RUNNING HEAD: APPLE AND SAMSUNG 1

Apple and Samsung

Name

Institutional Affiliation

APPLE AND SAMSUNG 2

Apple and Samsung

Apple and Samsung are leading brands in electronics and technology around the globe. Apple

Inc. was launched as a computer company in 1976. It was established by Steve Jobs, Steve

Wozniak and Ronald Wayne. It is considered as one of the best company that has unsurpassed

products and services so far. Apple is behind products like Macintosh desktops and laptop

computers, phones, iPods, iTouch, iTunes, icloud and Apple TV. Furthermore, Apple Company

has its own computers and it develops its own software.Apple is the world’s most valuable

company even though it faces fierce competition from its competitors. Apple has partnered with

other companies like LG and Samsung for the ipad and iphone displays. All the way, they have

partnered with China with a company called Foxconn which is behind manufacturing its devices.

Apple operates in 13 countries and has employed over 70,000 employees around the globe.

Apple is a solid company that has shown a lot of innovation and growth over the years and it is a

force to be reckoned with.

On the other hand, Samsung is also an important brand worldwide with its wide range of

electronic appliances and technology. Samsung is a North Korean company that was established

in 1983. It operates its markets mainly in the United States, Asia and Europe. The first product

by Samsung was a black and white television. From 1977, Samsung started growing its business

by producing a variety of products and services and it expanded its business worldwide by

establishing many more markets.At the moment, Samsung has products like mobile phones,

laptops, television sets, desktop and other electronic appliances. Samsung has accounted for 25

percent of all the company’s profit in South Korea. Samsung drastically reduced its operational

costs which allowed the company to keep low prices for specific products and extract higher

profit margin from premium products. Samsung India posted revenue of $2.2 billion last year

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and this is expected to go up to $3.5 billion this calendar year. Samsung’s universalincome is

about 116.8 billion dollars.

Millions of people around the globe use Samsung products and services. It is behind the galaxy S

series, windows mobile smart phones, Google android smart phone and Microsoft 7 smart phone.

Samsung has also launched its own operating system which it has licensed to third parties too.

By licensing its operating system bada to third parties, Samsung has increased its profits and it is

an advantageous strategy against their competitors.Currently, Samsung operates in 56 countries

and has employed over 344,000 employees worldwide.In 2010, Samsung Mobile

Communications made sales of 280 million phones,up by 23% over 2009, and achieved a

double-digit operating profit margin, supported by strong Smartphone sales.Samsung is the

number two in smart phones production and with its Samsung Galaxy smart phone, it is highly

competing with Apple’s phone. In 2007, Samsung earned 22 percent globally on mobile phone

share which rose from 14 percent. With this increase, Samsung tripled its annual revenue to 139

trillion won which is equivalent to $ 116 billion in a span of 10 years from the time it was

established. Samsung Electronics shares have risen drastically after it expanded its markets

around the globe.

Samsung Company has grown tremendously by studying its competitors andbyimproving their

mechanized and design. At present, Samsung has to envision exceptionally new products and

launch them from the ground up.

Apple and Samsung have heard a billion dollar panted discipline which apple won after suing

Samsung for $ 1.05 billion because of patent infringement. Both Apple and Samsung have

increased their sales over the years by growing their markets worldwide.Apple’s net sales for

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2009 increased up to $ 4.1 billion or 12% as compared to 2008 net sales which was 35% more

than 2007. The various factors come into play are given below:

I-Phone revenue and its related products are of total $ 6.8 billion in 2009 having increment of $

4.9 billion or 266% as compared to 2008.

Mac net sales declined 3% during 2009 compared to 2008 which in turn increased $4.0 billion or

38% during 2008 as compared to 2007.

The market share of US PC market for Apple Inc. is increasing as compared to the previous

years. But there is a slight increase in the revenue or in other words we can say that Apple

rebounds its position to the 5th place in US PC market. The unit growth for Apple Inc is 27.0

after Toshiba, HP and Acer. HP 29.6 % , Dell 22.5 % , Acer 13.7 % , Toshiba 8.5 % and Apple

is on 5th position having market share of 7.4 percentage at the end of Q4 of 2009.

In terms of Mobile Phone, Apple’s market share is also very less as comparison to other players

in the market. As Nokia is the market leader in this segment. Since I-Phones from Apple are

comes under the smart phone segments, the market share for the Apple I-Phones is 3.0% having

6th position as Motorola is at number 8th position. The projected market share for the Apple I-

Phone for the next 3 years is going to be 60% of the total mobile market. I-phones from the

Apple are based on the different concept. The Phones are for the business purpose or come into

the music gallery only.

The net income for the Apple Inc for the year 2009 was $ 5704 million in compared to $ 4834

million in 2008. While in 2007, the net income for the Apple Inc was only $3496

million.Earnings per share basic values also get increased as compared to 2007. In 2007, the

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earning per share basic was $ 4.04 as in 2008 it rose to $ 5.48. While in 2009 it becomes $ 6.39.

Earnings per share diluted values also get increased as compared to 2007. In 2007, the earning

per share diluted was $ 3.93 as in 2008 it rose to $ 5.36. While in 2009 it becomes $ 6.29.

Apple is a well-established brand with high quality products and services. Their financial status

is stable due to its vast markets. It is recognized for creating very attractive products compared to

those of other companies.Furthermore, it has a very impressive track record and its performance

is above par. On the other hand, Samsung’sfuture is promising and in good shapes due to its

unique products and good management. Even though it has been through many turning points, it

managed to secure markets for smart phones and smart TV products. There are many aspects that

might bring a company like Samsung down like being accuse of being a copycat. They are

accused of copying products from other companies and introducing a more advanced

productfrom the sample they got from other companies. In addition, it has been accused of child

labor in its manufacturing process which might bring legal problems to the company.

