Board games have been a part of family fun night for generations. Many can recall the healthy competitions shared between siblings or the exuberance of winning for the first time and bragging about it at every game thereafter. Too many board games exist to name them all as each family have their personal favorites. However, there are a few that have become famous with families all over the world.
Born out of the trying times of The Great Depression, Monopoly is detached the best selling family board game that has sold in 103 countries and produced in 37 different languages. Since its conception over 250 million games have been sold. The game was invented by Charles B. Darrow of Germantown, Pennsylvania in 1934. The famous board game was rejected by Parker Brothers in 1933 with the excuse that it had too many fundamental create flaws. Darrow returned to Parker Brothers in 1935 after producing and selling over 5000 games. Parker Brothers finally bought the copyright from Darrow and the rest is history. Monopoly is best played with a minimum of two players but can have as many as eight participants. The game board consists of 40 spaces: 28 color-coded properties, four railroads, and two utilities. The four corner spaces of the board game are GO, Jail, Free Parking, and Go to Jail. Various sets of rules can be applied but the basic object of the game is to form monopolies with purchased real estate in order to bankrupt other players. Every player chooses one of the well known pewter tokens such the racecar or the top hat to move around the board using the pair of dice All players are given $1500 of paper money to begin the game. Two ways exist to make more money with Monopoly: each property collects “rent” each time it is landed on by a player and every time a player passes the space GO, they collect $200. The amount of rent can be increased by building houses and hotels only when the player owns all of the same colored properties, i.e. a monopoly. Two small decks of cards, Chance and Community Chest, bring an added twist to the board game. The cards are pulled when the space with the corresponding name is landed on and the player must do what is written on the card. For example, a card drawn often is the Go Straight To Jail. No matter where your token is on the board, you must recede to the Jail corner space. The game ends when one player has bankrupted the other players. This board game can last for hours, sometimes days as the longest game ever played lasted 70 straight days. Monopoly remains a household well-liked because of the amount of skill and chance it takes in order to fabricate your monopolies to prevent declaring bankruptcy. A strategy guide is available at www.monopoly.com for the more serious gamer.
Another popular board game not only creates bonding time for the family, but has also remained famous for parties involving friends as well. Yahtzee is the fun family board game that can be played by up to ten people at a time. Over 40 million copies of the game have been sold worldwide which was originally invented by a wealthy Canadian couple in 1956. The nameless couple, who played on their yacht, sold the rights to Edwin S. Lowe for the production of 1000 copies for their friends who had fallen in cherish with the dice board game. Lowe had problems marketing the game, partly due to lack of interest and it was hard to describe. Lowe began having Yahtzee parties and by word of mouth the board game has grown to include a yearly championship hosting players from all over the world. Now manufactured by Milton Bradley, the game is categorized as a board game even though it is played without a board. Yahtzee has few components: five dice, a cup for the dice, and a score pad. Players must supply their own pencils. The object of the game is to roll certain combinations of numbers within 13 rounds of game play. With every round, each player can choose to roll once, twice, or three times. After the third roll, the player must enter the score of the resulting combination on their score card. The top half of the score card are the six face values of the dice. The sum of the dice corresponding to the face value on the scorecard is written in the appropriate slot. A total score of 63 or more in the top fragment of scoreboard results in a bonus of 35 points at the end of the game. The bottom half features spaces similar to the hand in Poker: 3 of a Kind, 4 of a Kind, Small and Large Straight, and Burly House. Chance is a total of all five dice, no matter what the face value. Yahtzee is all five dice with the same face value. A box cannot be chosen again once it is marked. After 13 rounds of play, whichever player has the highest score wins the game. Yahtzee will be played for many years to reach due to the high level of excitement the right dice combination can cause among the players.
Often a learning experience as well as a celebrated board game, Scrabble® sanctions over 180 tournaments and has more than 200 clubs in the United States and Canada hosted by the National Scrabble Association. In 1931, Alfred Mosher Butts invented the family game to be “half luck and half skill” combining letters of the alphabet with a point system. Originally named LEXIKO, the game wasn’t played with a board until 1938 and given the name Scrabble in 1948. Now manufactured by Hasbro, Scrabble consists of a game board, four tile racks, a bag for tiles, and exactly 100 tiles: 98 with letters and two blanks. The board is a square grid, 15×15, with cells that can double or triple the point value of a tile. A star is directly in the middle of the board where the first word will be played. Depending on the rarity of the letter, each tile has a different point value between one and ten. For example, an E or a L is worth one point while a J is worth eight points. At the beginning of the game, each player pulls a tile out of the bag. The letter closest to the beginning of the alphabet goes first. The players then pull seven tiles a piece to create words. The first player places their word on the star in the middle of the board. Other players then attempt to build more words onto that word. With each turn of play, a player can choose three actions: place a word, exchange tiles, or pass. A player can exchange one or all of their tiles in search of more words. A 50 point bonus is awarded if all seven tiles are used on one turn. The game is over when the bag of tiles are empty and one player has broken-down all of their tiles. Players who still have tiles left total the amount of points and subtract that number from their total point score. Only words in s standard English dictionary are used but many enthusiasts of this family board game use the official Merriam-Webster Scrabble dictionary. Some tactics can be stale to build up a healthy score. For example, become familiar with the many two lettered words in existence. Additional tips can be found at www.scrabblepages.com Scrabble® continues to be a family favorite not only for thrill of competition but for the educational purposes as well.
For many adults, Checkers may have been the first board game you ever learned how to play. A game for two players, Checkers is also known as Draughts in Great Britain and other parts of the world. The game board is 8×8 with alternately sad and red squares, resembling a checkerboard. Game pieces are usually black and red or white and each player starts with 12 pieces placed on the first three rows on their side of the board. The row closest to you is called home row. The player with the black game pieces must place pieces on red squared of game board and red pieces on black. The object of the game is to either buy all of your opponent’s pieces or leave them without any legal moves. There are two ways to move across the board: by sliding your game piece to an empty square on the board and jumping over an opponent’s share. A game allotment can only move forward. Players can continue to jump as many pieces as there are spaces to do so. If an opponent’s game section reaches home row, that game piece is “crowned” or becomes a king. At that point, the King can recede backwards and forwards around the game board. The first player to capture all their opponent’s pieces is the winner. Many don’t realize how important strategy is until they have actually played the game. For more information about Checkers strategy, visit www.checkers-strategy.com. Ideal for rapid play, Checkers is a board game that allows challenges among the whole family.
Othello hasn’t been around a long as the other family board games but it is quickly gaining distinction among families worldwide. Othello was first invented at the end of the 19th century with the name Reversi by two Englishmen: Lewis Waterman and John W. Mullet. In 1971, Goro Hasegawa reintroduced that game to the world – under the original name of Othello. Played by two players, it is a quick and simple board game that can be unpredictable. The board has 64 squares that the game pieces will conceal. The 64 game pieces are white on one side and black on the other. The basic goal of this board game is to encircle your opponent’s game pieces with your color. Game play begins with four pieces in the middle – two black and two white with the colors forming a X. The player with the white pieces goes first for a chance to flip one of the black pieces. If a player is white and a white game fragment is at the end of a line of black pieces, the player can then place a white piece at the destroy of that line. The player can then flip all the unlit pieces to white. Every proceed must cause a flip and if a player cannot recede, your opponent gets another move. The game ends when the board is full or both players have race out of move. Whichever player has the most of their pieces turned over wins the game. Like Checkers, this quick board game is perfect for competition game between families. Once a player has been a beaten, other members of the family can challenge the winner until someone else wins.
Sources:
Monopoly®, The History of Monopoly®, www.monopoly.com
Monopoly®, Strategy Guide, www.monopoly.com
Yahtzee®, The History of Yahtzee®, www.ideafinder.com
Yahtzee®, Rules of the Game, www.yahtzeeonline.org
National Scrabble Association, The History of Scrabble®, www.scrabble-assoc.com
Scrabble®, Rules of the Game, www.scrabblepages.com
Scrabble®, Scrabble® Tactics, www.scrabblepages.com
Checkers, www.boardgamecentral.com
Checkers, Checkers Strategy, www.checker-strategy.com
Othello, www.boardgamebeast.com
Othello, The History of Othello, www.beppi.it
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Filed under Monopoly Bankruptcy by on Jan 24th, 2012. Comment. 
Some unexplained accidents and trouble events happened to several films before and after it premiered to the audiences. Some say it is just a coincidence. But some others say the films have been cursed. They believed there are some supernatural forces trying to prevent the filming or showing it to public. When the producer insisted to do the film, something terrible happened to everyone that has taken fragment of their occupy in the film. Is it correct? Are those movies been cursed? By whom? Who? Why? How? Nobody can explain it until today. Maybe you can. Can you?
