Apple, Inc. Zachary Rose

The Company Apple is a multinational Technology Corporation headquartered in Cupertino, California. Main functions are to design, develop, and sell computer software, consumer electronics, and online services. Products consist of the iPhone, iPad, MacBook, Mac Computer, Apple Watch, Apple TV, and the iHome. Their devices possess different services and software such as the iOS operating system, safari, iTunes, and the app store.

History Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne in 1976. It was incorporated as Apple Computer Inc. in 1977. Apple went public in 1980. Steve Jobs became CEO in 1997 and opened Apple’s first retail store in 2001. Steve Jobs passed away in 2011 but because of his development of the company, Apple is the world’s largest information technology company by revenue and the world’s third-largest mobile phone manufacturer.

Geographical Diversification Apple’s sales and revenues are divided into five segments of reporting iPhone iPad Mac Services Other Products

Geographical Diversification Apple reported during Quarter 1 of 2017 that the iPhone produced 69% of revenues, iPad produced 7% of revenues, Mac produced 9% of revenues, Services produced 9% of revenues, and Other Products produced 5% of revenues.

Geographical Diversification

Geographical Diversification Apple’s sales and revenue are the highest and reported mainly from Americas Europe Greater China Japan Rest of Asia Pacific

Geographical Diversification

Currency Exposure In January 2017, Tim Cook (Chief Executive) noted the Chinese Yen had devalued by 6% year over year compared to the U.S. Dollar. This allowed Apple to report non-GAAP earnings on a constant currency basis. Because of the U.S. Dollar’s strength compared to the Chinese Yen, Apple has been able to Invest in large infrastructure Production and retail projects internationally (such as new retail stores in China and their Battersea Power Station development in London) Research and development facilities around the world

Currency Exposure

Political Risk When President Donald Trump was elected into Office, he proposed travel bans, restrictions on visas, the halting of infrastructure spending, and the postponement of a repatriation tax holiday. This caused shares of Apple to drop dramatically as well as the rest of the market. This political downfall hurt the U.S. Dollar but this had a positive effect on Apple’s global profitability.

Political Risk As the U.S. dollar weakened, Apple was making more money in different territories at its current price. This allowed Apple to lower product and application prices overseas in order to increase demand.

Financial Risk Apple reported during Quarter 1 in 2017 on their Balance Sheet: Cash Equivalents = $16.4 Billion Short-Term Marketable Securities = $44.1 Billion Accounts Receivable = $14.1 Billion Long-Term Marketable Securities = $185.6 Billion Total = $246.1 Billion

Financial Risk In order to transfer money into domestic accounts, Apple must repatriate the funds. When a company repatriates funds, they pay a 35% corporate tax rate fee. Apple has been issuing long-term debt at high interest rates to fund domestic purchases and their long-term debt has been increasing over time.

Financial Risk Compared to Microsoft and Johnson & Johnson

Financial Risk Although with Apple’s long-term debt, their earnings-per-share grew from $0.32 in 2006 to $8.31 in 2016 which has been rather rewarding.

Financial Risk

Current Event For years, Apple has funneled the majority of their overseas profits through Ireland. Arrangements with the Irish government allowed them to pay a tax rate of 0.005% in 2014 on its overseas sales. The Paradise Papers have reported Apple is looking for a new place to store their mass quantities of money that they have resisted from bringing back to the United States.

Current Event It was reported Apple began for a new jurisdiction in 2014 when the European Commission began to try and close tax loopholes that allowed companies to lower their tax below Ireland’s 12.5% rate. Apple aimed for Jersey, a British Crown Dependency off the coast of France. Jersey doesn’t charge tax on foreign companies’ profits and falls outside of EU jurisdiction.

Current Event When this became public, Apple stated they adjusted their corporate structure when Ireland changed its tax laws in 2015. Apple’s subsidiary became resident in Jersey. Since then, Apple has paid billions of dollars in U.S. tax on the investment income of the subsidiary. Apple states it pays every dollar it owes to every country around the world at the stated tax rate. Tim Cook (CEO) was also forced to defend Apple’s tax practices in front of the U.S. Senate.

References http://money.cnn.com/2017/11/07/technology/apple-tax-jersey-paradise-papers/index.html http://appleinsider.com/articles/17/05/23/weakening-us-dollar-poised-to-boost-apples-sales-performance-overseas https://www.smarteranalyst.com/2017/03/20/apple-inc-aapl-address-diversification-concerns-shore-aaa-credit-rating/