Apple's Vision and Strategy for Long-Term Growth

APPLE INC. CASE STUDY
OLMA NEXT LTD FEBRUARY 2017
Along with traditional financial analyses, OLMA Capital NBC Ltd commissions
independent researchers to prepare comprehensive studies relating to current and
future portfolio stock selections.
This case study has been prepared by Frédéric Bonelli at the request of OLMA Next Ltd.
We are pleased to share this work about Apple Inc. (AAPL) with you. We hope it will
provide you with the information and insight that will help you gain a more thorough
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2
ABOUT THIS WORK
Frédéric Bonelli
OLMA Next Ltd is contemplating the launch of a
open ended fund. With a combination of youth and
experience, the fund seeks current and future
listed companies that may be disruptive leaders.
These are businesses that are capable to sustain a
high level of growth in the next decade, and thus
offer investors a long term appreciation of capital.
www.olmafund.com
OLMA Next Ltd
Frédéric Bonelli is an independent research
consultant and VC entrepreneur who prepares
content about trends and companies for funds and
investors. He also helps start-ups and SMEs to
produce corporate support materials to help with
fundraising and other promotional activities.
contact@fredbonelli.com
You are welcome to share and adapt this work
Please cite this document as follow:
fredbonelli.com, Apple Inc. Company Review, February 2017
You may distribute a modified version of this work subject to the consent
of Frédéric Bonelli

OLMA NEXT LTD FEBRUARY 2017 3
INTRODUCTION
IN LESS THAN FOUR DECADES, APPLE INC. HAS BECOME THE WORLD’S MOST VALUABLE
COMPANY BY MARKET CAPITALIZATION. APPLE HAS BEEN ABLE TO TRIUMPH THROUGH
STAGGERING GROWTH AND THE BROAD VISION OF ITS MAIN FOUNDER TO CREATE A
COMPREHENSIVE AND CLOSED ECOSYSTEM THAT IMPOSES ITS OWN INDUSTRIAL
STANDARDS. THIS HAS RESULTED IN AN EXTREMELY POWERFUL BRAND. HOWEVER, WITH
STEVE JOBS GONE JUST OVER FIVE YEARS AGO, CAN IT REMAIN THE APPLE IN THE EYE OF
THE CONSUMER?
ONE BILLION APPLE DEVICE ARE ACTIVELY USED WORLDWIDE

5%
12%
12%
14%
57%
iPhone
iTunes
Mac
iPad
Accessoires
4
INTRODUCTION
The world’s highest market capitalization
Five years after inheriting Steve Jobs’s daunting legacy and CEO position, Tim Cook has proved his
worth: under his leadership, Apple has become a market leading record breaker. By 2012, Apple
Inc. had the world’s highest market capitalization1
. On November 25, 2014, it smashed through
the symbolic $700 billion valuation threshold. For the sixth consecutive year, the “Apple”
brand is the world’s most valuable - standing at $178 billion in 2016 – a whopping 87% higher
than second place Google2
. Since Tim Cook arrived at the helm in 2011, Apple has more than
doubled its revenue and market capitalization. Its stock price (AAPL:NSQ) has surged from $10 to
$117 in ten years with a P/S ratio of 2.74 compared with 5.50 for Microsoft and 6.11 for Google.
Founded as a personal computer maker, Apple switched strategy in 2007, brutally disrupting the
mobile telephone sector with the introduction of the iPhone. From the outset, the iPhone was a
game changer and quickly became the new industry standard. Since then, Apple has been
pursuing growth with its own four-axis strategy:
1. Complete control of its value chain – Apple designs its own products, microprocessors,
operating systems, app stores, software, payment platforms and even owns and operates a
network of brick and mortar stores.
2. Unique mix-marketing – Apple applies luxury sector methods and branding to the high tech
sector. It creates a buzz around new products through strategic ‘’leaks’’ and organizes widely-
anticipated events for the launch of new products. It controls distribution very closely by rolling-
out new products slowly and frothing up demand for them.
3. Innovation as an industrial strategy – Apple uses patents, but also restricts competitor
access to resources that are necessary to replicate Apple innovations. This gives Apple an
exclusive competitive advantage for features such as its iPhone/iPad multitouch film, the
aluminum unibody for MacBooks, and Touch Bar for the MacBook Pro.
4. Comprehensive product offering delivered through an exhaustive ecosystem – Apple’s
growth stems from efficient diversification of sales revenues from a range of products, content,
and services. In contrast, Google derives 90% of its revenue from advertising. Apple is becoming
less dependent upon its flagship product, the iPhone. It also gains significantly from its closed
ecosystem; its competitors such as Microsoft, Google and Amazon have open platforms.
TIM COOK FIRST 5 YEARS AS CEO
2007-2016 (million USD)
1 Financial Times Global 500
2 Forbes
Q3 2016
$42.4 b
REVENUE
APPLE GOOGLE MICROSOFT AMAZON
PC Mac computers Chrome browser Surface desk Online store
SMARTPHONE iPhone Android Windows Phone -
TABLET iPad Android tablets Surface tablets Kindle
HOME Homekit,
Apple TV
Google TV,
Chromecast
Xbox,
Insteon Fire TV
CAR CarPlay
Open Automotive
Alliance
Windows in the car -
WEARABLE iWatch,
HealthKit
Android Wear Fit Band Health -
THE USER ECOSYSTEM BATTLE
111.9
314.5
669.4
11
33.4
178
2007 2011 2016 2007 2011 2016 2007 2011 2016
233.7
108.3
24
MARKET CAP BRAND VALUE REVENUE
2x 5x 2x
APPLE REVENUE
by Type, Q3 2016 (million units)
iPhone

1996: Misdiagnosed with multiple sclerosis.
1998: After twelve years at IBM and Compaq, Steve Jobs asks him to join Apple.
2008: Made donation to Barack Obama’s first White House campaign.
August 2011: Becomes Apple CEO, replacing Steve Jobs.
April 2012: According to The New York Times, Cook was the highest-paid CEO among
large publicly traded companies in 2012.
October 2014: Inducted into the Alabama Academy of Honor. Came out as gay in an
editorial for Bloomberg Business.
December 2014: Made donation for LGBT rights.
March 2015: Topped Fortune Magazine World’s Greatest List. Announced plans to
give away most of his $800m to fortune to charity.
October 2015: Receives the Visibility Award at the Human Rights Campaign’s 19th
Annual National Dinner.
5
TIM COOK: CEO
“Apple has always had the discipline to make the bold decision to walk away.”
TIM COOK - CEO OF APPLE INC.
AGE
SOURCE OF WEALTH
RESIDENCE
CITIZENSHIP
MARITAL STATUS
NET WORTH: $785 MILLION
56
Apple
Cupertino, CA
United States
Unknown
EDUCATION
1982: Bachelor of Science from Auburn University
1988: MBA from Duke University
DATE COMPANY POSITION
Jun, 2016 - now Nike Inc
Lead Independent
Director of the Board
Apr, 2016 - now
Robert F. Kennedy
Human Rights
Member of the Board of
Directors
Oct, 2013 - now
Tsinghua University
School of Economics and
Management
Member of the Advisory
Board
Feb 2010 - now
National Football
Foundation
Member of the Advisory
Board
BOARD & ADVISOR ROLES (4)
DATE COMPANY TITLE
Aug, 2011 - now Apple CEO
2007 - Aug, 2011 Apple
COO
Interim CEO
1997 - 1998 Compaq VP, Corporate Materials
1994 - 1997
Intelligent
Electronics
VP, Chief Operating
Officer
1983 - 1994 IBM Corp. Director
WORK

A10 A8x / A9xMICROPROCESSORS S2 A8
6
PRODUCTS & SERVICES GLOBAL OVERVIEW
PC LAPTOP TABLETSMARTPHONE ACCESS.
MAC OS (Sierra) iOS + CarPlayOS
CONTENT
SOFTWARE
ILIFEIWORKS
1 2016 MacBook Pros also use a Apple T1 Chip for the Touch Bar
2 iTunes is a platform of content management that allows synchronization of multiple
devices as well as connecting them to the Store
FINALCUT
DEVICES
OFFICE ADOBE CC
…
…
UTILITIES
& APPS
HEALTHKIT CAREKIT RESEARCHKITCLOUDKIT REPLAYKIT
WEARABLE
watchOS
TV
tvOS
FINANCE
ITUNES2ICLOUD APPSTORE
Wallet
USER DATA
SOCIAL
HOMEKIT
FRIENDSFAMILY
CONTENT : HEALTH : HOME :
SIRI SAFARITIME MACHINEFIND
MESSAGE
CONTACT
CALENDAR
MAIL
NOTES
MAP
…
FACETIME PHONE
MESSAGES
…
PROPRIETARY
3RD PARTY
PHOTOS PODCASTS BOOKS NEWS
DISTRIBUTION
& SERVICES APPLECARE
RETAIL STORES WEBSITE
FINANCE
…
Xeon E5
i5 / i7
i5 / i7 + T11
m3 / m5