1. THE SERIES OF THE OMEN
One of the most talk about movies is The Omen. The production of this movie was plagued with a series of incidents which some members of the crew attributed to the operation of a curse. A documentary entitled “The Curse of The Omen” was shown on British television in 2005 (it also appeared in the 2nd disc of 30th Anniversary DVD release of The Omen), and mentioned the list of incidents that happened to the crews. Some of them are :
• Scriptwriter David Seltzer’s plane was struck by lightning.
• In a separate incident, Gregory Peck (the star of the film)’s plane also struck by lightning. In other chance, Gregory Peck canceled his reservation on a flight, and the plane crashed, killing all passengers on board.
• Richard Donner (the director)’s hotel was bombed by the Provisional IRA.
• On the first day of shooting, the distinguished members of the crew were involved in a head-on car crash.
2. THE SERIES OF POLTERGEIST
Poltergeist has also become one of the most talk about movies concerning the rumor of a supposed curse attached to the movie series and its stars. The rumor has been known as “The Poltergeist Curse”.
The rumor derived from the fact that four cast members died in a relatively short span of time during the release of the first and third film, with one dying during production of the second film. Some of unexplained dead are :
Dominique Dunne (actress who played the oldest sibling Dana, one of the characters in the first movie) died after being strangled by a jealous boyfriend in 1982.Julian Beck (played as Kane in Poltergeist II : The Other Side) died in 1985 of stomach cancer, with which he was diagnoses before he had accepted the role.
Will Sampson (played as Taylor the Medicine Man in Poltergeist II) died in 1987 of post-operative kidney failure and pre-operative malnutrition problems.
Beatrice Straight (played as Dr Lesh in the first series of Poltergeist) died in 2001 of pneumonia.
Heather O’Rourke (played as Carol Anne in all three Poltergeist movies) died in 1988 at the age of 12 caused by septic shock after bacterial toxins invaded her bloodstream. At the time, she had suffered acute bowel obstruction, initially diagnosed as Crohn’s Disease, which may have been the cause of the death.
Author James Kahn reported that when he wrote the line “Lightning ripped originate the sky”, the building was struck by lighting and all the arcade games in the lounge began playing themselves.
3. VARIOUS SUPERMAN SERIES
Also known as “Superman Curse”, it s the rumor about the series of misfortunes that have plagued creative people keen in adaptations of Superman in various media has been spread and somewhat well-known in popular culture. Some famous misfortunes are :
Kirk Alyn, played as Superman in two series of low-budget serials of Superman (1940) failed to score work afterward.George Reeve, played as Superman in Superman and The Mole Men (1951) was found died of a gunshot wound at his home with his Luger P08 pistol near him (June 16, 1959). His dead is still questionable, while some said it is a suicide.
Christopher Reeve – the son of George Reeve – played as Superman in four of Superman Film Series (1978 – 1987) was paralyzed from the neck flown after being thrown from his horse in a cross country riding (May 27, 1995). Reeve died on October 10, 2004 due to heart failure stemming from his medical condition.
Dana Reeve, the widow of Christopher Reeve, died of the lung cancer on March 6, 2006 at the age of 45.
Margot Kidder, played as Lois Lane in 4 series of Superman (together with Christopher Reeve) suffered from intense bipolar disorder.
Marlon Brando, played as Superman’s biological father Jor-El in Superman (1978) underwent various personal tragedies: In May 1990, his first son, Christian shot and killed Dag Drollet, the lover of Christian’s half-sister Cheyenne Brando. Even claimed it was accidental, Christian was found guilty of voluntary manslaughter and was sentenced to ten years in prison. Christian died at the age of 49. Later on, in 1995, Cheyenne committed suicide by hanging herself. She was peaceful 25 years old at that time. Brando himself died of lung failure brought on by pulmonary fibrosis at the age of 80 in July 1, 2004. He had also been suffering from liver cancer, congestive heart failure and diabetes, which was causing his eyesight to fail.
Lee Quigley played the baby Kar-El in Superman (1978) died after inhaling solvents in age of fourteen (March 1991).
Richard Pryor, played as Gus Gorman in Superman III (1983) had previously suffered from a drug addiction that leads to an almost fatal accident. He died of cardiac arrest on December 10, 2005.
4. THE SERIES OF THE EXORCIST
The discussion about the film was been cursed has become urban record and smooth been discussed until today. The interior sets of the MacNeil (the character in the film)’s residence, except for Regan’s bedroom, were destroyed by a studio fire and had to be rebuilt. Other issues include:
Linda Blair fractured her spine during the filming of one of the bedroom scene.During his first day of filming, Max Von Sydow was informed his brother in Sweden had died. Coincidence?
John Frankenhiemer (the original director of Exorcist: The Beginning) suffered a stroke after spinal cord surgery and died while the movie was in pre-production.
Renny Harlin (the director of Exorcist: The Beginning) also got several unexplained accidents. His dog started to hemorrhage for no apparent reason. The dog soon recovered, but no cause for the hemorrhaging was found. While did some scene shot in Rome, Harlin almost hit and killed by a car. He had 13 pins put in his leg and finished filming the movie on crutches.
5. THE CROW (1994)
The most famous incident that happened in this movie is about the dead of Brandon Lee – son of the legendary Bruce Lee – who died on the set while shooting his last film, The Crow. A scene was being filmed that required dummy rounds to be shown being loaded into the handgun. When shot the scene, the gun that should be loaded with blank cartridges, dislodged the bullet and sent into Lee’s abdomen. Brandon Lee died about 12 hours later.
Meanwhile, during the actual filming, many accidents happened. A carpenter was severely burned after a crane in which he was riding struck high-power lines. Another crew member slipped and drove a screwdriver through his hand. And a lorry full of equipment mysteriously went on fire.
6. BLADE RUNNER (1982)
Among the folklore that has grown up around the film over the years has been believe that the film was a curse to the companies whose logos were displayed prominently as a product placements in some scenes :
RCA, which is one of the U.S. leading consumer electronics and communications conglomerate, was bought out by one time parent GE in 1985 and dismantled.Atari, which dominated the home video game market at that time, had ceased to exist in 1990.
Cuisinart went bankrupt in 1989.
Bell System monopoly was broken up that same year, and all of the resulting Regional Bell Operating Companies have since changed their name and merged back with each other and other companies to form the unique AT&T.
Pan Am suffered terrorists’ destruction of Pan Am Flight 103 (December 21, 1988) and went bankrupt in 1991 with the falloff in overseas travel caused by the Gulf War.
6. THE DARK KNIGHT (2008)
Before the released of the film, Heath Ledger died on an accidental overdose and Conway Wickliffe -a stunt supervisor of the film – died in accident in London while setting up a car crash scene. And after the film gain financial successful (released on July 18, 2008), Christian Bale was arrested in connection with an alleged assault on his mother and her sister (July 22, 2008). Then Morgan Freeman has been in a tragic car crash come Ruleville, Mississippi (August 3, 2008) and broke his shoulder, arm, and elbow.
7. ROSEMARY’S BABY (1968)
The film was made partially on location at the Dakota, off Central Park West in Fresh York City. There is one scene that depicts where a woman jumped from a balcony is the same piece of the sidewalk where John Lennon was shot. Coincidence? Let’s try these facts :
Just before the first take was filmed, a private messenger served Mia Farrow with formal divorce papers from her husband, Frank Sinatra. Farrow openly wept in front of the cast and crew, and Roman Polanski – the director of the film – insisted that the day be canceled and filming be postponed until the next day.Roman Polanski and his pregnant wife actress Sharon Tate was murdered in 1969 by Charles Manson and his followers, who titled their death spree as “Helter Skelter”.
Producer William Castle got kidney failure after receiving death threats relating to the film in April 1969.
8. SEINFIELD (1989 – 1998)
Recently, the term of “The Seinfield Curse” has been applied to typecast actors / actresses who, after appearing in an enormously popular television series or movie, have trouble finding popularity in other roles. And this term at the beginning was refering to the three stars of the show: Julia Louis-Dreyfus, Jason Alexander, and Michael Richards. After the kill of Seinfield show, they have trouble finding popularity in other roles. Each attempted to commence current sitcoms as title-role characters. However, almost every show was canceled quickly, usually within the first season. But it seems like the curse is about to break after the latest sitcom from Louis-Dreyfus, The Unusual Adventures of Old Christine, received high ratings and entering the 4th season already. She also won the Lead Actress Emmy Award for her work on the show’s first season, which is exactly ten years after she won it in Seinfield.
9. QUANTUM OF SOLACE (2008)
Just two weeks in shooting site, Daniel Craig got injured two times already. In the first accident, he has eight stitches on his face after cut during filming. The second happened when he sliced the tip off one of his fingers. A fire broke out at Pinewood – the film set – and causing severe damage to an outdoor Bond set. Two stuntmen were injured in separate car accidents while filming car chase scene in northern Italy.
