Apple (AAPL)
Key Statistics
EV/EBIT = 20.24x
ROE = 175.5%
Debt/Equity = 237%
FCF Yield = 4.54%
Dividend Yield = .61%
Market Capitalization = $2.4 trillion
The Company
Apple is an American information technology company.
Apple was founded in 1976 by Steve Jobs and Steve Wozniak. The Apple I was a basic 8-bit computer for hobbyists. They followed this up with the Apple II in 1977, which was a smashing success. The success of this prompted Apple to go public in 1980, making Steve Jobs and Steve Wozniak quite wealthy.
Steve Jobs began to lose his grip on the company in the 1980s. His chief focus in the early 1980s was developing the Macintosh. This was the first computer with a completely graphical interface.
The 1984 Macintosh, while a revolutionary product, did not achieve the success that Apple hoped for.
The 1984 Macintosh noteworthy for its famous Super Bowl ad.
After the Macintosh disappointed, Steve Jobs was ousted from his own company in 1985.
Steve Jobs went on to found NeXT computer. NeXt was high end computer. Actually, high end is an understatement. The computer sold for $6,500 - or $16,400 adjusted for inflation. Jam packed with the best technology availabe, it was used by CERN to develop the world wide web. The first world wide web server & the first web browser ran on a NeXt computer. Steve Jobs also founded Pixar during his time away from Apple.
Without Steve Jobs, Apple spent a decade in the wilderness. It steadily lost share to competitors. Market share was eroded primarily because Apple computers were much more expensive than the IBM PC and the IBM PC clones. At the time, if a household and business were going to shell out dollars for a computer, they wanted the cheapest ones around that were compatible with other products. This was an IBM PC or one of the clones like Compaq or HP that were fully compatible with IBM PC’s and software.
A key difference between Apple and its competitors is the fact that its operating systems are walled off from development and the software is kept exclusively in-house. Windows and Samsung products, in contrast, can be commoditized and modified.
During the PC era, closed operating systems were a detriment for Apple. A bulk of the cheap products of the PC age were made to go with the cheapest software - Microsoft DOS specifically. This was a significant reason that Apple lost share in the ‘80s and ‘90s.
In 1997, on the brink of backruptcy, Apple bought NeXt. With the purchase of NeXt, they also bought Steve Jobs as CEO.
Jobs turbo charged the company into a new direction. This started with the iMac suite of computers - a dorm room staple in the late 1990s and early 2000s.
In 2001, Apple introduce the iPod, which was extraordinarily successful as an mp3 player. In fact, the first Apple product I ever owned was an iPod and it made the experience of listening to mp3’s smoother than ever before. Unfortunately, I was not smart enough to buy the stock.
In 2007, Apple changed the world with the introduction of the first iPhone. In a time when everyone still had Nokia bricks and flip phones, the first iPhone looked like it was from 20 years in the future.
Smartphones are now everywhere and the iPhone was the first. Within a few years, practically everyone I knew had a smartphone.
Today, Apple sells 4 key products: 1) iPhones, 2) Macs (includes mac computers, macbooks, etc.), 3) iPads, and 4) Wearables & Home Accessories (Airpods, Apple TV, Apple Watch).
Apple also has a ‘services’ segment consisting of: 1) Advertising (third party licensing agreements & the company’s own ad platforms), 2) cloud services, 3) digital content (charges on the app store, Apple TV, Apple Music), and 4) payment services like Apple Pay.
Sales of new iPhone’s are the biggest slice of Apple’s business. iPhone sales represent 52% of total revenue. This is why it is critical for Apple to continue pumping out new & improved iPhones every year to keep customers within the ecosystem.