0
60
120
180
240
300
2015 2016 2017 2018 2019 2020
7
TO DATE
By early 2016, there were more than a billion active Apple products around the world. As of July, more
than a billion iPhones had been sold since its introduction in 2007.
Between the third quarter of 2015 and third quarter of 2016, Apple posted revenues of $220 billion
even though it did not release any major new products. The iPhone 7 and the new MacBook Pro were
released during the fourth quarter.
The iPhone still represents Apple’s main income stream. It generates more than half of Apple revenues
despite slowing smartphone demand. Apple strategically needs to manage diversiﬁcation of its revenue
streams and successfully impose both its hardware and online ecosystems. To do so, Apple can rely on
the three major assets that it has over its competitors: $237.6 billion of cash assets (4Q2016), its
unique status as both a hardware and software designer, and ﬁnally but not least, its extensive
retail network. That network now includes over 500 Apple stores located in premium locations, third-
party retailers and an online platform (apple.com).
APPLE’S MEDIUM TERM CHALLENGES
1. Manage uncertain outcomes: The Trump presidency and a taxation model
that is being contested by the European Union1
2. Consolidate inroads in the Asian markets, especially China.2
3. Strengthen its content and service offerings to compensate for a weak
growth outlook in the mobile hardware sector, and innovate by launching
new products.
1 http://europa.eu/rapid/press-release_IP-16-2923_en.htm
“The European Commission has concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. This
is illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Ireland
must now recover the illegal aid.“
2 North America remains the Apple’s main market accounting for 40.2% of its 2015 income, while China accounts for
a quarter of global sales revenue, up from 13% in 2013.
“We’re going to get Apple to start building their damn computers
and things in this country instead of in other countries.”
DONALD TRUMP - 45TH PRESIDENT OF THE UNITED STATES
APPLE SHARES VS COMPETITION
Index of comparative share value growth November 2011-November 2016
GLOBAL DEVICE SHIPMENT FORECAST
by device type, 2015-2020 (millions of units)
Penetration rate, the slowdown in the microprocessor speed race, the increase in device
performance, as well as the new hybrid devices with detachable screens are all arguments that
suggest a weak growth outcome in the mobile device retail sector over the next five years.
2000
1600
1200
800
400
0
DesktopsLaptopsTabletsSmartphones
500%
400%
300%
200%
100%
Apple (AAPL)
Amazon (AMZN)
Alphabet (GOOG)
Microsoft (MSFT)
Index S&P 500 (^GSPC)
2012 20142013 20162015
Index 100:
Based on share value 21/11/2011

19/03/2015:
Apple (APPL) enters
the Dow Jones
07/20145  
MARKET CAP:  
700 BILLION USDIPO
TIMELINE
’76 ’80 ’97 ’07 ’09’08 ’11 ’13 ’15
FOUNDED
’16’03
PRODUCTS
LAUNCHES
IPHONE
MARKET CAP
CEO
STORES (487)
STOCK (NASDAQ:AAPL)
Apple become the
largest market cap
77 - 81 : Michael Scott
81 - 83 : Mike Markkula
83 - 93 : John Sculley
93 - 96 : Michael Spindler
96 - 97 : Gil Amelio
’84
Steve Jobs Tim Cook
Macintosh
iPhone iPhone 3G
MacBook
iPhone 4S
iPad
Apple overtakes
Microsoft in terms of
market cap
iPhone 5
iPhone 6
iPhone 6+
iPad Pro
iPhone 6S
iPhone 6S+
iPhone 7
iTune Store
iOS
AppStore
iPad
mini
Macbook Pro
Touch Bar
Apple Pay
Apple Health
Apple TV
iPhone 5C
iPhone 5S
iPhone 4iPhone 3GS
SERVICES
2001
USA
2008
AUSTRALIA
GERMANY
CHINA
SWITZERLAND
2009
FRANCE
2004
UK
2003
JAPAN
2005
CANADA
2007
ITALY
2010
SPAIN
2011
HONG KONG
2012
SWEDEN
NETHERLANDS
2014
BRAZIL
TURKEY
2015
UAE
BELGIUM
2016
MACAO
MEXICO
MacPro
’10
06/2010  
MARKET CAP:  
200 BILLION USD
’12
02/2012  
MARKET CAP:  
400 BILLION USD
’14
11/2014  
MARKET CAP:  
600 BILLION USD
+1,000%
+500%
0%
20162014201220102008
Progression APPL vs. S&P 500
+1,250%
+750%
+250%
iWatch
Apple Music
Mac
AppStore

1/4 MARKET STRATEGY: TRANSITIONING TO A ‘’COOK’’ STYLE MANAGEMENT
Apple under Steve Jobs
More than any major company, Apple’s strategy was and is a reflection of the core
vision of Steve Jobs as founder and CEO. His vision tied together several key
components: a limited number of products, with careful consideration paid to design
and user experience, in an integrated yet closed ecosystem that seeks to hold
customers within the Apple suite of hardware, software and peripherals.
Instead of regular product launches based on studies and market research, Steve
Jobs mostly based decisions on his vision and intuition, and stated “You can't
just ask customers what they want and then try to give that to them. By the time you get it
built, they'll want something new.”
Who is Tim Cook?
Tim Cook graduated from Auburn University with a B.S. in industrial engineering. He
later completed his MBA at the Fuqua School of Business of Duke University in North
Carolina. He spent twelve years at IBM before joining Compaq as Vice President of
Corporate Materials.
In 1998, Cook joined Apple when it was in the midst of a complicated financial
situation. He was first tasked with reorganizing production, logistics and retail as
Executive Vice President of Worldwide Sales and Operations. He was promoted to
Chief Operating Officer in 2005.
Cook replaced Steve Jobs as Apple CEO on three separate occasions beginning in
2009. He was named Chief Executive Officer in August 2011 following the resignation
of Steve Jobs for medical reasons.
Out with the Old - The Dawn of a New Strategy
In October 2012, Tim Cook dismissed Scott Forstall, Senior Vice President in charge of
the iPhone operating system (iOS) and John Browett, VP Retail Operations. These
dismissals came in the wake of increasing criticism over multiple bugs on the newly
released iOS 6. Tim Cook proceeded with an extensive restructuring of Apple’s
management flowchart. The message to management was that autocratic and
conflictual management methods used by princely VPs with inflated egos would not
be tolerated. Cook sought to impose his own management style, which flavors
collaboration, consensus and positive energy.
On the hardware front, things also changed; a new range of models for each flagship
product arrived. Jobs defended the idea of a single model for both iPhone or iPad, but
now each had several versions available in a dazzling array of colors and finish.
(iPhone 5SE/6/6S/7/7+, iPad Pro/Air/Mini). This was Cook’s “products based upon
demand” philosophy. The Apple Watch became another example and the first launch
of a completely new product under Cook’s helm.
CENTRALISED
DECISION MAKING PROCESS
TEAMWORK
FOCUS ON A SMALL
NUMBER OF PRODUCTS
MULTIPLE VERSIONS OF
FLAGSHIP PRODUCTS
“CUSTOMERS DON’T KNOW WHAT
THEY WANT UNTIL WE SHOW
THEM WHAT THEY WANT”
DEVELOPING PRODUCTS BASED
ON DEMAND
S.JOBS T.COOK
SHAREHOLDERS: NO DIVIDENDS SHAREHOLDERS: DIVIDENDS
“You look at what we are great at…But the one thing we do, which I
think no one else does, is integrate hardware, software, and services in
such a way that most consumers begin to not diﬀerentiate anymore.
So how do we keep doing that and keep taking it to an even higher
level? You have to be an A-plus at collaboration.”
TIM COOK - APPLE CEO - DECEMBER 2012