10. TWILIGHT ZONE : THE MOVIE (1983)
There was an accident in this film that has been known as “The Twilight Zone Tragedy”. On July 23, 1982, during the filming of a segment directed by John Landis, actor Vic Morrow and child actors Myca Dinh Le and Renee Shin-Yi Chen died in an accident involving a helicopter being used on the set. Pyrotechnic explosions caused the low-flying helicopter to spin out of control and crash. The accident led to legal action against the filmmakers which lasted nearly a decade, and changed the regulations interesting children working on movie sets at night and during special effects-heavy scenes.
11. REBEL WITHOUT A CAUSE (1955)
Three of the main stars (James Dean, Natalie Wood, and Sal Mineo) died under tragic circumstances. Dean was killed in a traffic accident on September 30, 1955. Wood drowned on November 29, 1981. Mineo murdered on February 12, 1976.
12. DIFF’RENT STROKES (1978 – 1986)
Although become one of the most successful sitcom – and was in the top 30 of the TV ratings for its three seasons from 1978 until 1981 – three of the child stars from Diff’rent Strokes ended up having problem after the show ended.
Dana Plato went on to pose for Playboy, arrested twice (for armed robbery and for forging a prescription for Valium). She died of a drug overdose in 1999 at the age of 34.
Todd Bridges was arrested in 1994 after allegedly ramming someone’s car after an argument. He also had issues with illegal drugs for several years.
Gary Coleman filed bankruptcy in 1999. He was working as a security guard at a shopping mall from 1998 – 2001, where he’s been charged with assault after punched a woman in the shopping mall in 1998.
13. THE DEVIL WEARS PRADA (2006)
A couple of weeks after the film’s release, all of the publicity traded companies that made products featured in the film had been their share prices plunge in the time.
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Filed under Monopoly Bankruptcy by on Dec 6th, 2011. Comment.
After months of undergoing stress tests in the Troubled Asset Relief Program (TARP), the Treasury Department finally let ten major banks exit the program and begin repaying their borrowed tax money which is estimated to reach $68.3 billion dollars which will be distributed to further recovery programs. Some of the banks that are being let lose are: US Bancorp, State Street Corporation, Capital One Financial, BB&T Corporation, Bank of Modern York Mellon, American Express, Morgan Stanley, and Northern Trust. Northern Trust was the only bank not to undergo stress tests. Mr. Obama stated that the nation will even build a small profit from loaning money to the banks, but to be careful of future outbreaks.
This action will abet many taxpayers nationwide, including me. I personally spend US Bank, and I was cautious while it was under government control and taking on stress tests. Now that the banks are more stable and can pause up on their own, I’m much more confident in putting money in the bank, and there’s no more stress from worrying about my bank foreclosing. Similar feelings will resound for bank-users across the country, and the new influx of money being stored in banks will act towards economic recovery, considering that the extremely large amount of people who began to miser their paper money at home during the bailout had a substantial impact on the circulation of money, effectively hurting the economy.
Mr. Obama makes a chilling statement to the recovering banks: “I also want to say: the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds.” The President seems very intent that the success of these banks plays an important role in emerging from financial crisis.
Some banks such as Citigroup, Bank of America, and Wells Fargo were not permitted to leave the TARP program, and Citigroup, which borrowed $45 billion, is likely to be in the program for years. The 10 emerging banks will hurt the competition for banks such as Citigroup even more. During bailout, competition became so rough that banks put up signs saying “I’m not a bailout bank”. I don’t inquire of Citigroup or the other TARP banks to survive much longer. If I had been using one of those banks, I would immediately switch over to a financially stable one, which is what many Americans most likely have in mind.
Another problem the banks have to deal with, even after paying back the tax payers money, is the situation with their warrants. The banks had to sell their warrants to the government to prevent further bankruptcy; to fully become independent from the government they will have to buy them back. These can cost up to $4.6 billion dollars, says finance professor Linus Wilson.
The bank crisis is affecting all Americans financially, including myself. The best chance we have is to create an elitist monopoly of bank powers so that banking is more centralized, organized, and easier to handle and understand. If a bank claims bankruptcy in the future under this system, only ONE bank will need a bail-out, as opposed to dozens.
“Treasury Lets 10 Big Banks Start to repay Bailout Money” – Eric Dash
http://www.nytimes.com/2009/06/10/business/economy/10tarp.html? _r=1&hp
New York Times: June 9, 2009
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Filed under Monopoly Bankruptcy by on Nov 30th, 2011. Comment.
You’ve spent the last four years thinking about it, and now you finally splashing out on that awesome new PC. You’ve sorted out your megabytes from your screen resolution and your bits from your bytes, and now you’ve got a Net ready PC in its big new boxes, but you don’t have a clue what to do next.
Will your kids be lured away from home by on-line pedophiles lurking in chat rooms? Will your partner indulge in an adulterous affair via email? Will you become uncontrollably addicted to porn? Will you race corrupt phone bills and end up in bankruptcy?
It’s easy for media scaremongers to dream up these catastrophic scenarios, but all these things have happened. It’s best to derive off to the right launch so you can reduce the chances of these disasters happening. It’s also worth having a witness at whether your family is making the most of its Net connection. There are dozens of shining educational sites for kids and recreational pages for stressed out moms and grandparents making the most of their retirement.
Now that you’ve got your PC, check out how long you can afford to be on-line each week. Keep costs down by limiting your access to weekends. Figure out how many hours everyone can spend on-line each week, and then ration this out and buy filtering software to invent sure everyone complies.
You might also want to catch an off-line browser so the kids can download sites during cheaper times.
Where to Put the Computer
It depends who wants to use it. The main points to consider are:
1.Who will be allowed to use it? If you want to restrict kids access without any fiddly software complications, you can spend a room with a lock on the door.
2.Be aware that PC’s are inherently very noisy. It probably doesn’t seem that way when you’re using it in an office, but the constant whirring of the fan and tapping of the keyboard will drive you crazy at home. Don’t even think of trying to watch TV when someone is playing games.
3.Have plenty of ventilation and don’t place your PC directly against a wall or next to a radiator, where it might overheat. Be careful to never cover the cooling fans inlet and outlet grills. Dampness can cause short circuits and dust is bad news for your PC’s heavenly inside components.
4.Don’t share an outlet with high wattage electrical appliances, because if a fuse blows you’ll lose any unsaved work.
5.Use ergonomic equipment. The best setup is a desk with an extra lower shelf for your keyboard, an adjustable monitor stand, a comfortable height adjustable chair without armrests and an adjustable footstool.
6.Make certain your camouflage is free of glare and reflection. Use a wrist befriend next to the keyboard. Have sufficient room under the desk to stretch out your legs, and use a desk light if necessary.
7.Buy a fast PC and quality software to minimize frustration and delays that means you spend hours getting anything done.
Avoid Computer Related Afflictions
Anybody who uses a computer for more than a few hours a day risks ailments such as repetitive strain injury (RSI), bursitis, tendonitis, tenosynovitis, and frozen shoulder. While these conditions aren’t life-threatening, they can be painful and inconvenient. They often gain gradually over many years, so its important to make sure your kids don’t spend too long staring at the computer screen, clenching a mouse or joystick in one fist.
Its not all Bad
It’s a great notion for families who want to stay in closer touch. Busy moms and dads who may be traveling, children in college or different locations, grandparents and young children, and even extended family spread around the world.
Once you’ve sensibly dealt with the hurdles, there are many positive aspects to using the Net. Despite the scare stories there’s no cause for alarm when you connect your family to the Internet. If you take the apt precautions and order your kids how to spend it, the Net will soon become an vital addition to the family.
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Filed under Monopoly Bankruptcy by on Nov 18th, 2011. Comment.
[3] Thus the outlook of the US’s economy is vital important for the future of the company. This part will focus on the discussion of the country’s GDP growth and monthly CPI change to understand the future economic prospect.
The global and U.S. economies correlations between each other are very strong. In most of the cases, it is the U.S. economy is driving the global growth. Chart 2.3 is a US GDP annual percentage change; it shows that the US economy was suffering a continuous tiring, down since 2005. It is estimated by IMF that the US GDP growth in 2008 is only 0.5 percent, down 77.3% compared with 2007.
Source: Bureau of Economic Analysis (U.S. Department of Commerce), IMF
To make things even worse, the economists believe that the U.S. economy has entered into a recession period considering its fourth-quarter GDP growth of only 0.6 percent in the last year and an unnerving job loss in January, the biggest since 2003.[4] The reason for such slow down is not only because of the financial market crisis but also the growing inflation. From chart 2.4, it can be seen that the US CPI month percent change has increased from 4.3% in January 2008 to 5% in July this year.
Source: Bureau of Labour Statistics (U.S. Department of Labour)
In conclusion, it is reasonable to predict that the U.S. market will shrink under the shadow of a great recession. Such circumstances will make a stout negative influence on both computer sales and other investment which the company is about to produce this year.
