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SWOT ANALYSIS Apple or "the company" is engaged in design, development and marketing of personal computers, media devices, and

portable digital music players. The company also sells a variety of relatedsoftware, services, peripherals, networking solutions, and third-party digital content and applications.The Apple brand is well recognized amongst most consumers.The company's strong brand enables it to command a premium pricing and create significant demand for its products such as iMac, iPod, iPhone and iPad. Strong brand image gives the company an edge over regional and global competitors. However, rising popularity of Android may affect the attractiveness of Apple's iOS affecting the market share of Apple.

Strengths Strong brand image provides an edge over Competitors. Robust financial performance strengthens investors' confidence and provides capital for future growth avenues. Focused R&D driving innovation and consolidating its market position. Opportunities Strong growth in smartphone and tablet markets to boost Apple's revenues Robust outlook for mobile advertising market provides growth opportunity

Weaknesses Patent infringement lawsuit may affect financial condition and operating results. Product recalls may harm Apple's reputation and add significant warranty and other expenses

Threats Rising popularity of Google Android may affect its market share Intense competition may affect revenues and profitability Dependence on specific suppliers may affect its operations

STRENGTHS Strong brand image provides an edge over competitors The Apple brand is well recognized amongst most consumers. Apple's products enjoy a high level of brand awareness and brand recognition throughout all its markets. This is evident with the rapid sales of new Apple launches. For instance, net sales of iPad and related products

and services was $5 billion and unit sales of iPad were 7.5 million during 2010. iPad was released in the US in April 2010 and in various other countries over the remainder of 2010. Also, the company sold 7.33 million iPads in the first quarter of 2011. Apple leverages its brand image to differentiate its product offering and drive sales. The company's strong brand enables it to command a premium pricing and create significant demand for its products such as iMac, iPod, iPhone and iPad. In FY2010, net sales of iPhone increased 93% to $25.2 billion. Also, the net sales of Mac desktops and portables increased 43% and 18%, respectively, while net sales of other music related products and services increased 23% compared to 2009. According to industry sources, Apple is the fourth largest player in the global mobile phone market. The company holds a market share of approximately 5% and trails Nokia, Samsung and LG Electroics, which hold 29%, 18.5% and 6.5%, respectively. Moreover, in the global smartphone market, Apple's iOS platform is the third largest player, with a market share of approximately 18.5%. The company is projected to take the second spot by overtaking the Symbian platform by the end of 2011. Strong brand image gives the company an edge over regional and global competitors. Robust financial performance strengthens investors' confidence and provides capital for future growth avenues. Apple reported robust financial performance in the past few years. The company's total revenue increased to $65,225 million in FY2010 from $19,315 million in 2006, representing a compounded annual growth rate (CAGR) of 36%. The company's net income rose at a CAGR of 63% to $14,013 million from $1,989 million in 2006. Following the trend, Apple's net income margin also improved to 21.5% in 2010 from 10.3% 2006. Strong operating performance has resulted in higher cash and cash equivalents for the company. The company's cash and cash equivalents stood at $51,011 million in FY2010, which grew at a CAGR of 50% from $10,110 million in 2006. Strong growth in revenues and cash flows indicates the company's robust financial position, which strengthens investors' confidence, as well as allows it to invest in future growth avenues. Focused R&D driving innovation and consolidating its market position Apple has a strong focus on research and development (R&D) as continual investment in R&D is

critical for the development and enhancement of innovative products and technologies. In addition to evolving its PCs and related solutions, the company continues to capitalize on the convergence of the PC, digital consumer electronics and mobile communications by creating and refining innovations, such as the iPod, iPhone, iTunes Store, Apple TV and iPad. Apple leverages its unique ability to design and develop its own operating system, hardware, application software, and services to provide its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design. The company's R&D expenditure was $1,782 million, $1,333 million and $1,109 million in FY2010, 2009 and 2008, respectively. The company's research and development spending is focused on further developing its existing Mac line of personal computers; the Mac OS X and iOS operating systems; application software for the Mac; iPhone, iPad and iPod and related software. It also plans to develop new digital lifestyle consumer and professional software applications and invest in new product areas and technologies in coming years. Strong R&D has enabled the company to continually launch new products and upgrade the existing ones. In March 2011, the company introduced iPad 2, the next generation of iPad featuring an entirely new design that is 33% thinner and up to 15% lighter than the original iPad. Apple's strong focus on research and development has led to the launch of innovative products such as iPod, iPhone and iPad enhancing its brand image and consolidating its market position.

WEAKNESSES Patent infringement lawsuit may affect financial condition and operating results The company is involved in legal complaints relating to patent infringement. For example, in January 2010, Nokia filed a revised suit against Apple with the US International Trade Commission (ITC), alleging that Apple has infringed Nokia's patents in almost all of its mobile phones, portable music players, and computers. Motorola Mobility had filed complaints against the company in the US District Court for the Districts of Florida, Illinois, Delaware and in the International Trade Commission (ITC). These complaints include claims of patent infringement related to certain of the company's products. Unfavorable verdict in any of the matters related to patent infringement or other intellectual property rights may affect the company's financial condition and operating results.

Product recalls may harm Apple's reputation and add significant warranty and other expenses The company's products and services experience quality problems from time to time. Apple sells highly complex hardware and software products and services that can contain defects in design and manufacture. Defects may also occur in components and products that the company purchases from third parties. There can be no assurance the company will be able to detect and fix all defects in the hardware, software and services it sells. For instance, in 2010, due to antenna problems in the newly launched iPhone 4 smartphone, demands for product recall were raised. Instead of the complete product recall, the company offered iPhone 4 customers a free case that will mitigate reception problems. Similarly, in 2008, Apple announced Ultracompact USB Adapter Exchange Program. Under certain conditions, the new Ultracompact Apple USB power adapter's metal prongs broke off and remained in a power outlet, creating the risk of electric shock. Therefore, the company decided to exchange every Ultracompact power adapter for a new redesigned adapter, free of charge. Product defects may harm Apple's reputation and add significant warranty and other expenses.

