RUNNING HEAD: APPLE AND SAMSUNG

Apple and Samsung

Name
Institutional Affiliation

APPLE AND SAMSUNG

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 worlds 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 companys 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

APPLE AND SAMSUNG

and this is expected to go up to $3.5 billion this calendar year. Samsungs 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 Apples 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.Apples net sales for

APPLE AND SAMSUNG

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, Apples 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 IPhone 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

APPLE AND SAMSUNG

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, Samsungsfuture 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

APPLE AND SAMSUNG

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 Samsungs
operation:
Financial data
2010

2011

2012

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

Revenue

Net Profit
16,147
13,759
23,845
* '09~ figures are K-IFRS based in billions
The 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:

APPLE AND SAMSUNG

2010

2011

2012

ROA

13.1%

9.5%

14.2%

ROE

19.9%

14.4%

21.4%

0.38

0.50

0.34

48

45

76

Debt/EBITDA
EBITDA/Interest Expenses
* 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

154%

161%

186%

Liability/Equity (%)

50%

53%

49%

Debt/Equity (%)

12%

14%

12%

- 13%

- 12%

- 19%

Current ratio (%)

Net debt/Equity (%)

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
41,733,000
The study will also be interested with establishing financial ratios as follows:

Period Ending: 9/29/2012 9/24/2011 9/25/2010 9/26/2009

Liquidity Ratios
Current Ratio

150%

161%

201%

274%

Quick Ratio

148%

158%

196%

270%

APPLE AND SAMSUNG

Cash Ratio

76%

93%

124%

204%

Gross 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%

Profitability Ratios

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 Apples 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
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

APPLE AND SAMSUNG

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
companys 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
Samsungs 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 Apples
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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10

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-883546AB-ACC2-6FA28DFB546D/Three_Yr_Financial_History.pdf
Samsung Inc. Financial Highlights 2013 [online]
http://www.samsung.com/us/aboutsamsung/ir/financialinformation/financialhighlights/IR_Finan
cial2012.html