2/4 MARKET STRATEGY : TIM COOK’S 2011-2016 TRACK RECORD
Tim Cook might not be Steve Jobs, but Apple remains Apple
Over the last five years, Apple has not released any new ground breaking products like the
iPhone. This has predictably led to a public outcry from Apple fans and investors. There was a
longing for the legendary Steve Jobs “keynote” unveilings. With his sudden disappearance, the
complicated “spiritual” legacy of Jobs and his leadership style were replaced by the
pursuit of growth and a successful epic management transition.
However, the figures are clear-cut: Tim Cook’s management has been exceptional. Despite
attacks in all its markets, especially smartphones, and growing predatory Chinese competition
and the Samsung rivalry, Apple was able to maintain its core principles.
Most important was sound finance - that is to say, stratospheric profits. In the smartphone
sector alone, with no more than 12.1% market share, Apple achieved 91% of all benefits
generated by all smartphone makers worldwide, around $8.5 billion.
The Apple Watch allowed Apple to take the leading position in the “connected wearable” market.
This was an exceptional Trojan horse into the connected health market. By contrast it had taken
four years for the iPod to gain significant traction.
Apple’s connected watch has already generated billions of dollars since its unveiling in
2015. More units were sold in its first twelve months than iPhones were sold in the year that
they were launched. Over the second quarter of 2016, in the midst of a market slowdown, Apple
sold over 1.6 million Apple Watches, reaping a 47% share of the “connected wearable” market.
Over the last five years under Tim Cook, Apple has had a cash flow of $237.6 billion, and a
rapidly increasing R&D budget, up from $2.43 billion to $8.07 billion (2.24% and 3.45%
respectively of global revenue). There has also been a plethora of innovative start-up
acquisitions, especially in the past 24 months. From this it appears that Tim Cook’s next five
years at the helm of Apple will most certainly be synonymous with spectacular innovation.
0
50
100
150
200
250
2011 2012 2013 2014 2015 2016
215.6
233.7
182.8
170.9
156.5
108.3
2011 2012 2013 2014 2015 2016
81.6
121.3
146.8 155.2
205.7
237.6
0
2
4
6
8
10
12
2011 2012 2013 2014 2015 2016
10.45
8.067
6.041
4.475
3.381
2.429
10
REVENUE
2011-2016 (billion $)
R&D INVESTMENTS
2011-2016 (billion $)
250
200
150
100
50
CASH FLOW
2011-2016 (billion $)

3/4 MARKET STRATEGY: USER BASE EXPANSION/RETENTION
The Quest for a New Customer Profile
Since 2014, Apple has sought to increase its business sector sales to compensate for a
forecasted slowdown in consumer electronics sales. Apple quickly implemented strategic
partnerships with big business-to-business (B2B) players such as IBM, Cisco Systems and SAP.
In September 2016, Deloitte and Apple announced that they had put together a team of 5000
consultants to preach the Apple gospel to businesses around the world.
Apple’s revenues stemming from its incursion into the B2B arena, pitting it against
companies such as Microsoft or Oracle, were $25 billion for 2015, a 40% increase over the
preceding year. B2B was close to zero for Apple in 2013.
The picture looks much less promising for Apple in the education sector. This is a crucial area since
it enables the company to introduce future consumers to its products. Over the first quarter
2016, iOS accounted for no more than 17% of all purchases made by institutional buyers
in the American K-12 education sector. Google’s cheaper Chromebook achieved 51% and
Windows products took 25%. By comparison, the iPad represented 40% of the education
market budget in 2013.
‘’Product as a Service” - Quest for a New Sales Strategy
Customer retention is a vital lever for sales revenue and an art at which Apple excels. It remains
well ahead of competitors with an 87% customer retention rate in the United States and
Europe (February 2015), versus 62% for Samsung. However, like most most luxury brands, Apple
does not offer a loyalty program to customers. For product and service compatibility reasons, the
Apple closed ecosystem encourages customers to make most of their purchases from Apple
acquiring their first Apple product. Hence, the idea behind the Apple Upgrade Program.
Concurrent with Apple’s release of the iPhone 6S, the new Apple Upgrade Program (leasing) was
put in place. The program includes two years of hardware repairs, software support, up
to two incidents of accidental damage, and an annual replacement for a new iPhone.
Monthly payments of $32 to $45 and a 24-month contract enabled customers to trade-in their
smartphones for a new model each time Apple unveils new iPhones. Despite a few initial hiccups,
one out of four iPhones were sold through the program as of Q3 2016.
AUGUST 2014
APPLE-IBM
PARTNERSHIP
DECEMBER 2014
APPLE LAUNCHES TEN
ENTERPRISE TARGETED APPS
AUGUST 2015
CISCO PARTNERSHIP
SIGNED TO OPTIMISE IOS
APPS NETWORK FLOW
MAY 2016
APPLE-SAP
PARTNERSHIP
OCTOBER 2016
APPLE-DELOITTE
IMPLEMENTATION OF A 5000-STRONG
CONSULTANT TEAM TO PREACH THE APPLE
GOSPEL TO BUSINESSES WORLDWIDE
APPLE B2B STRATEGY PARTNERSHIPS
2014-2016
“The deal with IBM … is the ﬁrst of its kind for the two companies and
is an important step for Apple, which had inﬁltrated businesses at an
employee, but not company, level … Apple now has the software
companies wanting devices that employees actually want to use.”
MAX SLATER-ROBINS — ITPRO.CO.UK - MARCH 2016

4/4 MARKET STRATEGY: INTERNATIONAL STRATEGY
Losing Speed in China
Apple’s path to sustained growth in China is rocky. iPhone sales fell 33% over the second
quarter of 2016 in the face of increasingly cutthroat Chinese competition (Oppo, Huawei and
Vivo). Oppo in particular stood-out: it increased its market share from 2% to 22.9% over the
last two years. Oppo finished in first place for 2016 among cellphone makers for domestic
market sales due to powerful field marketing tactics and a commission-based retail system.
Oppo has made no secret about its intent to expand internationally.
Protectionist policies of the Chinese government are not helping; it recently banned
some Apple services such as online sales of books and movies. To tackle these issues, Tim
Cook has visited China seven times and recently announced the creation of R&D centers in
Beijing and Shenzhen. Trump’s arrival to the equation is bound to make matters worse,
especially since he has declared that the United States will not sign the Trans-Pacific-
Partnership.
Emerging Markets, Apple and the Indian Dilemma
China has been unavoidable for Apple since it is such a large market,. However, Apple must
also successfully establish itself in other emerging markets. Smartphone sales
growth rates for industrialized countries such as United States and Western Europe,
as well as China are predicted to drop in the next few years. However, analysts predict
that the Indian market share of the smartphone retail sector will grow 75% by 2019 in terms
of sales volume, and reach 13.5% of global demand. However, Apple must catch-up to stay in
the game. Samsung alone took 29% of first quarter sales in 2016, while Apple
achieved only a measly 2.2%. The issue is that prices of the Apple product range do not
match purchasing power of Indian consumers; only 4% of Indians can afford Apple’s entry-
level smartphone, the iPhone SE, which costs a whopping $600.
To overcome this problem, Apple should produce and market a “low-cost” smartphone
that still fits its business model. This would not disrupt Apple’s luxury/premium brand
strategy which produces a profit of 60% of the retail price of an iPhone 6.
0%
8%
15%
23%
30%
0
5,000
10,000
15,000
20,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2013 2014 2015 2016
APPLE’S MAINLAND CHINA REVENUE
% of total revenue (millions of dollars)
SMARTPHONE SECTOR EVOLUTION
0%
25%
50%
75%
100%
June-15 June-16
25.1%28%
6.8%
9.5% 6.8%
15.1% 9%
13.2%
12%
7.3% 17.4%
20.8%
22.9%
6.1%
Oppo Huawei
Vivo Apple
Xiaomi Samsung
Autres
0%
5%
10%
15%
20%
25%
30%
0%
5%
10%
15%
’15 ‘19 ’15 ‘19
’15 ‘19 ’15 ‘19
China USA
India Brazil
Top five worldwide
per country (volume)
’15 ‘19
China
per company (sales)
UK