OPPORTUNITIES Strong growth in smartphone and tablet markets to boost Apple's revenues. The worldwide smartphones market segment is forecast to record strong growth in coming years.The shipments for smartphones are expected to exceed 400 million globally.The number is expected to reach approximately 850 million by the end of 2013. Apple is the third largest player in the smartphone market segment in the US since launching its first mobile device, iPhone, in 2007. iPhone is a multimedia and internet-enabled mobile phone, combining mobile phone, widescreen iPod and internet functionalities and applications that support email, web browsing and maps on a mobile phone. The company also experienced strong growth in its iPhone business in recent years. Its iPhone and related offerings revenues almost doubled, at a rate of 93.2% in 2010 over 2009, to record revenues of $25,179 million from $13,033 million in 2009. Moreover, the demand for tablets is increasing over the years. Globally, tablet shipments are expected to touch 150 million units by 2013. Apple launched the iPad in January 2010. In

FY2010, the iPad generated $5 billion in revenues and showed unit sales of 7.5 million. In the first quarter of 2011, iPad sales were 7.33 million. Mobile apps are one of the most important factors in driving sales of smartphones. Apple is the strongest player in the mobile apps market, with approximately 350,000 apps. Its closest competitor, the Android market has 250,000 apps, while Blackberry and Windows Phone 7 has 20,000 and 9,000 apps respectively. The mobile app market is expected to exceed $9 billion by 2014. With its innovative products such as iPhone and iPad, Apple is in a position to increase its share in the growing smartphone and tablet market. Robust outlook for mobile advertising market provides growth opportunity. Global mobile advertising market is forecast to recover and have a modest growth in near future. According to industry sources the mobile advertising market is forecast to reach approximately $25 billion globally by the year 2015, riding on the strong growth of smartphones in both developed and emerging nations. In April 2010, Apple launched its mobile advertising platform, iAd. Apple had earlier acquired mobile ad platform Quattro Wireless to take a foothold in the mobile ad market. iAds combine the emotion of TV advertising with the interactivity of Internet advertising, giving advertisers a dynamic and powerful new way to bring motion and emotion to mobile users. iAd launched its mobile ad campaigns from leading global brands including AT&T, Best Buy, Campbell Soup Company, Chanel, Citi, DirecTV, GEICO, GE, JCPenney, Liberty Mutual Group, Nissan, Sears, State Farm, Target, Turner Broadcasting System, Unilever and The Walt Disney Studios. Robust outlook for mobile advertising market provides a growth opportunity for the company.

THREATS Rising popularity of Google Android may affect its market share The Google Android OS for smartphone is gaining rapid popularity. With the acquisition of Android Inc. in 2005, and the subsequent launch of Googles mobile OS Android changed the competitive landscape of smartphone business globally. According to Andy Rubin, Google's Vice President of Engineering and one of the cofounders of the earlier Android Inc., approximately 350,000 Android smartphone are activated daily. In comparison with this, every day approximately 150,000 iPhone are activated. Additionally, Android is fast emerging as the

preferred mobile OS for OEMs with multiple OEMs using the platform for their devices. HTC and Samsung have been aggressively pushing new mobile phones based on the Android platform. Also, Sony and Motorola are also actively leveraging the Android platform. Moreover, the online application store for Android applications Android Market is growing at a rapid pace.The Android Market currently offers approximately 250,000 apps, compared to 350,000 offered by Apple's App Store, although Android has been a late entrant in the market. Increasing popularity of Android may affect the attractiveness of Apple's iOS affecting the market share of Apple. Intense competition may affect revenues and profitability. Apple operates in a highly competitive and rapidly evolving technology industry. The company faces intense competition in consumer electronics, PCs and related software and peripheral products markets. Rapid technological advances in both hardware and software, increasing the capabilities and use of PCs and digital electronic devices, characterize these markets. Rapid changes in the technology have resulted in the frequent introduction of new products with competitive prices, features and performance characteristics. The company's competitors include Microsoft, Dell, Hewlett-Packard, Fujitsu, Samsung Electronics, Sony and Toshiba, among others.The company is currently focused on market opportunities related to mobile communication devices including the iPhone.The mobile communications industry is highly competitive with several large, well-funded and experienced competitors. Further, the launch of iPhone spiked the demand for smartphone with touch functionality and other innovative features. This made several players in the mobile phone market, such as Nokia, HTC, RIM, Palm, Samsung and LG Electronics, launch their respective smartphone devices in the market creating significant competition. Intense competition in various markets in which Apple operates may result in the price erosion which may affect the company's revenues and profitability in the long run. Dependence on specific suppliers may affect its operations. The company depends on third party suppliers for various components used in its products. Although most components essential to the company's business are generally available from multiple sources, certain key components including microprocessors, enclosures, certain liquid crystal displays (LCDs), certain optical drives, and application-specific integrated circuits (ASICs) are currently obtained by the company from single or limited sources. Moreover, many

key components that are available from multiple sources including NAND flash memory, dynamic random access memory (DRAM) and certain LCDs, are subject to industry-wide shortages and significant commodity pricing fluctuations. The company's dependence on few suppliers makes it susceptible to supply and pricing risks, which may adversely affect the company's operations.

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