I would prefer investing and owning stocks in Samsung Company other than in Apple. This is

simply because Samsung has been generating better gross profit based on yearly performance

and has recorded recommendable growth for three consecutive years.. Samsung is a massive

growing company that has become a force to be reckoned with. Moreover, it has maintained a

competitive advantage over their competitors by establishing vast markets all over the world.

They produce a variety of attractive and easy to use products and services to its customers and

this is satisfactory to the customers’ needs. If I invest in such a company, I will be certain of

making profits and will have an opportunity to be associated with one of the worlds most valued

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companies. Samsung has high-tech products and investing it will promote its income thus the

innovation of more helpful and new products to its customers.

According to my view, both companies Apple and Samsung are reputable and competitive with

similar pressure to change and innovations. They both face pressure of competition, credibility,

and reputation but I feel that Samsung outstand Apple with its high-tech and interesting products

and services.

Financial information and analysis of Samsung

In order to understand the financial health of the companies, it is essential to assess financial data

as tabulated below. The following is the financial data for the past three years of Samsung’s

operation:

Financial data

2010 2011 2012

Revenue 154,630 165,002 201,104

Gross profit 51,964 52,857 74,452

Operating Profit 17,297 15,644 29,049

Profit before Income Tax 19,329 17,192 29,915

Net Profit 16,147 13,759 23,845* '09~ figures are K-IFRS based in billionsThe above financial income statement forms the basis of share distribution earning at Samsung.

In order to have a comprehensive understanding of the financial situation at Samsung, the study

will assess financial ratios for the past three years as indicated in the table below:

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2010 2011 2012

ROA 13.1% 9.5% 14.2%

ROE 19.9% 14.4% 21.4%

Debt/EBITDA 0.38 0.50 0.34

EBITDA/Interest Expenses 48 45 76* Debt= total borrowings* EBITDA= Operating Profit + Depreciation

2010 2011 2012

Net Margin (%) 10.4 8.3 11.9

Asset Turnover 1.25 1.14 1.19

Financial Leverage 1.52 1.52 1.51

Current ratio (%) 154% 161% 186%

Liability/Equity (%) 50% 53% 49%

Debt/Equity (%) 12% 14% 12%

Net debt/Equity (%) - 13% - 12% - 19%

Financial information and analysis of Apple inc.

It is also important to go through the financial health of Apple Inc. in order to gain insights into

the current financial status of the company. The below is financial income statement

2010 2011 2012

Revenue 65,255,000 108,249,000 156,508,000

Gross profit 25,684,000 43,818,000 68,662,000

Operating Profit 18,385,000 37,790,000 55,241,000

Net Profit 14,013,000 25,922,000 41,733,000The study will also be interested with establishing financial ratios as follows:

Period Ending:9/29/20129/24/20119/25/201

09/26/2009

Liquidity Ratios

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Current Ratio 150% 161% 201% 274%Quick Ratio 148% 158% 196% 270%Cash Ratio 76% 93% 124% 204%

Profitability RatiosGross Margin 44% 40% 39% 40%Operating Margin 35% 31% 28% 27%Pre-Tax Margin 36% 32% 28% 28%Profit Margin 27% 24% 21% 19%Pre-Tax ROE 47% 45% 39% 38%After Tax ROE 35% 34% 29% 26%

Observations

According to the above analysis, it is quite evident that Samsung has been generating better gross

profit based on yearly performance and has recorded growth for three consecutive years. The

gross profit margin over the years have been shooting upwards with a large margin as compared

to Apple Inc. based on financial findings, both companies have been recording tremendous

earnings in terms of gross profits which also have been growing for the past three years of

operations. However, the rate of growth of gross profits at both ends is quite different. While

Samsung earns above 20% of what Apple are able to make, it is apparent that the difference is as

a result of pricing strategies at both companies. Samsung is known to retail most of its products

at affordable prices while Apple’s products retail at optimum costs due to superior brand name.

Nonetheless, none of the companies have recorded gross loss hence the two are tightly

competing on technology provision basis.

Asset Utilization

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Turnover at Samsung indicates better utilization of assets as compared to turnover at Apple Inc.

asset turnover at Samsung currently stands at 1.19 as compared to previous year 1.14 implying

that assets are well managed at the company. Compared to Apple Inc turnover of 0.8, the

significant difference indicates utilization at apple is not as stiff as at Samsung.

Liquidity position

Liquidity position at both companies will be measured using liquidity ratio which determines the

company’s ability to pay off its short term debt obligation. The higher the value of the ratio, the

better positioned the company stands the chance of settling its short term debts. Assessing

Samsung’s liquidity ratio in comparison to Apple Inc. liquidity ratio, it is clear that Samsung is

better positioned to settle short term debts due to high liquidity of 1.86 as compared to Apple’s

1.5.

Conclusion

After assessing the two companies, I would suggest that it would be wise to invest in a promising

company such as Samsung. With the financial trends predicting future growth, it is quite clear

that any investment at the premises is worth.

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References

Yahoo Finance “Apple Inc. Financial Income Statement” http://finance.yahoo.com/q/is?

s=AAPL+Income+Statement&annual

Apple Three Year Financial

Historyhttp://files.shareholder.com/downloads/AAPL/2528301297x0x444195/E7A8FE5F-8835-

46AB-ACC2-6FA28DFB546D/Three_Yr_Financial_History.pdf

Samsung Inc. “Financial Highlights” 2013 [online]

http://www.samsung.com/us/aboutsamsung/ir/financialinformation/financialhighlights/

IR_Financial2012.html