2.3 Euro Area and UK Economy
The net sales of Apple in Euro zone contain 22.74% of its total in 2007. Traditionally, Apple’s products are welcomed by most of the Europeans by its unique innovation and product features. The Euro Area GDP growth, however, is expected by IMF to go down to 1.4 percent in year 2008[5]. The reason for such decrease is believed to be mainly affected by the US economy since there is a great tie between the two economies. Besides, the increasing inflation in these Europe countries is also affecting its growth.
UK is one of the major economies in the Euro zone and it is also a very important market for Apple Inc. Like any other major European countries, Britain’s economy is closely related to the United States. The slow down of US economy in the recent years is already making Britain suffers from a low rate of growth. Besides, UK’s internal market’s demand is also decreasing. Studies found by IMF suggests that Britain’s GDP growth is expected to go down from 3.1 in 2007 to 1.6 in 2008 as it is showing in chart 2.5.
Source: IMF World Economic Outlook 2008, PP242
At the same time, the UK’s CPI has gone up sharply this year. Chart 2.6 shows that the CPI monthly percent change has increased from 2.2% at the beginning of this year to 3.8% in June. Along with the impact of global credit crisis, it is reported that the bursting of UK’s housing bubble has also caused many internal problem of its economy. According to Halifax, Britain’s housing price has dropped by 9 percent since August 2007.[6] Since the UK’s retail businesses are going down and consumer confidence is falling, it is difficult to image how consumers will be likely to spend for their new iPod this year.
Source: Office for National Statistics (UK Statistics Authority)
2.4 Japanese Economy
Japan has only taken 5% of Apple’s 2007 total net revenues; it may have little influence on the company. Here the discussion on this country is limited since the country’s economy condition has been kept going worse for a long period of time. According to IMF, the Japanese GDP will continue to go down from 2.1 in 2007 to 1.4 in 2008.[7] Under the global economy influence and the domestic low consumption needs. The Japanese economy is still far from recover.
To Apple, the Japanese market, unlike any others, has a great more competitive market situation along with a reducing demand. The local company, such as Sony, has already launched similar products, such as carefully designed PC, portable music device and mobile phone, in compete with Apple. The company will be difficult to increase its sales in Japan this year.
2.6 Conclusion
The above macro economy analysis shows that the world economy is unfortunate and facing a stout recession in year 2008. These facts will lead consumers find themselves with less disposable or discretionary income which will eventually cause them not to use much consumption on luxury products[8]. Companies such as Apple will be largely influenced by the reluctant consumption needs. However, Apple has better positioned itself in the market; the introduction of new iPhone with a relatively cheap designate is reflecting a very good sales strategy to accelerate consumption. Apple has successfully sustained a better profit rate in the last three years despite global economy slow down. We maintain it may continue to do so in this year. However, there is no company can always increase its profit while the national GDP is decreasing.
Chapter 3 Industry Analysis
3.1 Introduction
Apple has expanded its products range from computer to software, portable music plan and mobile phone since it changed its name from Apple Computer Inc to Apple Inc. However, chart 3.1 shows that Apple’s Mac computer takes up 42% of the company’s 2007 net sales. This indicates that the computer hardware manufacture business is dominating Apple’s business.
Source: Apple 10K FY2007 Annual Report PP 42
Further more, iPod is almost a monopoly in the portable music device market and iPhone only takes up 1% of the total net sales in 2007. For analyse purpose, the industry analysis share will be focused on the computer industry. Only companies which are doing computer business will be discussed in both the industry overview and Porter’s five analyses. It is believed that such narrow in analysing the company’s industry is more accurate and effective by the author.
3.2 Industry Overview
According to a technology research firm Gartner Inc, it forecasted that the PC sales will come 297 million units in 2008 while the 2007 sales figure are 264 million units[9]. Despite the global economic recession, global PC sales growth is in a good rate. Compared with last year, it is a 12.5% growth. The growth is believed to be a combination of improvements in both technology and effect for the laptops, and the laptops are becoming the driving forces of PC sales, according to Market Look.
However, the global computer industry’s competition is also very intensifying. According to another market research firm, IDC, the world’s top five PC vendors are including HP, Dell, Acer, Lenovo and Toshiba.[10] Although Apple did not step into either of the mammoth five, it has successfully gained a third place in the U.S. PC vendor market in the second quarter of 2008. From chart 3.2, it can be found that Apple’s market share is 8.5% in US. This result is even higher than two of the top five world players rated in 2007.
Source: ExtremeTech.com ‘Apple Climbs Into Third Place in U.S. PC Market’,
July 17, 2008
3.3 Porters’ Five Forces Analysis
The Five forces analysis can be used to identify the most important aspects of competition in the consumer electronic industry; it was first developed by Michael Porter at the Harvard Business School (Porter 1980). It consists five parts of major forces to explain the structure of competition in an industry, which are the intensity of rivalry among existing firms, the threat of unique entry, the threat of substitutes, the power of buyers, the power of suppliers.
3.3.1 Rivalry among existing firms
The PC and portable music player markets are two most important market segments for Apple Inc. These are all well developed and highly competitive markets. Firms involved in this market are all titanic names, such as Dell, HP Compaq, Gateway, and Apple. The competition has driven the PC price down which eventually damage the profit of everyone in this market. However, Apple has sustained a better market position by continuing invest in R&D. Its name and innovative develop has long been attracting customers which helped Apple to gain a higher price for its product.
Apple’s portable music player is facing very minute competition since it is controlling the most innovative design and technology in its product. Their products are now almost dominating this market. It is reported that iPod and its related products take up 58 percent of market shares compared with Sony Walkman’s 23 percent market portion even in the Japanese market.[11]
3.3.2 Threat of New Entrants
The personal computer market is a very well established market with very grand companies in it, such as Dell, HP Compaq, and Lenovo. There are basically two important barriers for new entries which are extremely difficult to obtain. First, the start up of such a company requires an enormous capital investment. The great economies of scale and price war in the personal computer market require new firms to hold a massive investment to keep itself active in comparing price and technology strength with others. Second, the giant firms in the PC market are all having its beget copyright for patents and technologies which made original entries difficult to follow.
The big names either protect them from others or asked the new entries to pay a copy right fee to do so. If they don’t want to buy it from the exiting firms, the company needs to invest in Research and Development to develop their own. However, such technology advance requires not only a great capital investment but also a long time period.
3.3.3 Threat of Substitute Products
Apple’s products are fleshy of competition. Its computer and iPod player are a rapidly growing industry among the market. Companies like Lenovo, Thinkpad uses different series of its product to cloak different kinds of needs towards customers. For example, the R Series of ThinkPad is for everyday computing, T series has a premier performance, X series has a Thinnest and lightest feature for business travellers.[12] Dell also specified its product for different user purpose, such as solutions for Home, Small & Medium Business, Large Business, Public Sector, Partners.[13] All this can be seen as a substitute of Apple’s computer products since it almost share the same feature with Apple’s product range.
However, Apple has sustained a better position by offering consumers a different operating system, OSX Operating Systems, while others rely on Microsoft Windows Operating Systems. The OSX Operating Systems is wholly owned by Apple. It means Apple can differ the software packages and overall functionality from the other companies. The unique feature of its product also helped Apple to obtain a greater loyal from users. It enables Apple’s product stay in an innovative and price conscious among various competitors. In the other face, such unique operating system has limited Apple with some other targeting consumers who are familiar with Microsoft’s Windows operating system. These customers may found it is unnecessary for them to give up a well established habit to follow another brand new system.
For the portable music market, Apple’s iPod, which is based on hard-disk, is inevitably facing a massive competition. There are many alternatives for consumers to choose, such as Sony’s mp3 and other flash memory featured is an alternative for iPod. However, Apple’s product has a better storage and design compared with the Sony’s mp3. Other portable music method such as radio, CD player is not in comparable with iPod, because iPod is the leading technology and brand in the current market. But these products are always cheap and easy to be found in the market while iPod is only available in some enormous town or over internet, which is quite minute to hide the majority of potential customers.
Since iPod is taking a big share of the portable music market, it can be concluded that it faces little competition compared with the computer section. However, Apple may experience difficulties in keeping its unique feature in the market without a substantial sign advantage in the future.
3.3.4 Bargaining Power of Buyer
Apple’s OSX Operating System is the only alternative operating systems available for use if consumers want to avoid using Microsoft products. This enables Apple to reduce the bargaining power of buyers, since there are no other options for the buyers if they prefer to use the products from Apple. At the same time, Apple had actually restrained itself from opening the system to other PC manufactures. It is still argued by some analyst that the reason for Apple not to be as mountainous as Microsoft is mainly because they did not give the copyright of their operating systems to other firms.[14]
All the products of Apple have been retailed by many ways to the whole world market at the same time with almost an identical price. By adopting such marketing strategy, the number of products sold during the new products launch is always fine high. For example, Apple had sold 270,000 units of the newly launched iPhone 3G in its first week.[15] It is estimated that Apple will sell 5.1 million units in its fiscal fourth quarter, according to Mike Abramsky, of RBC Capital Markets. The popularity of Apple’s products will effectively affect the buying volume of its products and leave very little bargaining power of buyer. Especially the Online store and direct stores worldwide have consistently helped Apple to get sale in an efficient time manner.
