Today, Apple concentrates of manufacturing, selling, and marketing high-tier products, including smartphones, laptops, tablets, and other pieces of advanced equipment for personal use. On a global scale, its name is associated with the high quality and integrability of the gadgets that form a united ecosystem for the convenience of the end consumer. In addition to physical items, Apple provides a range of digital services for its customers, the range of which includes cloud storage, financial services, and multimedia platforms. For example, Apple employs its own streaming service, Apple TV+, and its iCloud technology encompasses all modern gadget types, including the famous iPhone series (Yahoo Finance, 2022). This information implies that Apple actively maintains its presence across multiple trending industries, providing its customers with a full cycle of support. The intellectual property of the company is utilized across the globe, contributing to its image of a well-known and established digital-oriented company.
Overall, Apple occupies one of the leading positions in the global market. Thus, the characteristics described above can reasonably be expected to translate into excellent financial performance of the organization. However, the prospects of this high-tech industry attract other players who invest into their operations to win their own share of this profitable global market. In fact, the scope of Apple’s expertise is so large that its specific industry can hardly be determined with absolute precision. It produces and sells a variety of products from computers and peripheries to digital subscription-based services. As a result, Apple is able to engage a broad range of consumers across the globe, but it also faces more intense competition, which is a downside of such a globalized business model. For example, in its core sector, Apple competes for top-tier smartphone sales with Samsung, as well as emerging Chinese brands. Next, the company’s laptops and computers face competition from Asus, HP, and other manufacturers. As far as Apple’s subscription-based services are concerned, the company is matched against Amazon and Netflix.
It is proposed to examine Apple’s position with regards to two companies of similar scales and scopes. First of all, since the majority of Apple’s fame has been obtained through production and marketing of electronic devices, such as iPhones, iPads, and iPods, Samsung is a viable competitor in this industry. In many ways, the business models of the two companies exhibit strong similarities. Samsung actively promotes its high-end smartphone Galaxy Series, the most advanced varieties of which pose serious threats to the domination of iPhone. Even though Apple is superior in terms of market capitalization, its Korean counterpart continues to impose competition-associated risks for the company. It is notable that Samsung pursues Apple’s aspirations in terms of transcending the limits of one single industry, offering both electronic gadgets and supporting digital services to form an ecosystem. For example, the financial service Apple Pay is matched against a similar product named Samsung Pay. Nevertheless, Samsung remains behind in terms of market capitalization and global economy share. On the other hand, it is a major company is South Korea where it contributes to a considerable portion of the country’s gross domestic product.
Within the framework of global high-tech solutions, Apple faces another threat in the form of the company that occupies the second position globally in terms of market capitalization. Microsoft is a renowned giant of technology that operates on a worldwide level and competes with Apple for the title of the most financially successful organization in the market. Unlike the latter, Microsoft does not actively pursue manufacturing and marketing of electronic devices at present. Indeed, this company has made attempts to enter the smartphone segment in cooperation with the leading manufacturers of the past. Nevertheless, Microsoft’s Windows Mobile platform could not attain a level of success similar to that of Apple’s iOS or its own desktop counterpart (Crescioli, 2020). In other words, Apple has outperformed its competitor in the smartphone segment. However, the competition remains active in other spheres, as Microsoft Windows continues to be the leading desktop operating system. In terms of market capitalization, Microsoft may reasonably expect to challenge Apple’s leadership in the near future.
The financial health of Apple, Inc. is to be a key determinant of success in this struggle to remain the most valuable company in the world. In this regard, the organization’s financial statements provide important indicators for this parameter. For the fiscal year 2016, Apple (2017) reported $215,639 million in net sales, as compared to the previous year’s level of $233,715 million (p.1). This decline may reflect a decrease in the company product’s appeal to its target audience. For example, Samsung’s sales saw a simultaneous increase, albeit only by 0.5%, and amounted to $175,510 million (Samsung, 2017). The purchasing power of the consumers is an important determinant of such figures, especially as far as smartphones and other electronics are produced. Apple’s devices are closer to the high-end range, whereas Samsung provides a wider range of products, including more affordable options. Considerable crises may further undermine the ability of Apple to sell its gadgets, which will be replaced by less expensive ones, causing another decrease of sales by about 10%. Nevertheless, the company’s sales remain above Samsung, indicating that serious alarms may be premature.
On the other hand, there is another important item on Apple’s consolidated financial statement for the fiscal year 2016 that shows a different dynamic. The total current assets that are in the company’s possession have shown an increase from $89,378 million to $106,869 million between 2015 and 2016 fiscal years (Apple, 2017, p.2). This parameter is of paramount importance for investors and shareholders, because it reflects the value of the assets that are in a company’s possession and can be sold within one year via standard business operations. The item usually includes liquid assets, including cash and its equivalents, as well as stock inventory. The key distinguishing characteristics is that long-term assets cannot be sold quickly in case of need. In contrast, a company is able to use its current assets to cover the current operating expenses and short-term obligations. This item also reflects whether an organization will be able to withstand the detrimental influence of unexpected crises.
In terms of such expenses endured, Apple’s most serious expenditures have been the purchases of marketable securities. They accounted for $142,428 million in 2016 and $166,402 million in 2015 (Apple, 2017, p.2). This item is an investing activity that consists of purchasing liquid financial instruments, such as common stock and treasury bills, which can be converted to cash. In other words, Apple actively invests in its own liquid assets, taking into account a possibility of short-term liabilities in the near future. This is a positive sign for investors, meaning that Apple has enough available cash to not only ensure its survival but also invest into the market security of the company. By the end of 2016, Apple possessed $321,686 million in total assets, of which $128,249 are the equity actually owned by the shareholders. The cash and cash equivalents were $13,844 million and $21,120 for 2015 and 2016, respectively (Apple, 2017, p.2). The remainder of the assets are liabilities owed by Apple to the amount of $193,437 million, most of which are long-term. Thus, the accounting equation for Apple is 128.249 + 193.437 = $321.686 million.
In other words, Apple, Inc. demonstrates adequate financial health capable of reassuring its investors in the short-to-mid term.
References
Apple. (2017). Q4 FY2016 consolidated financial statements.
Crescioli, T. (2020). Tech giants and competition: A political economy perspective. E-International Relations.
Yahoo Finance. (2022). Apple Inc.
Samsung. (2017). 2016 business report.