1/5 SUPPLY ANALYSIS: HARDWARE
Proprietary Microprocessors: the Key to Success
The successful launch of a new connected consumer electronic device in the hi tech sector
is based on many factors. There must be a careful balance of performance, design, user
interface friendliness (OS and apps), product positioning, price and many other factors.
Apple’s major competitive advantage is due to its unique and historical strategy of
pairing a software/operating system and hardware design. Microsoft, for example,
has historically been a pure systems and software designer, but it has now started to
develop its Surface product line.
It took three attempts for Apple to finally find the "golden egg" in this market when in 2010 it
integrated a microprocessor design model for products following the acquisition of
Intrinsity. Intrinsity was founded in 1997 by 22 veterans of the semiconductor industry.
Since then, the performance of Apple chips has continuously evolved, from the A4 chip in
the iPhone 5 to the A10 fusion chip of the iPhone 7. Now the numbers speak for
themselves; the chip that equips the iPhone 7 is on par with desktop Intel
microprocessors.
Logically, the development of iOS focuses on the optimal exploitation of Apple chips to
consume less energy. Apple’s mastery of the entire value chain allows the iPhone 7 to
benefit from the best battery power/operating autonomy ratio. At equal power and
performance levels, Apple devices consume significantly less energy than other devices.
Thanks to its total vertical integration, Apple is in position to reach total unification
within a maximum of three years. It will have a single operating system and a single set
of microprocessors for its entire range, from mobiles to desktops. The key advantages are:
• A perfectly homogeneous user experience;
• Very high economies of scale in design and productions costs;
• Freedom from dependence upon the output schedule of a contract designer
and supplier such as Intel.
2016 SMARTPHONE GEEKBENCH
Geekbench 4 - average score
“It’s really unprecedented in the industry that a team like this should
crank out such high-quality silicon. Typically, those who crank out
silicon for their own products aren’t industry-leading”
PATRICK MOORHEAD— MOOR INSIGHT & STRATEGY - OCTOBER 2015
Source : https://browser.primatelabs.com
Method: Geekbench 4
Battery Life calculations (battery power / endurance) gsmarena.com data with the following settings :
Calls = 1:30h / Web Browsing = 3:30h / Video playback = 1:00h
DEVICE SINGLE-CORE MULTI-CORE EFFICIENCY AUTONOMY
Apple iPhone 7 Plus
Apple A10 Fusion @ 2.3 GHz
3306 5358 64.4 45
Apple iPhone 7
Apple A10 Fusion @ 2.3 GHz
3298 5342 53.0 37
Samsung Galaxy S7
Samsung Exynos 8890 @ 1.6 GHz
1785 5201 73.2 41
Samsung Galaxy Note 7
1760 5166 74.5 47
Huawei P9
HiSilicon Kirin 955 @ 1.8 GHz
1734 4827 76.9 39
Samsung Galaxy S7 Edge
1728 5170 66.7 54
OnePlus 3
Qualcomm MSM8996 Snapdragon 820 @ 1.6 GHz
1699 4021 85.7 35
LG G5
1658 87.5 32
Xiaomi Mi 5
1620 60.0 50
HTC 10
1611 83.3 36
Google Pixel XL
Qualcomm MSM8996 Pro-AB Snapdragon 821 @ 1.6 GHz
1580 4035 84.1 41
Google Pixel
Qualcomm MSM8996 Pro-AB Snapdragon 821 @ 1.6 GHz
1573 4013 68.8 33

2/5 SUPPLY ANALYSIS: OS & SOFTWARE
MacOS (Sierra): Ever Closer to a Unified System
In terms of functionality and performance, the two main operating systems, Windows 10 and MacOS
Sierra, seem to be equal. However, the know-how developed by Apple on the mobile version of
iOS provides an undeniable competitive advantage, especially its user experience
“mobility” phenomenon. Apple is now very close to a unified watch/mobile/home/desktop
ecosystem. This is evidenced by the recent MacOS Sierra Universal Clipboard and Siri virtual assistant
now being available on all Apple hardware.
Windows device integration suffers from the delay taken in the mobile sector during the Steve Balmer
era. In less than a decade, consumers have made their choice, and that choice is a mobile OS that
comes free with the purchase of a mobile device. This pairing is now the mainstay of any digital
ecosystem. Unfortunately for Windows, its mobile sector share is less than 0.4% of the
market as of August 2016.
Google’s mobile OS, Android, peaked at 87.6% market share. However, it suffers from the need to
simultaneously maintain the plethora of versions that are used on hundreds of devices from a variety
of brands, bringing added costs and security risks. Apple however, with 11.7% of the market, only
needs to develop for its own devices. It has a closed ecosystem under the Apple Appstore that
requires that each App be subject to verification by Apple. This curtails the risks of malicious attacks
and pernicious code.
Apple: Leading Software Designer by 2020
Apple’s numerous acquisitions provide a strong indication of what will be the important
components of the software environment of any digital ecosystem by 2020. Apple’s cash flow
of more than $237 billion means it can afford to simultaneously chase the best talent, create research
departments with several thousand engineers, and acquire any startup, patent or license it desires.
Most importantly, it can afford to be wrong and does not hesitate to backtrack when it needs to, as
evidenced by Tim Cook’s admission regarding Apple’s electric vehicle project code-named “Titan".
As the “next big thing”, Apple is working on a structured augmented reality development environment
for trendy Pokemon Go type applications. It appears Apple will offer this environment for its iPhone 8,
which is expected in September 2017.
Camel Audio
Digital synthesizers
softwares
Emollient Facial recognition
Faceshift Motion Capture
Flyby Media Augmented Reality
FoundationDB Database
LearnSprout Educational softwares
LegbaCore Security softwares
Gliimpse Medical Data
LinX Imaging Cameras
Coherent
Navigation
GPS
Metaio Virtual Reality
Mapsense GPS
Perceptio Deep-Learning
Semetric
Music analysis
software
VocallQ Deep-Learning
Turi Inc Artificial Intelligence
MA JOR APPLE ACQUISITIONS 2015-2016
Selected Examples
IOS VS ANDROID
Distribution of active versions of IOS and Android (September 2016)
34%
61%
iOS 9
iOS 10
Antérieur à iOS 9
19% 16%
28%
35% 5.x (2014)
4.4 (2013)
4.1-3 (2012)
6.x (2015)
3-2-1.x (<2012)
7.x (2016)
iOS
ANDROID
2,9%
4,8%
0,1%
iOS Android Others
Market
share
87,6%
11,7%
74%
4%
Malware

Q3
2014
Q3
2015
Q3
2016
Chine USA Japon
15
3/5 SUPPLY ANALYSIS: SERVICES
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
1
2
3
4
5
6
7
8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
6.3
6.06.06.1
5.15.05.04.84.64.54.64.44.3
4.04.1
3.7
SERVICES/SOFTWARE REVENUE
2013-2016 ($ billion and % Total Revenue)
2013 2014 2015 2016
$b
-30
-20
-10
0
10
20
30
REVENUE YEAR-OVER-YEAR CHANGE
(%YoY of Q4 2016)
iPhone iPad Mac Services Other
The Rise of a New Business Model?
The iPhone is without a doubt the most significant step in the Apple’s history. However,
it is important to understand that Apple also owes its incredible growth to intangible
disruptions. The common denominator of the ever powerful GAFAM (Google, Apple,
Facebook, Amazon, Microsoft) is their ability to construct an innovative and new
business model:
• Microsoft: the software license model;
• Amazon: the online retail model;
• Google: the Adsense/Adword model;
• Facebook: the social network model;
• Apple, inventor of the AppStore model.
In the second half of 2016, services accounted for 13.8% of Apple’s turnover. In the
fourth quarter alone, services increased 24% overall, including:
• Apple Music: + 22% vs. Q2-2016;
• AppStore: 43% YoY 09/2015 - steady increase over five straight
quarters;
• Apple Pay service + 500% YoY from September 2015.
Apple App Store: Quality and Profit
The Apple App Store offers less selection than its competitor Google Play, but better
quality; each App is validated by Apple teams and thus are less exposed to malware.
The Apple Store also stands out for its record breaking profitability, four
times that of Google Play.
As of Q3 2016, China has become the biggest market for the Apple AppStore
and Google Play is absent from China. Thanks to entertainment Apps, 75% of
turnover is generated on the AppStore.
APPLE VS GOOGLE APP STORES
(Indexed - Q3 2016)
0
50
100
150
200
iOS App Store Google Play
Downloads Revenue
APPLE STORE TOP THREE
(Revenue - $ billion Q3 2016)
100
215
100
50
2,0
1,5
1,0
0,5
0