3.3.5 Bargaining Power of Suppliers
Apple has been obtaining supplies from a large number of vendors to assemble its products[16]. In most of the cases, Apple does not only use a single supplier but a number of them. For example, Apple’s computer storage devices including brands like Hitachi Global Storage Technologies, Western Digital, and Seagate. By having a verity of choices to decide which components to chose, Apple is able to negotiate the product more efficiently. This strategy will also enable Apple away from a sudden short of certain components.
However, some key components are always difficult to maintain if manufactures decided to produce the common products instead of the customized one. The Intel® microprocessors are an example of how Apple is trying to support this customized supply.[17] Based on efficient communication with the vendor, Apple uses product introduction plans, strategic inventories, coordinated product introductions, internal and external manufacturing schedules and levels to ensure the availability of such components.[18] It has been proved to be an efficient method for both sides. By customizing key components, Apple’s products are more flexible in terms of size and weight which gives them a better position in the market place.
3.4 Conclusion
There are certain limitations for five forces analysis. It can not give a certain prediction of positive industry but a picture of it. Because the assumption is focusing mainly on computer industry, products like iPhone are not considered during the analysis. This might be giving an inaccurate explain of the competition portray of Apple Inc.
Nevertheless, the above analysis showed that the computer industry is very competitive. Besides, due to the expect recession of world economy and inflation across the world, the performance of the business can be worse this year. Both of the bargaining power of buyers and suppliers are comparatively strong despite Apple’s effort to increase its bargaining power. The constant price war and quick innovation in the personal computer industry has made companies become more and more difficult to net abnormal earnings. Apple is not likely to keep its high profits due to this constrain in the near future.
Chapter 4 Effect Valuation
4.1 Introduction
“If this business were split up, I would give you the land and bricks and mortar, and I would take the brands and trademarks, and I would fare better than you”[19]
John Stewart (Former CEO of Quaker)
Brand value is an sparkling property that every business holds. It is regarded almost the same as the value of plant and machinery today. However, the values of such ‘intangible assets’ are very unstable compared with the above normal physically existed. Today, there are many arguments on the impact of brand valuation to a High-Tech firm’s value. Apple’s imagination, innovation and differentiation brand name and other trade marks have produced far more value for the company. According to chart 4.1, Apple’s note value has increased from 9,130 million US dollars to 11,037 US million dollars, and has been listed in the top 100 brand name companies in 2007 by Interbrand. It is a 21% increase in such intangible assets to Apple Inc.
Chart 4.1 Apple’s Brand Value
Source: Interbrand, Best Global Brands 2007
At the same time, Apple’s intangible asset has more than doubled from year 2006 to 2007 according to their balance sheet. Thus it is important to understand the valuation process of such brand name. This literature review is frail to get to know the various ways to measure a firm’s brand value in order to get a clearer picture of Apple’s brand value.
4.2 Literature Review
4.2.1 Background of Brand Valuation
Although brand valuation has been studied by John Murphy since 1989, but there is relatively few studies can be found in this area. Because the valuation of brand is not an exact science, it usually involves some exercising of so called professional judgment. The judgment is dependent on three very separate areas, including the law, accountancy and finance, and Marketing. Ideally, According to John Murphy (1989), any brand valuation methodology must have involved the following three concepts:
* “follow fundamental accounting concepts
* allow for revaluation on a regular basis
* be suitable for both own-developed and acquired brands”[20]
The most popular price valuation methodology till now was developed by a stamp consultancy firm, named Interbrand. The company had published the first of its study for brands valuation in 1990; the book is named
World’s Top Brands. Interbrand’s peek on impress valuation is very popular in the US, Europe and Australia. It is often applied when dealing with mergers and acquisitions, brand strategy development and brand licensing, fund-raising in these geographic areas.[21]
Interbrand believes that the value of a brand is mainly dependent on its economic benefit. They use five steps to approach the intrinsic value of a brand. As it can be found on graph 4.2, this valuation methodology is including segmentation, financial analysis, interrogate analysis, brand strength analysis, and the calculation of rep present value of the brand earnings respectively.[22]
Graph 4.2 Interbrand’s Brand Valuation Steps
Sources: www.interbrand.com
The segmentation of the designate step is the first step, it is to put the impress into a product category and then geographically separate the product by different features. Graph 4.3 shows an example of how brand segmentation works. During the step in financial analysis, the method is focusing on the label earning and uses Economic Value Added (EVA)[23] to determine it. The role of brand index (RBI)[24] and Brand Strength Score (BSS) [25]will then be calculated in the following two steps. Based on a five years earning forecast, the final NPV value will be calculated by assuming a discount factor. An example can be found in appendix 3. This final value will show the intrinsic value of a brand.
Graph 4.3 Heed Segmentation
Sources: www.interbrand.com
Generally speaking, there are three methods in valuing an ‘intangible asset’, which is including cost, earnings and market approach. The Interbrand’s valuation methodology can be considered as an earning approach in valuing brand names. Economically, the value of a brand name or trade notice would be related to the loss in profit when such name is not allowed to be in use for the unusual holder.[26] This method can be considered as a cost based method to value a brand. Market value of a brand is through reference to market transactions involving similar tag names.[27]
4.2.2 Are Note Valuation Matter When Valuing High-Tech Companies?
High-Tech companies often have a higher value for its brand name, such as Microsoft, Apple and Dell. These are all among the top 100 brand name of 2007 according to Interbrand’s report. A proper valuation model is important to understand why the values of such companies are so high.
The Interbrand’s valuation methodology is the most practical one as it has already adopted by industries. It measures the brand by its earning ability rather than a pure assumption. As long as the brand and trade marks are providing an extra income to the company, it is reasonable to recognize a value on the brand.
However, many companies are quite reluctant while listing their designate values to their balance sheet. Even more, most of the accounting regulations in the world does not recognize brand name and trade marks as an asset in the balance sheet. Another reason is due to the unstable of brand value. For example, an air service company’s impress value can be simply destroyed by one single air crash.
4.3 Conclusion
Although a company’s brand value can be measured according to the above mentioned three methods. There are still some obstacles in these brand valuation. The most obvious one is that it has quite different results when applying with different valuation methods.[28] Second, all of the measurements are based on some assumptions stated by those professional rather than industry standards. For example, the Interbrand’s valuation is dependent on a assumption that the company will grow forever with a ratio sometimes even higher than the national GDP growth. Thrid, brand value is a very unstable value, once the products of the company are found unhealthy to human beings, like the iPod case (mentioned in the company analysis), the value of the brand and trade marks will become a nightmare for business.
Chapter 5 Company Analysis
5.1 Introduction
This chapter is a business study of Apple Inc itself. It will be started by a brief discussion of the company’s corporate governance and business strategy. Then, the PEST and SWOT analysis will be added to derive an understanding of the company’s business environment and future growing opportunity. In the last part, Apple’s financial plot, such as profitability, cash flow management, investment ratio will be discussed.
5.2 Corporate Governance
According from Apple’s webpage, the corporate governance allotment, Apple said, it conducts its business with ethically, honestly manner and in full compliance with all laws and regulations.[29] Apple requires not only all the member of its staff but also the business partner it deals with to have a high ethical standards. This business attitude is considered to be a key component to the success of Apple Inc.
There are currently seven members in the company’s Board of Directors. Their paramount duty is to oversee the CEO and other senior management staff’s operation. The Board of Directors consists of three committees, which are including Nominating and Governance Committee, Audit and Finance Committee, Compensation Committee. The existing of these three committees will help to ensure the company’s daily management. All of its members have met with the criteria for independence established by the NASDAQ Stock market. This is quite typical as a public listed corporation in the United States. It can be found from the company’s competitors who share some identical committees.
Michael Bush (2008) has wrote that the connection between Apple and Steve Jobs is unlike any other brand and CEO relationship in the US or even the whole world, Apple’s success is mainly contributed from this man’s wisdom and technological innovation.[30] Steven P. Jobs is one of the directors and Chief Executive Officer of the company. He is also a co-founder of Apple Inc. Mr. Jobs re-joined Apple in 1997 and his continued leadership is considered to be important to Apple. Since he re-joined Apple, Mr. Jobs entire compensation is only $1 annual salary. However, Apple has awarded him with a grant of 5 million shares of restricted stock in March 2003 and an aircraft as an executive bonus in 1999. Apple’s Mix of Equity, Cash Incentives and Salary compensation policy is effective in attracting entrepreneurial, creative executives and promoting the management’s long-term commitment to Apple.
