1. Apple Inc. (AAPL) Covering Analyst: Cameron Schwartz cschwar3@uoregon.edu

2. Company Overview ›Incorporated in 1977 to sell personal computer kits by Steve Jobs and Steve Wozniak ›Jobs leaves company in 1985 ›Jobs returns in 1996, becomes CEO in 1997 ›iPod launch in 2001 sets path for series of revolutionary product launches ›Largest publicly traded corporation by market capitalization: $554.4 Billion –More than 4% of S&P 500 MarketCap since February

3. Apple’s Products

4. Apple Software ` ›Desktop – OS X Mountain Lion ›Mobile – iOS 6 –iCloud

5. Strategic Positioning ›Supply Chains Operations ›Research and Development ›Sales and Marketing

6. Business Growth Strategies ›Innovation ›Retail Stores ›Educational Institutions ›Asia-Pacific

7. Industry ›PC Market Growth Slowing – (5.1%) until 2017 –Tablet Market Growing ›Smartphone Market Growing –Market Research projects 16% CAGR

8. Competitors

9. Tall Firs Portfolio ›8/3/12 – Purchased 75 shares at $616.80 ›9/28/12 – Sold 25 shares at $679.58 ›Transaction realized gains - $1,569.50 ›Current cost basis - $30,840.17 ›Current Unrealized Losses - $1,372

10. Svigals Portfolio ›2/3/2011 – Purchased 9 shares at $459.85 ›4/9/2012 – Sold 3 shares at $627.57 ›Transaction realized gains - $503.16 ›Current cost basis - $2,759.10 ›Current unrealized gains - $777.06

11. Revenue Model ›Percentage of Revenue method ›Product Segment –Slowing year-over-year growth –Strong growth from iPhone & iPad –Slow/declining growth from iPod, Desktops, Portables –Unable to predict new products ›Apple TV? ›Geographic Segment –Americas consistent –Asia-Pacific growing into 2 nd largest geographic segment –Europe continues to slow

12. Working Capital Model ›Projected by Percentage of Revenue

13. DCF Assumptions ›COGS: % of Sales, Increases in Q1 and Q4 annually due to projected new product iterations ›R&D: % of Sales, Increase as Apple continues to pursue introducing innovative products ›SG&A: % of Sales, Historical rates based on number of retail stores opened. ›Depreciation: Straight line depreciated ›Acquisitions: % of Revenue, conservative rate

14. DCF cont.

15. Beta

16. Growth Rates ›4% intermediate growth rate used. Chosen to create smooth transition to terminal growth rate ›3% terminal growth rate used to project future economic growth into perpetuity

17. DCF Valuation

18. Comparable Analysis ›Comparable companies screened for: similar product offerings, market capitalization, growth rates, risk, and capital structure ›Google (50%), Samsung (30%), Microsoft (20%0, Amazon.com(0%)

19. Metrics/Multiples ›EV/EBITDA weighted at 50% because it captured the entire relative valuation of comparable

20. Final Valuation

21. Recommendation ›Based on my current valuation I recommend a hold of Apple stocks for both portfolios ›Apple’s is viewed as a premium product by all consumers and is positioned well to capitalize on international expansion, especially in China

22. Questions?