4/5 SUPPLY ANALYSIS: SERVICES - APPLE PAY
Apple Pay
“Touchless” in-store mobile payments are a principal strategic challenge for next few years in
digital services. In the United States alone, the mobile pay-as-you-go market is expected to
reach $210 billion by 2019. This compares to an expected $27 billion in 2016. Apple is
therefore betting big on this market, as its pioneering roll-out of Apple Pay in 2014 demonstrates.
The release of Apple Pay coincided with the appearance of fingerprint sensors on iPhones, which
are also now on laptops. These make for safer transactions. Google Wallet has been around since
2011, but it does not have Apple's major competitive advantage: its "closed" ecosystem. This
ecosystem enabled Apple to impose its payment app on all iOS devices. Google’s payment
system had to be manually installed on Android devices. Google eventually corrected its strategy
with the introduction of Android Pay in 2015, and by negotiating with the cellphone operators to
equip smartphones with the app.
Apple and Google are not alone in trying to impose mobile contactless payments. Other
contenders include:
• Tech giants: Samsung, Amazon, Paypal, Facebook
• Banks: Chase, Capital One
• Retailers: Walmart, Kohl’s and others
Banks have a particular interest to gain a foothold in the tap-and-go market in order to control the
means of payment. As for retail players, the development of a mobile payment service is a sure
way to save on bank transaction commissions. However, Apple has successfully lined-up the
assets to its advantage: first to market, present on 100% of iOS devices, an 80 million strong
iTunes user base, rapid launch internationally. It also very quickly became available
through a critical mass of merchants, and unlike credit card companies, charges no
transaction fees (Visa/Mastercard charge 2% to 4%).
Despite major competition, Apple seems to be successfully achieving its implementation of Apple
Pay. Apple had ten million users worldwide by the end of 2016 (+ 450% YoY). In the United States,
three-fourths of contactless transactions were done using Apple Pay. There are more than three
million businesses in the United States and more than eleven million globally that are equipped to
receive Apple Pay payments. In terms of value, one out of every two transactions took place
outside the United States.
MOBILE PAYMENTS USERS
number of users - Q1 2016 USA
Source : eMarketer/Apple
2015 2016
APPLE PAY AVAILABILITY
2014-2016 (country to country)
Users of the mobile payment service completed more
transactions in September 2016 than in
the entire year of 2015.
Transaction volume was up 500% in the fourth quarter of 2016,
compared with the same quarter in 2015.
2014
ANDROID PAY
SAMSUNG PAY
APPLE PAY
0 5 10 15
6%
1%
4%5 Million
5 Million
12 Million
% of users among Apple Pay enabled smartphone users
LAUNCHED

5/5 SUPPLY ANALYSIS: SERVICES - APPLE HEALTH
HEALTHKIT
CAREKIT
RESEARCHKIT
HUMAN 7 MINUTE CARROT FIT FITSTAR
ENDOMONDO WEBMD STARVA NOOM COACH
WITHINGS
WS-50
BEDDIT
JAWBONE
UP3
WITHINGS
BPM
IHEALTH
PULSE
IHEALTH
BPM
Compatible Apps & Devices
IPHONE WATCH HEALTH APP
DR CHRONO
PATIENT IO
HEALTHLOOP
SHARECARE
EPIC
Electronic Health Record
Third Party Apps Consumer
Doctor
Health plan
Hospital
Patient
Manual Input
The Health Sector - a Dedicated Market
In March 2016, Apple introduced CareKit, the third and final tool package
for developers that design health dedicated apps. Sophisticated, effective,
and unanimously acclaimed by health professionals, this development environment
also relies on several remarkable start-up acquisitions including Gliimpse.
APPLE HEALTH SERVICE MAP
“When you look at most of the solutions, whether it’s devices, or things coming up out of Big Pharma, ﬁrst and foremost, they are done to get the
reimbursement [from an insurance provider]. Not thinking about what helps the patient. So if you don’t care about reimbursement, which we have the
privilege of doing, that may even make the smartphone market look small.”
TIM COOK— APPLE CEO - AUGUST 2016
The global mHealth market accounted for an estimated revenue of $13.7
billion in 2015, and is expected to grow at a CAGR of 34.0% from 2016 to 2022. The
mHealth apps segment is expected to witness the fastest growth among various
products and services, with a CAGR of 40.1% over the forecast period.
CLOUD DATA STORAGE

MATRIX: PORTER 5 FORCES
LEVEL OF COMPETITION: STRONG
Apple is competing in every segment (smartphone, tablet, laptop, Apple TV) and
also against other high tech generalists who seek, like Apple, to impose their global
digital ecosystems: Amazon, Google, Microsoft, and to a lesser extent, Facebook.
Apple enjoys a designer-manufacturer core business that constitutes a very strong
barrier to entry, and it projects very powerful brand capital. However, that barrier
alone will not alone discourage consumer transition from one ecosystem to
another: Apple must simply remain the best, always.
INDUSTRY RIVALRY
THREAT LEVEL: LOW
The bargaining power of suppliers is quite low given the multitude of them
available. For most of Apple’s historical suppliers, Apple is a major customer
that they cannot risk losing.
Some designers and manufacturers are suppliers of both Apple and
Samsung. The fierce commercial competition between "designers" can
impact and interfere with their "supplier" status with Apple.
BARGAINING POWER OF SUPPLIERS THREAT LEVEL: MODERATE
Apple’s customer satisfaction and brand loyalty are the highest in the market.
Several recent disappointments could erode customer loyalty, particularly since
competition has intensified and now attacks Apple on its traditional stomping
ground, innovation. Examples include
• SMARTPHONE: Samsung and its curved screens, Xiaomi and its "full" screens
and Google and its Pixel models.
• COMPUTERS: Windows Surface, and perhaps other newcomers.
Apple attracts new buyers to its systems through the development of features
(e.g. Apple Pay, mHealth) but competition could catch up.
BARGAINING POWER OF BUYERS
THREAT LEVEL: MODERATE
Whatever the product, the threat of new entrants is quite low since the
market requires heavy investment in communications, R&D and
manufacturing.
Chinese players have risen quickly and perform outstandingly well in the
domestic market (Oppo, Vivo, Huawei, Xiaomi). However, they are struggling
to expand outside Asia due to a lack of brand recognition.
THREAT OF POTENTIAL NEW ENTRANTS
THREAT LEVEL: VERY LOW
The multifunctional aspect of smartphones has developed quickly in recent
years, and it makes the notion of substitute product obsolete.
As for computers, tablets with detachable keyboards appear to be credible
alternatives. Apple therefore did not hesitate to design detachable models
from its own products, even if it had to cannibalise its own laptops in the
process.
THREATS OF SUBSTITUTES

MATRIX: SWOT
Financial stability: Apple’s treasury is flush with $237.6 billion as of 2016, an
amount unparalleled in history for a private business. This gives Apple a margin to
maneuver and jostle all sectors with which it is involved.
R&D investments: After an investment of close to $10 billion in R&D in 2016 alone,
Apple continues to maintain a solid culture of innovation.
Strong branding: Apple has a strong brand image and its premium stores enable a
global presence. Releases of new products remain much-anticipated global media
events.
Ecosystem: Apple has developed connectivity between its products, encouraging
customers to buy more of the interconnected Apple products.
STRENGTHS
Market opportunities: Apple is able to soundly project itself into many high-
potential service markets throughout its user base with its business, marketing and
technical resources. These markets have included the mobile payment market with
Apple Pay or Healthcare with Apple Health.
Samsung Galaxy Note 7 scandal: In September 2016, after numerous battery
explosions, Samsung recalled its flagship product for the second time. The image of
Apple’s main rival was strongly affected by the scandal. Analysts expect the impact
will be long lasting since several other problems still trouble the Korean
conglomerate. In addition, Samsung leader was arrested in February 2017 for
bribery and embezzlement as corruption scandal deepens.
OPPORTUNITIES
Legal proceedings: In February 2016, Apple was found guilty of using four patents
from VirnetX, a company that specialized in mobile security technology. A month
prior to that, Apple was sued by Dot 23 Technologies LLC for integrating three of its
patents into the Siri application. Other lawsuits are pending against the company.
iPhone dependency: With close to 64% of revenue from the iPhone family of
products, Apple remains overly dependent on its flagship product.
iPhone 7 launch problems: Following launch, the iPhone 7 quickly went out of
stock, testifying to less than ideal sales management and associated logistics.
In China, many iPhone 7 users reported network connectivity issues and the brand
image suffered accordingly.
WEAKNESSES
Increasing competition: Competition in the smartphone market has grown
tremendously with the emergence of many new players, especially in China with
Xiaomi, Vivo and Oppo. Although these competitors are now mainly present in the
Chinese market, their internationalization is a real threat to Apple since their
products are innovative, well made and well priced.
Android market penetration: Google dominates the mobile device market in
terms of penetration rate thanks to its open Android OS. Despite its critical mass,
Google is still struggling to find profitability. However, it has the means to continue
to seek the perfect business model.
THREATS