5.3 Business Strategy Analysis
5.3.1 General Business Analysis
Apple is a leading company in the personal computer industry. It is the only company which controls both the operating system and hardware of personal computer. Now it has expanded its market to not only personal computing, portable digital music but also mobile communication equipment and its related computer software. This business strategy has enabled Apple to have greater economies of scale to compete with other companies. William J. Baumol, Alan S. Blinder (2005) said in its economics book that the production relationships with economies of scale lead to long-run average cost curves that decline as output expands.[31] Apple has been constantly invested in research and development to deliver its unique innovative products and technologies with a rapid update.
The company is aimed to bring the best available digital life to students, educators, creative professionals, business, government agencies, and consumers.[32] Digital lifestyle is a new view built just after computer came into our society. It brings an ease and comfort lifestyle to consumers.[33] Apple sells its product via several distribution methods, including but not limited to retail stores, online stores and exclusive contractors worldwide. The company has been increasing the number of its retail stores year on year worldwide. According sources from its company’s webpage, it has over 200 retail stores worldwide now. All of these are located in the traffic centre and give Apple a greater image to publics. It believes that such direct contact with targeted customers is an efficient way to communicate with.
The author also paid a visit to one of Apple’s Stores in Edinburgh. Unlike other computer store, Apple’s store enable a greater function to consumers, it brings not only the dependable product but also the all the necessary function to its potential customers. For example, the author has tried to watch Youtube[34] from iPhone in Apple’s Edinburgh store while others do not normally enable internet function with its products in stores. The author believes such experience helped him to finally purchase one of their products in the store.
5.3.2 Competitive Business Analysis
Apple’s competitive strategy is, however, not focused on the cost-leadership as most of its competitors are all trying to reduce both the cost and price. The company paid more attention on the differentiation strategy since the market is chubby of identical products. Its recent operating system, Mac OS X, accompanied with powerful graphics and audio technologies, plus the customized components, it enables Apple to give its customers a completely different experience compared with other low-cost computer.
More important, Apple has created itself with an image as the industry leader in technology innovation, and had technology fans all over the world. The name of its brand, a multi-colour apple logo, has became an unmistakable icon and famous for its innovative products and popular designs. Further more, the recent introduced mobile device, iPhone, is believed to be the next generation of its kind. This is an example of how innovation changed the plot business organized. All the other companies are all seem busy to catch up with the path of Apple.
5.4 PEST Analysis
5.4.1 Introduction
With the help of PEST analysis, it is possible to gain an understanding of Apple’s business potential, future market situation and the direction of its operation. The political, economic, social and technological factors are four components of PEST analysis. Considering the PEST analysis is powerful and covering lots of factors in identifying SWOT factors, the SWOT analysis will be simplified in the next part to show a graph describe of the list of factors involved in both of the above analysis.
5.4.2 Political Factors
Apple’s business operation is currently performed all over the world. According to Chart 2.2 (it can be found from page 8 of this dissertation), there are around 52% of the company’s net sales in 2007 coming from countries outside America.[35] War, terrorism, geopolitical uncertainties, public health issues may affect the company’s business greatly. All these events are far beyond the company’s ability to control.
Further more, Apple has outsourced its components, product manufacturing, transportation and logistics management to many third-party manufactures to lower operating costs. Many of these third-party manufactures are located outside the U.S.A. For example, the final assembly of the company’s products is being performed in countries such as Cork, Ireland, Korea, China and Czech Republic.[36] The manufacturing or logistics in these countries might be interrupted by political events. Once it is delayed by such political events, Apple may not be able to deliver its products to its customers on time. Such events will harm the credit image of the company to both consumers and retailers.
5.4.3 Economic Factors
The overall global economy outlook is not as worthy for this and the following. The raise of oil and food prices has lead inflation to the world economy while the consumers’ income has not been much reduced. Since consumers are also facing a greater risk of being unemployed, it will push them to spend less in consuming luxuries goods, like update their current computer or to pick a new iPhone. This will have a quite mountainous influence on Apple’s retail business.
The exchange rate between dollars and other currencies like euro and pounds sterling has fallen sharply since the credit crunch and the housing market problem in the US. The following chart 5.1 tells the weakening of the dollars against the euro as of 4-July-2008.
Chart 5.1: USD to EUR
Source: yahoo.com
Considering the US economy will continue going down this year, the exchange rate might be falling further down. However, Apple has used foreign exchange forward and option positions to hedge the currency movement’s risk. The forward and option position means Apple has purchased its foreign currency in a fixed imprint well ahead they actually receive such income. The adverse finish of the exchange movements can be minimized by such financial instruments. Indeed, the continual depreciation of the US currency had increased Apple’s revenue and other receivables in the overseas market so far.
5.4.4 Social Factors
Health safety and environmental protection are becoming more and more an important issue in countries which the company is operating its business. A variety of regulations and laws may adversely affect the company’s financial condition and operating results by requiring a safe disposal or recycling of Apple’s products. Particularly, there are now various countries within Europe and Asia, certain Canadian provinces and positive states within the U.S adopting such regulations to against companies like Apple Inc.[37] Certain products of the company is actually face health issues because of the design problem. It is reported that the improper use of iPod may lead to hearing loss for users.[38]
5.4.5Technology Factors
The market for PC, portable music player, mobile phone and other consumer electronic products are subject to not only huge competition but also lickety-split technological changes. The short product life, frequent introduction of new products and the continual improvement in product performance and make requires the company to continue invest in the research and development in order to discontinue in the top of the industry. Apple’s control over the entire production procedures of personal computer and the continual innovation on iPod and iPhone is a clear advantage over its competitors. Others have to simply follow its path. In the other hands, the increasing cost on R&D causes Apple to exhaust its capital reserve compared with its competitors. For example, Dell uses Microsoft’s operating system in all of its products while Apple installs its own brand operating system. But as a leading company in the industry, it might be worth to keep its advantage in such cases.
5.5 SWOT Analysis[39]
The SWOT analysis is simplified in this table and details of each discussion can be found from 5.4 PEST analysis.
Strengths
- Customer Loyalties
- Innovation
- Product Diversification and Differentiation
- Fresh Mac OS X operating system
- World market capacity
Weakness
- Poor Product Quality Control
- High Price
- Lack of market consideration when launching new product
- Zero Dividends Policy
Opportunities
- New stake in the mobile phone industry
- Entry to the emerging economy
Threat
- Strong competition in the technology market
- Substitute products are widely available in the market
5.6 Financial Analysis
5.6.1 Capital Structure and Liquidity Analysis
There are 882 million shares outstanding for Apple Inc, the majority of the outstanding shares are owned by institutional investors, which takes up 65% of the total. Large institution ownership helps the company to maintain a smaller risk of being taken over, at least in a short run basis. It also means the company will be continue growing without fare for stock market change, as these mammoth institutions don’t usually sell their stocks once the market goes down, and they are always being referred to long term investors.
Apple’s debt to equity ratio is being kept zero in the most recent three years. Debt to equity ratio is the percentage of the proportion of all borrowing, such as long-term loan, bank overdrafts to total capital employed or the amount of equity, it also known as gearing ratio.[40] The zero rate of such ratio means that the company prefers to expend its own money instead of borrowing to invest in its business. Thus the company’s interest coverage is also zero as it is shown in table 5.2. Interest coverage is an important ratio to measure Apple’s ability to meet required interest obligations.[41] The zero rate of its kind has minimized the risk in borrowing a high debt to finance its business, but the company may lose the advantage of financial leverage.[42] Alternatively, the zero gearing ratios or debt to equity ratio can help the company to obtain long term debt with more flexibility in the future. Zero long term debt also means the company has a solid financial reserve to facilitate its risk. As it is shown in table 5.2, Apple’s current ratio and quick ratio are kept higher than two in the most unusual three years. Thus the company is considered to have a solid short-term financial strength. It is reasonable to believe that Apple’s ability to meet its financial obligation is high and it can easily accumulate debt to finance its business with, probably a lower borrowing cost.
Table 5.2 Financial Health
Year:
2005
2006
2007
Financial Strength
Gearing Ratio
0.00
0.00
0.00
Interest Coverage
0.00
0.00
0.00
Current Ratio
2.96
2.25
2.36
Quick Ratio
2.91
2.21
2.34
Source: Apple Inc FY 10K Annual Report
5.6.2 Cash Flow Analysis
It can be found from the chart 5.3 that Apple’s net sales have been continuously increasing in the last three years. However, the revenue of this company is increasing in a decreasing rate, as it is shown in table 5.6; such growth rate has decreased from 38.7% in 2006 to 24.3% in 2007 according statistics from Apple’s financial recount.
Source: Apple Inc 2007 10K FY Annual Recount PP 56
At the same time, Apple’s net income has increased from 1,328 million USD in 2005 to 3,496 million USD in 2007. Chart 5.4 shows that the find income is more than doubled in just three years. Moreover, the rate of increase of such rep income is 75.8% in between 2006 and 2007. The increased net income is largely contributed by a suited cash management skill since the company is suffering from a continual slowing rate of sales growth
Source: Apple Inc 2007 10K FY Annual Report PP 56
According to table 5.5, Apple’s cash and cash equivalents growth, waste of each year, is fairly stable. Despite a negative results from investing activities, both of Apple’s cash generated by operating activities and financing activities have more than doubled. More than half of Apple’s changes in operating activities are contributed by changes in operating assets and liabilities while the other half is from increased net income.
