.com/laurene-powell-jobs-inherited-steve-jobs-fortune-2016-2?r=US&IR=T
Microsoft bought more than 150 companies.
MSFT:
-Applications and Services Engineering Group, focuses on broad applications and services core technologies in productivity, communication, education, search, and other information categories.
• Cloud and Enterprise Engineering Group, focuses on development of our cloud infrastructure, server, database, CRM, enterprise resource planning, management, development tools, and other business process applications and services for enterprises.
• Windows and Devices Engineering Group, focuses on our Windows platform across devices of all types, hardware development of our devices, including Xbox consoles, Surface devices, Lumia phones, non-Lumia phones, Surface Hub, Microsoft Band, and other hardware products and accessories, and associated online marketplaces.
Microsoft Research is one of the world’s largest computer science research organizations, and works in close collaboration with top universities around the world to advance the state-of-the-art in computer science
Icahn Carl: Overestimated Apple’s performance (iPhone 6 did took market share to android, the Apple watch wasn’t that big success and the iPad revenues are not boosted and Apple TVHD is almost dead) estimated share worth $203 when at the time it only worth $100 !
Forbes:” The hedge fund titan sold 7 million Apple shares in the last quarter, worth about $700 million at recent prices. That’s only 13% of Icahn’s prior stake, and he still owns more than $4.4 billion in the iPhone maker. But it’s the first time Icahn has sold since he built up this large position in Apple in mid-2014.
The sale could reflect Icahn’s need for cash–his publicly-traded Icahn Enterprises LP is down 45% in the last year. But it also could be an admission that he was wrong about Apple.”
-> suporter of Trump, may be Treasury Secretary
Why pressure :the company’s enormous net cash position continues to grow while the company’s shares are still dramatically undervalued. With Apple’s shares trading for just $128.77 per share versus our valuation of $240 per share, now is the time for a much larger buyback."
AAPL:
The Company has entered, and in the future may enter, into accelerated share repurchase arrangements (“ASRs”) with financial institutions. In exchange for up- front payments, the financial institutions deliver shares of the Company’s common stock during the purchase periods of each ASR
In 2012, the Company’s Board of Directors authorized a program to repurchase up to $10 billion of the Company’s common stock beginning in 2013. The Company’s Board of Directors increased the authorization to repurchase the Company’s common stock to $60 billion in April 2013, to $90 billion in April 2014 and to $140 billion in April 2015. As of September 26, 2015, $104 billion of the $140 billion had been utilized. The remaining $36 billion in the table represents the amount available to repurchase shares under the authorized repurchase program as of September 26, 2015. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated and/or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.
http://www.forbes.com/sites/petercohan/2015/09/08/5-reasons-carl-icahns-bet-on-apple-is-down-by-577-billion/#78e65c832861
http://www.macobserver.com/tmo/article/carl-icahn-steps-up-pressure-on-apple-and-tim-cook-to-buy-back-more-shares => Carl Icahn
As of September 2, 2015, the Company considers the declines in market value of its marketable securities investment portfolio to be temporary in nature and does not consider any of its investments other-than-temporarily impaired. The Company typically invests in highly-rated securities, and its investment policy generally limits the amount of credit exposure to any one issuer.
Apple issued 5.1 million shares of its common stock to former equity holders of Beats.
Overall, Apple’s sales rose by 17.57% => great
Goods
The iphone is the product that grows the most (key product)=> keep developing it ! High quality features (quality camera, siri, Be careful w/ future new product development and design and target (iPhone SE). Furthermore keep gaining weight in revenues
Ipad: sales decrease by 25% => bad sign for the future of the product. Ipad pro did not have the expected success since the tablet market is saturated. (problem USB key)
Ipod sales are troumendousely down by 46%. They should not develop it anymore (no R&D on the product) but keep customers locked in. (attrack young customers=> children) This product is affected by cannibalization. => macs, iphone, ipads etc can now display music as well so the iPod became less useful and attractive.
Services
iTunes, iOS and Apple Tv are the future of Apple as they do not have any production cost. Apple TV does not need cables so easier to install. It’s becoming attractive.
Microsoft
Operating mix 1.9% for watch but (3.12%) ipad, (3.50%) mac
MICROSOFT PRODUCT CONSISTENCY
Microsoft is trying to force its customers to only buy and use Microsoft software. To do that, they sell the phone that matches with its operating system.
Today someone who has a mircosft computer but also an iphone is forced to download itunes for example. =>not convenient and encourages people to buy only Apple products
Royalties are paid as a % of revenues of licensees. So if licensees revenues from Microsoft Intellectual Property decrease, royalties fall and revenues for MSFT fall.
Licensing which regroups all the microsoft software incliding microsoft office windows server, exchange etc. They are the key dynamic products of the company and Microsoft has been ahead of the game ever since itstarted its business. Even Apple has to conform and people who buy mac need the pack office on their computers so they evolve in a monopoly.
They are competitors in some aspects but as you can see here what drives their revenues is particular to each company.
As you can see iPhone drives both revenues and largin for apple
Licensing drives both revenues and margin for Microsoft
Iphone and licensing are two different categories of products.
For Microsoft, the most lucrative categories are definitely licensing, both for D&C and commercial. And Computing and gaming as well as phone are not the most lucrative and represent less than 5% of the total margin whereas they represent 20% of the sales.
Decrease in RE is due to huge decrease in NI
The decrease is NI is due to impairement charges and integration and restructuring expenses
“You have a company that’s in a highly volatile industry that could have up to $50 billion of debt five or six years down the line, just based on that, it didn’t smell like a triple-A.” Bloomberg
Julie&Léonore
This shows how much $$ shareholders will receive if the companies file for bankruptcy.
TO estimate this amount, we set coefficient to determine coefficient for the assets.
The first thing the company has to pay is the liabilities that is why the coefficient must be 1
Cash and cash equivalents has to be 1 because it is a liquid asset.
Then the company can sell its assets and we estimated that STI which are marketable securities for Apple and equity investment for Microsoft cousl be sold at 20% discount.
PPE high value
Goodwill : do not really care for Apple but important for Microsoft
Apple’s shareholders willl only get back 6.23% of the their initial investment and microsoft’s shareholders willreceive 6.15%
Add something about terrorism and Apple
On February 27, 2008 the European Union (EU) competitions commission announced its decision to fine the Microsoft Corporation €899 million (US$1.35 billion), approximately 1/10 of the company's net yearly earnings, for failing to comply with the 2004 antitrust order.
The first decision in this antitrust case was given in 2004 citing that Microsoft withheld needed interoperability information from rival software companies which prevented them from making software compatible with Windows. The commission ordered Microsoft to provide this information.
Source = seekingalpha.com
India’s GDP is rising so fast !!!
Tim Cook sees high potential for its iphone market in the future.
Quantum break= most audacious game of Microsoft
Azure : service cloud platform of Microsoft
(Data base, calculation, analysis, mobile function, web storage, etc)
Four million developers.
Microsoft gets the technology