MATRIX: PESTEL ANALYSIS
Fiscal policies of the United States and Europe are
evolving towards stricter taxation of multinationals.
The Chinese government exerts ever greater control
over Apple’s digital content in China (the Apple book
and movie online platform is blocked).
Apple is making efforts to obtain favors from the
Chinese government (e.g. construction of R&D centers
in Beijing and Shenzhen), but it is becoming increasingly
dependent upon China, since it is the largest
contributor to its turnover. The growing bond between
Apple and the Chinese government could harm the
image of the brand, especially in Europe and the United
States. Donald Trump wants Apple to manufacture its
products in the United States.
POLITICAL
Competitors like Samsung and Google are showing
great abilities to emulate Apple products.
Many Apple products, like Apple TV for example, cater
to a limited market.
TECHNOLOGICAL DEVELOPMENT
Labor costs are increasing in China. The increase in
value of the dollar makes it more costly to develop
international markets, especially in key markets like
Europe and China.
The emergence of a middle class in many developing
countries makes it possible to foster greater demand
for premium products such as the Apple products.
ECONOMIC
Apple has successfully developed a more eco-friendly
image, particularly through efforts to bring renewable
energy power to its plants. As of 2014, 100% of Apple
operations in the United States and 87% of global
operations are powered by renewable energy.
Tim Cook made a strong statement by hiring Lisa
Jackson, after she stepped down as the head of the US
Environmental Protection Agency.
ENVIRONMENTAL
Apple has greatly enhanced its image as a socially
responsible corporation. Tim Cook has taken a
committed position on the subject:
• Involvement in the Fair Labor Association;
• A high profile op-ed in the Wall Street Journal in 2013
stating Apple support for workplace equality and
urging Congress to support the Employment
Nondiscrimination Act;
• Resistance to demands from the FBI that it should
create backdoors to its own encrypted software.
SOCIAL
Apple’s European tax scheme, with profits accrued to a
practically untaxed head office, was fiercely denounced
by the European Commission.
Apple is increasingly being attacked on issues related to
patents and branding and is also targeted by class
actions that tarnish its image and that of its products.
LEGAL

Q&A
What are the consequences of Apple’s fiscal strategy?
In August 2016, the European Commission ordered Apple to hand over
thirteen billion euros plus interest to Ireland in unpaid taxes.
This tax award was instigated by Margarethe Vestager, European
Commissioner for Competition. She had examined similar cases of deals
between companies and countries of the European Union such as those
between the Netherlands and Starbucks, and Luxembourg and Fiat. She
called them "sweetheart deals”.
The European Commission is challenging Apple’s two main divisions in
Ireland: Apple Sales International (ASI), which collects company revenues
from Europe, Middle East, Africa and India; and Apple Operations Europe
(AOE), with is responsible for, among other tasks, the manufacture of
certain MacBook components.
According to the European Competition Commission, these companies
and in particular ASI, funneled most of their profits to a head office that
had no premises or employees. Apple benefited from unfair terms of
taxation negotiated directly with the Irish Government. Instead of the
standard 12.5% profits tax for non-resident companies, Apple paid no
more than 0.05% to 2% on all its worldwide revenues, excluding the
United States.
The three protagonists involved in the case made legal-fiscal arguments to defend their
respective interests:
• Apple fears receiving another very expensive retroactive tax adjustment and has
already been defeated in terms of image by the scandal.
• The European Commission wants to set an example to restore its image in a context
marred by Brexit and a concern for depleted authority vis-a-vis member states.
• Ireland fears losing its status as a “legal tax-heaven” which enabled it to attract many
foreign corporations that have adopted financial structures similar to Apple.
Both Apple and the Irish government have voiced their intent to appeal the decision put forth
by the European commission.
“In 2011 Apple Sales International made a profit of €16
billion, less than €50 million euros were allocated to the
Irish branch, The rest, the huge majority, was allocated to
the so-called head office where they remained untaxed…
For every €1 million in profits, it paid just €500 in taxes.”
MARGARETHE VESTAGER
EUROPEAN COMMISSIONER FOR COMPETITION - AUG 2016
AOE
ASI
APPLE INC.
EU stores
HEAD OFFICE
Irish
staffed
Irish
staffed
PROFIT
ALLOCATION
No-Tax residence
“paper” company
with no employees
US
staffed
R&D
financing
APPLE OFFSHORE STRUCTURE
simplified and focused on EU
Commission claims
ASI: Apple Sales International
• Handles the import and distribution of
Apple products after their manufacture in
China—everywhere outside the Americas.
• Accounts for 99.6% of the €13 billion figure
• Non-resident company (Head Office) that
has an Irish branch.
AOE: Apple Operations Europe
• Was the more important company of the
two subsidiaries when the 1991 tax deal
was put in place.
• Makes MacBooks and provides shared
services to Apple’s EMEA subsidiaries.
€13 BILLION
demanded in back taxes =
100% Ireland
healthcare budget
27% of Apple
2015 profit
OR

Q&A
Is the Apple Watch a failure?
Launched in September 2014, the Apple Watch was not the first smartwatch
on the market. Samsung launched the first of its kind, the Galaxy Gear, in
September 2013.
For many analysts, the Apple Watch is an emblem of the Apple era under
Tim Cook; it was the first innovative product released by Apple since the
death of Steve Jobs. Although it is not a true game-changer on the scale of
the iPhone, the product meets real market demand.
In order to properly assess the Apple Watch sales figures and its medium-
term potential, one must avoid the pointless comparison with the traditional
mechanical watch market1
. Although it is worn on the wrist and looks like a
traditional watch, the Apple Watch is far from just a watch. Apple Watch is a
new connected device, which will only reveal the full possibility of its
functionalities by the fourth or fifth generation.
1 Who would seriously try to compare the bicycle market to the motorcycle
market under the pretense that they are both two wheelers?
[…] The Apple Watch started shipping almost one year ago. […] Is it essential for daily life? Of course not.
Chances are you already own an iPhone, which has many of the same features. But you can’t wear an
iPhone on your wrist, and that’s why the Apple Watch will become a key component in Apple’s product
lineup—even if it doesn’t seem like it yet.
[…] Apple recently filed a patent application for smart watch bands with modular pieces. The patent
covers a band that has multiple links, each with an electrical component. Those components could
include an actuator, an electricity generator, a photovoltaic cell, a speedometer, GPS, a thermometer, a
blood pressure sensor, a sweat sensor, a magnetic field sensor, a speaker, a force sensor, and more,
according to Apple’s filing on March 31. […] Millions of Americans avoid going to the doctor until they
absolutely have to. The watch could be a preventative health device, nudging you to seek medical
attention when your heart rate is irregular or when the cortisol levels in your sweat are abnormal. With
CareKit apps, you’ll be able to immediately share that data with a doctor. Health insurance companies
and the employers who pay them will love this.
“Apple Watch's second year:
Health apps will make it a
must-have
Forget Hermès bands. Let's think bigger.
by Caitlin McGarry
April, 2016
http://www.macworld.com/
“
Several generations of Apple Watch are necessary given the
technological breakthroughs that are still needed to house potential
components into such a small device and to develop a truly long lasting
battery. This is the main challenge that Apple faces: to fully occupy the
market space in terms of market share, and to develop the strategic
partnerships that will allow it to prepare for the market’s future.
On September 29, 2016, an Apple partnership with Aetna was made
public. The healthcare provider, which covers about 23 million people
in the United States, is now subsidizing the price of Apple Watch for
customers as part of its wellness reimbursement plan (cash back for
exercise). As part of the agreement, Aetna will also create multiple
health apps for the iPhone and iPad - these are set to be released in
2017. As a start, Aetna said that its almost 50,000 employees will be
eligible for an Apple Watch at no cost.
The iPod, iPad and iPhone each took years to achieve their full
potential, whether in terms of market statistics or from a technological
standpoint. It is too soon to judge the Apple Watch. Patience has costs,
but the good news is that Apple can afford it.