Table 5.5 Apple’s Cash Crawl Activities (USD in Million)
Year:
2005
2006
2007
Cash generated by operating activities
Cash generated by investing activities
Cash generated by financing activities
Cash and cash equivalents, end of the year
Source: Apple Inc 2007 10K FY Annual Report PP58
As it is shown in Apple’s consolidated cash flow statements in 2007, the most significant change is in purchasing assets; such activity’s cash flow has increased from a negative 1,040 million USD in 2006 to a certain 81 million in 2007. Most of the reason in explaining the increased cash flow in financing activities is the continual excess tax benefits from stock-based compensation and fewer repurchases of common stock compared with 2006. The company’s stock bonus paid to its management is an important factor here.
Since Apple is an aggressive company in producing leading technology in the IT industry. Apple’s last year’s investment in purchases of short-term investments and some payment for acquisition of intangible assets are both largely increased. The growth in such investment leads the cash generated by investing activities made a loss of total 3,249 million USD in 2007.
Despite the increasing investment for technology and other intangible assets, Apple has maintained a continuing increase of cash and cash equivalents at the end of every year. This is quite helpful in keeping a salubrious financial health of this company. Because the zero gearing ratio and high current ratio has kept the company away from liquidity risk and sufficient fund left in every year is good for further investment needs. This financial management strategy has enabled the company a greater ability in investing new technology and borrowing debt as well.
5.6.3 Key Financial Ratio Analysis
The revenue growth of Apple has been increasing in a decreasing rate since it hits a 10 years high in 2005, dropped to 24.3% in 2007. However, the company’s 5-Year annual average sales growth rate is tranquil as high as 33.12% while the industry is only 28.13%. Table 5.6 shows Apple’s gross margin has increased from 29.0% in 2006 to 34.0% in 2007, it is reasonable to expect the company’s sales to be increased in this year. Indeed, the latest financial quarter shown that the company has achieved 42.7% of sales growth while the industry only did 34.90% in the same period. This is believed to be resulted from the surging Macintosh revenues.[43] The introduction of iPhone 3G in July this year will also help sales to grow in the remaining financial periods.
Table 5.6 Profitability and Management Efficiency
Year:
2005
2006
2007
5 Yr.Avg
5 Yr.Avg (Industry)
Management Effectiveness
Return on Equity (%)
17.9
19.9
24.1 ↑
19.84
10.90
Return on Assets (%)
11.5
11.6
13.8 ↑
12.03
5.82
Growth Rates
Sales Growth (%)
68.3
38.7
24.3 ↓
33.12
11.23
Growth Margin (%)
29.0
29.0
34.0 ↑
30.33
29.48
Net Profit Margin (%)
9.5
10.3
14.6 ↑
9.96
4.80
Source: Thomson Reuters
Further more, Apple’s management efficiency has slightly improved in the last three years, as it is shown in table 5.3, both of the ROE and ROA has increased to a new high. Table 5.3 also suggests that the five year average industry management effectiveness figures are only half of what Apple has made.
Table 5.7 shows that both of Apple’s P/E (price to earning) ratio and EPS (earning per share) have done a very good result in 2007 compared with its major competitors. The brand earning ratio for Apple is 50.5 while the same earning on S&P 500 is only 16.5. Apple’s P/E ratio is also higher than the major competitor, such as HP and Dell, which can be found from table 5.4. The company’s earning per allotment is also higher than the competitors did in 2007. High P/E and EPS ratio might show Apple’s stock return will be better compared with others.
Table 5.7 Valuation Ratio
Year:
2005
2006
2007
Apple Inc
[46]
4.13%
Cost of Equity (5 Year Avg. Industry)[47]
10.90%
Market Premium
6.77%
Beta (Bloomberg)
1.11081
Cost of Equity/WACC
11.65%
Source: Bloomberg.com
Formula 6.2
Cost of Equity=Risk Free Rate + Beta × Market Premium[48]
6.2.1 Limitations of DCF Model
There are certain limitations on the result of DCF model. The model is based on several key assumptions, such as the cost of equity, beta, market rate of return and the future growth rate. These ratios are all pre-determined in an industry average basis. It may produce different results by changing the value of the assumptions. Second, the model ignores the potential risk associate with the company once they failed to accomplish such results or even over perform in the future earning. Thus the result of this model may be imprecise under these circumstances.
6.3 P/E Multiple Model
Note earning multiple business valuation models can provide a benchmark for business valuation. As table 6.3 indicated, The P/E multiple is from YAHOO technology industry average PE ratio, EPS was calculated by the estimated gather income of 2008 financial year dividing the number of shares showed in Apple’s most recent financial report. The estimated share value is equal to the industry average PE ratio multiplied by the estimated earning per share.
Table 6.3 P/E Multiple Model
P/E Multiple Model
P/E Multiple (Industry Avg.)
19.49
885.875706
Fraction Value
US$96.12
Source: yahoo.com
According to the formula 6.4, Apple’s target share value is equal to USD 96.12 while its current share mark is USD 162.12 (as of 25/07/2008). This result shows that Apple’s present share price might be over valued based on P/E multiple model.
Formula 6.4
Share Value=P/E Multiple × Estimated EPS[49]
6.3.1 Limitations on P/E Multiple Model
There are two important factors in this model were being estimated, including PE multiple and earning per share. The estimated EPS was calculated by dividing the 2008 estimated fetch income with total shares outstanding. Both of the variables in formula 6.4 might be imprecise since it is based on a series of assumption which can be found in appendix 1. Investors should beware that the price arrived by this model is only good for being an additional consideration of the previous model.
6.4 Famous factors which may influence the results of the above calculated
Although this dissertation does not include remarkable discussion on the mobile industry, and Apple’s iPhone business fraction is only taking a small scale of Apple’s overall sales performance in 2007, the new iPhone 3G product’s sales performance is quite good when it is launched this year. There can be a significant change in Apple’s overall revenue based on iPhone 3G’s sales results and share tag can be significantly increased in this case. While there are a lot of expectations over iPhone’s business results, it also should be noted that the product has several complaints. The new iPhone 3G does not seem to fulfil its promised performance and network connectivity expectations.[50]
Chapter 7 Conclusion and Recommendation
7.1 Introduction
According to the investment analysis of Apple Inc, it is very unsafe to invest or hold Apple’s shares. Both of the discount cash flow and P/E multiple models have proved that the company is overvalued by the market. Further more, the US economy is running into a recession period. Such slow down will not be changed in year 2008.
The technical analysis is also suggesting that Apple’s stock impress will go down. As chart 7.1 indicated, Apple’s most fresh stock price and the ten weeks moving average sign are both piquant like a double top pattern.
Chart 7.1 Apple’s Stock Price Change
Impress as of July 25, 2008 USD 162.12
Source: yahoo.com
This is a very typical technical pattern which suggesting the imprint will soon move down by creating an “M” pattern. The 30 week moving average price, as shown in chart 7.1 is also suggesting that the price has kept itself for the same trend for more than two months.
Chart 7.2 shows that both the S&P500 and Apple’s stock notice are moving in a downward trend. Based on the above analysis and the evidence collected in the whole look, the final recommendation on this company is to SELL!
Chart 7.2 Apple’s two years stock impress compared with the S&P 500
Source: yahoo.com
7.2 Limitations of the Study
It is always difficult to protest what will happen exactly in the future. Although a comprehensive study has been done on this company, there are still some limitations in it, such as time constraints on the research and the unavoidable bias estimate of the model itself. Thus it is important to know each valuation model or fundamental model’s advantage and disadvantage, which will be clearly stated in each chapter. Readers should then be aware of the contemplate results are actually based on many assumptions, for example, the cost of equity in analysis the future piece price of the company is an estimate using average industry cost of equity ratio.
