Apple reported mixed third-quarter 2014 results with earnings
comfortably beating the Zacks Consensus Estimate despite modest
growth in revenues. Strong iPhone and Mac sales drove robust
performance in China. The company's growing market share in the
BRIC countries as well as in the emerging nations is a major
positive. The partnership with China Mobile will continue to boost
iPhone sales in China. Although iPad reported a dismal quarter, its
growing adoption in enterprises sector is positive. The partnership
with IBM will improve Apple's position in the enterprise market.
However, the company continues to face significant competition from
Asian handset makers, such as Samsung. Moreover, ongoing litigation
issues remain an overhang on the stock. We, therefore, maintain our
Neutral recommendation on the stock and set a price target of
Founded in 1977, Apple Inc. (AAPL) is headquartered in
Cupertino, CA. Formerly known as Apple Computer, Inc., the company
changed its name in Jan 2007. Apple designs, manufactures and sells
personal computers (Mac), portable digital music players (iPod) and
mobile communication devices iPhone and iPad), as well as related
software, services, peripherals and networking solutions,
Revenues are generated primarily from the sale of hardware,
software, digital content and applications, and service and support
contracts. Apple offers various software products and computer
technologies including Mac operating system software, iOS mobile
operating system software server software and related solutions
professional application software and consumer, education and
business oriented application software. In Oct 2011, Apple launched
its iCloud service. The company also sells digital content and
applications through its iTunes Store, App Store, iBookstore, and
Mac App Store.
Apple primarily reports revenues in seven categories iPhone and
related products and services, Macintosh, iPad and related products
and services, iPod, Other Music related products and services,
Software, service and other sales, and Peripherals and other
iPhone and related products and services consist of iPhone
handset sales and Apple-branded and third-party iPhone accessories
sales. In fiscal 2013, the company launched iPhone 5C and 5S (Sep
2013). Apple's tablet computer iPad continued its strong growth in
fiscal 2013. In Oct 2013, the company introduced iPad Air and iPad
Mini with Retina display.
Macintosh includes desktops (iMac, Mac mini, Mac Pro and Xserve)
and portables (MacBook Air, MacBook Pro and MacBook). The iPod line
(iPod Touch, Classic, Shuffle and Nano) consists of portable
digital music players.
Other music related products and services consist of iTunes
Store sales, iPod services and Apple-branded and third-party iPod
accessories. Software, service and other sales include sales of
Apple-branded operating system and application software,
third-party software, AppleCare and Internet services. Peripherals
and other hardware include sales of Apple-branded and third-party
displays, wireless connectivity and networking solutions, and other
hardware accessories including printers, storage devices, computer
memory, digital video and still cameras, as well as various other
computing products and supplies.
Additionally, Apple offers the Apple TV set top box, designed
and marketed by Apple, which can store content on an internal hard
drive or stream it across a network, depending on the needs of the
user. Apple TV is a digital media receiver that plays digital
content originating from any Mac OS X or Windows computer running
iTunes on an enhanced-definition or high-definition (HD) widescreen
No single customer accounted for more than 10% of revenues in
2013. Apple faces significant competition in most of its markets
such as smartphone and tablet, particularly from Asian equipment
manufacturers such as HTC and Samsung. In the personal computer
segment, the company also faces strong competition from Hewlett
Packard and Dell. In the digital music and cloud services market,
Amazon and Google are Apple's primary challengers.
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