Q&A
Apple Management Structure and Compensation
Tim Cook
CEO
Angela Ahrendts
Senior Vice President Retail
Eddy Cue
Senior Vice President
Internet Software and
Services
Craig Federighi
Software Engineering
Jonathan Ive
Chief Design Officer
Luca Maestri
Chief Financial Officer
Dan Riccio
Hardware Engineering
Phil W. Schiller
Worldwide Marketing
Bruce Sewell
General Counsel
Jeff Williams
Chief Operating Officer
Johny Srouji
Hardware Technologies
Salary:
Stock Awards:
Compensation:
Total
~$2M
~$136,5M
~$8M
~$146,5M
Salary:
Stock Awards:
Compensation:
Total:
~$1M
~$20M
~$4M
~$25M
ESTIMATED EXECUTIVE
COMPENSATION (2016)
Revenues,
stock awards & bonus
undisclosed

Apple Inc.
Income Statement ($m) FY2015 FY2014 FY2013
Revenues 215,639 233,715 182,795
Gross Profit 84,263 93,626 70,537
Pretax Income 61,372 72,515 53,483
Net Profit (loss) 45,687 53,394 39,510
EPS Basic Net 8.35 9.28 6.49
EPS Diluted Net 8.31 9.22 6.45
Total operating expense 155,615 162,485 130,292
Operating income 60,024 71,230 52,503
Balance Sheet ($m)
Total Current Assets 106,869 89,378 68,531
Total Assets 321,686 290,479 231,839
Total Liabilities 193,437 171,124 120,292
Shareholders Equity 128,249 119,355 111,547
Cash Flow Statement ($m)
Cash Flow 45,687 53,394 39,510
Net Cash From Operating Activities 65,824 81,266 59,713
Net Cash From Invesment Activities -45,977 -56,274 -22,579
Net Cash From Financing Activities -20,483 -17,716 -37,549
Net Change In Cash And Cash Equivalents -636 7,276 -415
APPLE INC.
NASDAQ: AAPL)
IPO on 29 June 2010 on NASDAQ
Founded Sector
01/04/1976 Electronic
Employees End of Fiscal Year
110 000 30 September
Adress Website
1 Infinite Loop www.apple.com
Cupertino, California
United States of America
($m)
($m)
FINANCIAL STATEMENTS
-40%
-20%
0%
20%
40%
,0
40,000
80,000
120,000
160,000
200,000
240,000
2016201520142013
Revenues Net Profit (loss) Profit margin
-40%
-20%
0%
20%
40%
,0
40,000
80,000
120,000
160,000
200,000
240,000
2016201520142013
Revenues Net Profit (loss) Profit margin

SHAREHOLDING STRUCTURE, FUNDING ROUNDS AND M&A DEALS
MERGER & ACQUISITIONS SINCE MAY 2014 (27)
Data from 30 June 2016
DATE ACQUIRED AMOUNT
Sep 23, 2016 tuplejump Unknown
Aug 22, 2016 Gliimpse $200M in Cash
Aug 5, 2016 Turi Unknown
Feb 3, 2016 LegbaCore Unknown
Jan 29, 2016 Flyby Media Unknown
Jan 28, 2016 LearnSprout Unknown
Jan 7, 2016 Emotient Unknown
Nov 24, 2015 faceshift $18.2M (terms undisclosed)
Oct 5, 2015 Perceptio Unknown
Oct 2, 2015 VocalIQ Unknown
Sep 15, 2015 Mapsense $25M (terms undisclosed)
Jun 26, 2015 Privaris Unknown
May 28, 2015 Metaio Unknown
May 28, 2015 Metaio Unknown
May 18, 2015 Coherent Navigation Unknown
Apr 14, 2015 Linx Imaging $20M (terms undisclosed)
Apr 8, 2015 Dryft Unknown
Apr 7, 2015 OttoCat Unknown
Mar 24, 2015 FoundationDB Unknown
Feb 24, 2015 Camel Audio Unknown
Jan 21, 2015 Semetric Cash & Stock
Nov 3, 2014 Union Bay Networks Unknown
Sep 23, 2014 Prss Unknown
Jul 28, 2014 Concept.io $30M (terms undisclosed)
Jul 25, 2014 Booklamp Unknown
Jun 6, 2014 Spotsetter Unknown
May 28, 2014 Beats Electronics $3B in Cash & Stock
SHAREHOLDERS Nº OF SHARES % HELD
The Vanguard Group, Inc. 334.23m 6.27%
BlackRock Fund Advisors 214.30m 4.02%
Fidelity Management & Research Co. 153.49m 2.88%
SSgA Funds Management, Inc. 152.03m 2.85%
Northern Trust Investments, Inc. 68.51m 1.29%
T. Rowe Price Associates, Inc. 58.34m 1.09%
Geode Capital Management LLC 49.23m 0.92%
Norges Bank Investment Management 48.15m 0.90%
Capital Research & Management Co. (World
Investors)
38.34m 0.72%
Invesco PowerShares Capital Management LLC 38.33m 0.72%
TOP TEN INSTITUTIONAL SHAREHOLDERS
21.66 %!
Percent of shares
held by top 10 holders

USD per share
90
120
140
130
2014 2015 2016
Apr Jul OctApr Jul Oct Apr Jul Oct
80
100
110
26
EQUITY & DEBT SITUATION
KEY STATS AND RATIOS
TRAILING TOTAL RETURNS
Total return (%) as of 31/08/2016
60%
40%
RATIOS YTD 3Q 2016 2016
Net proﬁt margin 19.24% 21.19%
Operating margin 25.10% 27.84%
EBITD margin - 32.38%
Return on average assets 11.53% 14.93%
Return on average equity 28.38% 36.90%
— -
STOCK ANALYSIS
Equity
$126.541bn
Debt
$84.935m
APPLE INC. (NASDAQ: AAPL)
TOTAL RETURN (%)
AS OF 31/08/2016 1-MTH 3-MTH 6-MTH YTD 1-YR 3-YR 5-YR 10-YR 15-YR
AAPL -2.16 4.70 11.82 7.12 -4.69 13.65 16.87 24.70 33.73
Consumer Electronics -2.05 3.66 11.29 8.40 -2.80 11.66 15.81 16.18 14.77
S&P 500 TR USD 3.70 1.83 6.01 9.79 8.06 9.07 14.45 6.89 6.62
1-month 15-year10-year5-year3-year1-yearYTD6-months3-months
- 20%
0%
20%
40%
AAPL Consumer Electronics S&P 500 TR USD

CONCLUSION
Over the last four decades, Apple has faced and prevailed over numerous obstacles. Nothing has hindered its impressive growth. In just over five years, Tim Cook has
successfully transitioned Apple into the "post-Jobs" era. This era saw Apple become the highest value company in the world, with the most revenue and with a cash
flow of over $230 billion. This gave Apple an unparalleled advantage over competition. Apple continuously develops its range of products, putting the vision of Steve Jobs
within reach: to supply a global ecosystem of products, systems and services that accompanies users throughout their daily lives.
Apple has anticipated the downward trend in the smartphone market, which still contributes to more than half of revenues to date, by implementing numerous solid
propositions, now largely focused on services. The potential to capitalize on Apple’s billion captive users within a skillfully closed ecosystem is simply enormous.
Just four years ago, Warren Buffet said “the chances of being wrong with IBM are probably less at least for us, than the chances of being way wrong in Google or Apple… I just
don’t know how to value them”. But in 2016, Berkshire Hathaway, Buffet’s own investment firm, acquired $1.5 billion of Apple shares.
Has the investment strategy of one of the most brilliant and respected investors of the planet evolved? No, Apple has.
APPLE CAMPUS 2 BY FOSTER PARTNERS
OPENING PLANNED FOR EARLY 2017