Appendices
Appendix 1
Apple Inc
Estimation USD in Million
Fiscal Years Ending 9/30
13931
19315
24006
31207.8
37449.36
43066.76
49526.78
56955.8
EBIT
Operating Profit Margin
13.03%
14.59%
20.86%
20%
15%
15%
15%
15%
480
829
1512
1872.468
1685.221
1938.004
2228.705
2563.011
26.45%
29.42%
30.19%
30%
30%
30%
30%
30%
2008E
2009E
2010E
2011E
2012E
Terminal
DCF Model
Free Cash Flow
4369.092
3932.183
4522.01
5200.312
5980.359
5980.36
PV (Free Cash Flow)
3913.20
3154.40
3249.04
3346.53
3446.94
119607.17
Total
136717.2795
Shares Outstanding
Source: www.interbrand.com
Bibliography
Apple’s Website, News Section ‘
Apple to Use Intel Microprocessors Beginning in 2006′:
http://www.apple.com/pr/library/2005/jun/06intel.html
Apple Inc
10K 2007 Annual Report
Apple’s Corporate Web Page: www.apple.com 25 July, 2008
Abratt, Russell, Bick, Geoffrey (2003), ‘Valuing Brands and Brand Equity: Methods and Processes’ Journal of Applied Management and Entrepreneurship
Business week, ‘
Economists say UK economy in trouble’, July 15, 2008
Brad Miser (2002), Mac OS X and the Digital Lifestyle, Thomson Course Technology PP268
Catherine Tremblay, (2008) ‘A How-To Guide to Assessing Brand Value’, brandchannel.com
Dell Corporate Website: http://www.dell.com/ 25 July, 2008
David Logan Scott (2003), ‘Wall Street Words: An A to Z Guide to Investment Terms for Today’s Investors’, Houghton Mifflin Reference Books PP192
Financial Times (London, England) Thursday London Edition2 “
Macs surge shields Apple from recession fears” April 24, 2008
Graham Mott (2008), ‘Accounting for Non-Accountants: A Manual for Managers and Students’, Kogan Page Polishers PP102
Geoffrey A. Hirt, Stanley B. Block (2004), ‘Managing Investments’, Mc Graw-Hill Professional, PP149
Interbrand www.interbrand.com 25 July, 2008
IMF,
World Economic Outlook, APR 08, PP241
John McCormick (2007), Cio Zone, ‘
The Top 5 PC Vendors For 2007′, http://www.ciozone.com/index.php/Server-Technology-Zone/The-Top-5-PC-Vendors-For-2007.html
Judy Mottl, (2008), ‘iPhone Lawsuit: Woes Ahead for Apple, Carriers? ‘, Internetnews.com
John Murphy (1989), Note Valuation, Establishing a good and fair view, Hutchinson Business Books, PP32
Jeffrey A. Dubin (2006) ‘Valuing intangible assets with a nested logit market share model’ PP 24
Lenovo’ Thinkpad Website: http://www.pc.ibm.com/uk/thinkpad/25 July, 2008
Market Watch: ‘
Gartner raises 2008 outlook for PC sales’ http://www.marketwatch.com/
Matt Haig (2006), Trace Royalty: How the World’s Top 100 Brands Thrive $ Survie, Kogan Page Publisher, PP107-112
Market Watch, ‘More excitement greets Apple’s new iPhone’, July 11, 2008 Friday
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Not Made In Japan; once upon a time, the country was a leader in technology. Now it’s struggling to find its place in the digital age. Can an entrenched corporate culture change? ‘ February 25, 2008 U.S. Edition
Reuters Finance, http://www.Reuters.com 25 July, 2008
Simon Benninga, Benjamin Czaczkes (2000), ‘Financial Modeling’, MIT Press PP35
Sunday Times (South Africa) ‘
No need for Slit wrists, it’s just a cycle’, August 03, 2008 Business Times Edition
Nasdaq Finance, Nasdaq.com 25 July, 2008
The Econommic Times, ‘
iPods leading to a new generation of deaf young adults’, http://economictimes.indiatimes.com/
THE KOREA HERALD, ‘Recoupling’ Could travel down global economy’ February 22, 2008 Friday
U.S. Department of Treasury, http://www.ustreas.gov/,
10 Year Treasury bond Rate, July 25, 2008
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Wendy Lomax, Adam Raman (2006), ‘
Analysis and Evaluation: Analysis And Evaluation”, Butterworth-Heinemann, PP55
William J. Baumol, Alan S. Blinder (2005), Economics: Principles and Policy, Thomson South-Western, PP 135
[1] From Reuters.com
[2] IMF, World Economic Outlook, APR 08, P241
[3] Apple Inc 10K 2007 Annual Report PP42
[4] THE KOREA HERALD,
‘Recoupling’ Could drag down global economy’ February 22, 2008 Friday
[5] IMF, World Economic Outlook, APR 08, P241
[6] Businessweek, ‘Economists say UK economy in trouble’, July 15, 2008
[7] IMF, World Economic Outlook, APR 08, P241
[8] Sunday Times (South Africa) ‘No need for Slit wrists, it’s just a cycle’, August 03, 2008 Business Times Edition
[9] Market Watch: ‘Gartner raises 2008 outlook for PC sales’ http://www.marketwatch.com/
[10] From: http://www.ciozone.com ‘The Top 5 PC Vendors For 2007′,
[11] Newsweek, ‘Not Made In Japan; once upon a time, the country was a leader in technology. Now it’s struggling to find its place in the digital age. Can an entrenched corporate culture change? February 25, 2008 U.S. Edition
[12] Lenovo Website: http://www.pc.ibm.com/uk/thinkpad/
[13] Dell Website: http://www1.euro.dell.com/content/default.aspx? c=uk&l=en&s=gen
[14] Matt Haig (2006),
Notice Royalty: How the World’s Top 100 Brands Thrive $ Survie, Kogan Page Publisher, PP107-112
[15] Market Discover, ‘More excitement greets Apple’s new iPhone’, July 11, 2008 Friday
[16] Apple’s 10K FY07 PP 11
[17] Apple’s Website, News Portion ‘Apple to Use Intel Microprocessors Beginning in 2006′: http://www.apple.com/pr/library/2005/jun/06intel.html
[18] Op. cit PP 11
[19] Wendy Lomax, Adam Raman (2006), ‘Analysis and Evaluation: Analysis And Evaluation”, Btterworth-Heinemann, PP55
[20] John Murphy (1989),
Notice Valuation, Establishing a true and fair view, Hutchinson Business Books, PP32
[21] From www.interbrand.com
[22] From www.interbrand.com, Sign Related Services, The Key to unlock the benefits from your brand assets
[23] Economic Value Added or EVA is an estimate of true economic profit after making corrective adjustments to GAAP accounting, including deducting the opportunity cost of equity capital.
[24] The role of notice index or RBI is multiplied with the EVA, yields the price earnings
[25] Brand Strength Accept or BSS explains how strong the stamp is compared with its competitors on the basis of seven factors (i.e. market, stability, brand leadership, trend, brand attend, diversification, and protection)
[26] Jeffrey A. Dubin (2006) ‘
Valuing intangible assets with a nested logit market share model’ PP 24
[27] Catherine Tremblay, (2008) ‘
A How-To Guide to Assessing Brand Value’, brandchannel.com
[28] Abratt, Russell, Bick, Geoffrey (2003), ‘
Valuing Brands and Brand Equity: Methods and Processes’ Journal of Applied Management and Entrepreneurship PP2
[29] From Apple’s Corporate Web Page: www.apple.com
[30] Michael Bush, ‘
Why Apple must tell its story; With fortunes so tied to Jobs, marketer needs to lay out succession plan’, from Advertising Age, July 28, 2008
[31] William J. Baumol, Alan S. Blinder (2005),
Economics: Principles and Policy, Thomson South-Western, PP 135
[32] From Apple’s website, company introduction, www.apple.com
[33] Brad Miser (2002),
Mac OS X and the Digital Lifestyle, Thomson Course Technology PP268
[34] Youtube is a online video sharing website, detail can be found from youtube.com
[35] Apple 10k FY: PP 12
[36] opt cit PP 17
[37] Apple 10K FY07 PP23
[38] The Econommic Times, ‘iPods leading to a new generation of deaf young adults’, http://economictimes.indiatimes.com/
[39] SWOT analysis is used to determine a company’s ability to compete against other businesses that sell similar products or services in the same marketplace and to the same target customers.
[40] Graham Mott (2008), ‘
Accounting for Non-Accountants: A Manual for Managers and Students’, Kogan Page Polishers PP102
[41] David Logan Scott (2003), ‘
Wall Street Words: An A to Z Guide to Investment Terms for Today’s Investors’, Houghton Mifflin Reference Books PP192
[42] Financial leverage is the extent to which a company finances the acquisition of its assets by means of debt: that is, a company that borrows money to acquire assets engages financial leverage.
[43] Financial Times (London, England) April 24, 2008 Thursday London Edition2 “Macs surge shields Apple from recession fears”
[44] TTM=Trailing 12 Months
[45] Appendix 2
[46] U.S. Department of Treasury, http://www.ustreas.gov/, 10 Year Treasury Bond Rate, July 25, 2008
[47] From Yahoo Finance www.yahoo.com
[48] Simon Benninga, Benjamin Czaczkes (2000), ‘
Financial Modeling’, MIT Press PP35
[49] Geoffrey A. Hirt, Stanley B. Block (2004), ‘
Managing Investments’, Mc Graw-Hill Professional, PP149
[50] Judy Mottl, (2008), ‘
iPhone Lawsuit: Woes Ahead for Apple, Carriers? ‘, Internetnews.com
[51] July 27, 2008 Stock Imprint, from Nasdaq.com
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