SOURCES
Pictures used in the document: apple.com.
Icons from The Noun Project (thenounproject.com) :
Icone 54 - Jennifer Helms - Nicolas Molès - Matteo D. - Nikita Kozin - Sybolon -
Delwar Hossain
Slide 4
http://www.rankingthebrands.com/The-Brand-Rankings.aspx?
rankingID=37&year=1096
Slide 7
http://fortune.com/2016/01/18/donald-trump-says-hell-make-apple-stop-
making-iphones-in-china/
https://www.statista.com/statistics/263441/global-smartphone-shipments-
forecast/
https://www.statista.com/statistics/272595/global-shipments-forecast-for-
tablets-laptops-and-desktop-pcs/
http://www.marketwatch.com/story/apples-stock-has-gotten-a-bad-rap-under-
tim-cook-2016-08-24
Slide 8
http://amigobulls.com/stocks/AAPL/stockcharts
Slide 9
http://www.businessinsider.com/scott-forstall-leaving-apple-2012-10?IR=T
nounproject : Icon54
Slide 10
http://www.cnbc.com/2016/08/22/tim-cooks-next-five-years-as-apple-ceo-will-
be-different-from-his-first.html
http://www.investors.com/news/technology/click/apple-iphone-grabs-104-of-
smartphone-industry-profit-in-q3/
http://thenextweb.com/apple/2016/11/04/apple-iphone-profits-q3-2016/
https://www.idc.com/getdoc.jsp?containerId=prUS41611516
http://bgr.com/2016/05/05/apple-watch-sales-profits-iphone-ipod/
http://images.apple.com/newsroom/pdfs/
Q4FY16ConsolidatedFinancialStatements.pdf
Slide 11
http://www.itpro.co.uk/strategy/26179/how-apple-built-a-25-billion-enterprise-
business-in-three-years
http://uk.businessinsider.com/ipad-sales-hit-lowest-point-in-educational-
market-since-2013-2016-6?r=US&IR=T
http://futuresource-consulting.com/2016-05-K-12-Q1-Press-Release-2961.html
http://www.fool.com/investing/general/2015/02/05/apple-inc-brand-loyalty-is-
paying-off-handsomely.aspx
http://www.imore.com/apple-q3-2016-transcript
Slide 12
http://www.gsmarena.com/
idc_q2_2016_huawei_tops_chinese_market_xiaomis_shipments_down_by_38-
news-19976.php
http://www.counterpointresearch.com/press_release/chinajune2016/
https://www.statista.com/chart/585/top-5-smartphone-markets/
http://www.gfk.com/insights/press-release/smartphones-growth-unabated-in-3q-
though-china-expected-to-weigh-on-2017-demand/
https://www.statista.com/statistics/431224/market-share-smartphone-
shipments-countries/
http://www.independent.co.uk/news/business/analysis-and-features/apples-
iphone-the-most-profitable-product-in-history-10009741.html
http://www.smartphonemarketresearch.com/
Slide 13
https://browser.primatelabs.com/android-benchmarks
http://www.counterpointresearch.com/press_release/3q2016global/
http://www.digitaltrends.com/computing/how-apple-quietly-built-a-silicon-
empire/
Slide 14
https://www.statista.com/chart/5930/adoption-of-ios-and-android-versions/
http://www.idc.com/prodserv/smartphone-os-market-share.jsp
http://www.forbes.com/sites/maribellopez/2016/06/22/apples-macos-sierra-
holds-its-ground-against-microsofts-windows-10/#bceb5493c18c
http://www.securityweek.com/mobile-malware-shows-rapid-growth-volume-and-
sophistication
http://resources.alcatel-lucent.com/asset/200492
http://www.itproportal.com/2016/08/09/a-rising-tide-of-sophisticated-mobile-
malware-threats/
http://bgr.com/2016/03/04/android-malware-accessibility-clickjacking/
https://www.sophos.com/en-us/medialibrary/PDFs/other/sophos-mobile-
security-threat-report.pdf?la=en
Slide 15
https://www.ft.com/content/68e80a44-9b28-11e6-b8c6-568a43813464
http://www.cmlviz.com/cmld3b/images/AAPLservices_quarterly_816.gif
https://www.statista.com/statistics/263426/apples-global-revenue-since-1st-
quarter-2005/
http://venturebeat.com/2016/10/26/apples-service-revenue-growth-provides-
offers-optimism-amid-tough-year-and-a-glimpse-of-the-future/
http://www.macworld.co.uk/news/apple/apple-q4-2016-financial-results-iphone-
mac-sales-down-again-3581769/
https://www.appannie.com/fr/insights/market-data/q3-2016-index-china-hits-
ios-app-store-milestone/
https://www.techinasia.com/10-android-app-stores-china-2014-edition
Slide 16
http://www.androidauthority.com/samsung-pay-growing-faster-than-apple-
pay-677551/
https://www.bloomberg.com/news/articles/2016-03-01/samsung-gunning-for-
apple-in-race-to-dominate-mobile-payments
http://fortune.com/2016/07/26/apple-pay-contactless/
http://uk.businessinsider.com/apple-pay-is-dominating-the-mobile-payments-
industry-2016-7?r=US&IR=T
http://arstechnica.com/business/2016/06/apple-android-samsung-whos-
winning-the-mobile-pay-app-race/
Slide 17
http://www.slideshare.net/handeum/apple-health-ecosystem
https://www.statista.com/statistics/295771/mhealth-global-market-size/
http://www.marketwatch.com/story/global-mhealth-market-expected-to-grow-
at-34-cagr-during-2016---2022-by-ps-market-research-2016-03-14
https://www.psmarketresearch.com/market-analysis/mobile-healthcare-market
http://realmoney.thestreet.com/articles/08/23/2016/apple-takes-glimpse-
potentially-big-healthcare-innovation
http://www.slideshare.net/FrostandSullivan/healthcare-2020-disrupt-transform-
and-collapse
http://www.slideshare.net/FrostandSullivan/healthcare-2020-disrupt-transform-
and-collapse
http://ophirgottlieb.tumblr.com/post/149332044804/apple-healthcare-tech-
and-services-success-could
http://www.slideshare.net/rrgossen/health-20-slides
http://fortune.com/2016/08/11/apple-standalone-health-device/
https://www.linkedin.com/pulse/could-apple-become-what-doctor-ordered-
karol-severin
Slide 20
https://www.greenbiz.com/article/what-apples-reuse-robot-says-about-
sustainability-and-tech
http://mallenbaker.net/article/clear-reflection/how-tim-cook-brought-corporate-
social-responsibility-to-apple
http://vertohomes.com/apple-sustainability-iphone7-rank/
Slide 21
http://www.forbes.com/sites/leesheppard/2016/09/05/the-eu-case-against-
apples-irish-tax-deal/#6a4c4eba7e2b
http://www.bbc.com/news/world-europe-37251084
http://mashable.com/2016/08/30/apple-sweetheart-deal-ireland/
#kpiNN70ZIEqx
http://www.irishtimes.com/business/economy/how-the-european-commission-
calculated-13bn-tax-bill-1.2773254
http://fortune.com/2016/08/30/apple-tax-ireland-ruling/
http://www.businessinsider.co.id/what-just-happened-to-apple-
explained-2016-8/#2LGcIJclA4tS5YvQ.97
Slide 22
http://www.macworld.com/article/3056689/hardware/apple-watchs-second-
year-health-apps-will-make-it-a-must-have.html
http://thehustle.co/apple-partnership-deals
https://www.bloomberg.com/news/articles/2016-09-27/aetna-to-make-apple-
watch-available-in-health-monitoring-push
http://mashable.com/2016/09/28/apple-watch-aetna/#ripxxX4TwPqM
Slide 23
http://fortune.com/2016/01/07/apple-tim-cook-compensation/
http://www1.salary.com/Tim-Cook-Salary-Bonus-Stock-Options-for-APPLE-
INC.html
Slides 24-26
Financial Times - Morningstar - Google finance - Yahoo finance - Amigobulls -
Nasdaq -Crunchbase - 4-traders.com - CNN - Reuters -
The contents of this document have been researched and implemented
with the highest degree of care. However, the possibility of errors in the
processing of sources acknowledgement and copyright respect for
external content use cannot be fully excluded.
Please send any remarks or corrections to: f.bonelli@chapkaz.com

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ALEX DER MEGREDITCHIAN
Analyst

Apple's Vision and Strategy for Long-Term Growth

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