Apple’s Recent Approach to Business

I find Apple’s approach to business fascinating and I believe it is a result of their, as Steve Jobs likes to put it, West Coast mindset. Over the past five plus years Apple has undergone tremendous changes internally and have also been lucky enough to change the way people get their music.
Internally they have changed to the “just in time” inventory virtually copying the process that made Dell a success…this has saved the company hundreds of millions of dollars that they have continued to put back into R&D. The R&D is fueling the successful new products that are leading to record profits…In Japan Mac sales and periphery items sales are up over 30%.

I also determined from my friend who was CFO with Apple Asia Pacific for the past 5 years that Apple has virtually no debt and as an investor I think that would be a very convincing stat if I were determining whether to invest in the company. Of course Apple has other key issues to face.

The most dramatic change is the decision by Jobs to put the Intel processor in the newest Macs…industry experts also believe that this move signals a change that could lead to more changes including a move to have closer ties to Windows operating systems.

While as a user I am excited the following note in the 10K report is of concern because it points out that the switch could adversely affect the “in time” inventory that was so positive and that support from third party suppliers of software could be lost on the company’s non-Intel products. It also illuminates the fact that people may not purchase Mac products until the launch of the new product…I was one of those consumers.

The Company’s ’s transition from PowerPC microprocessors used by Macintosh computers to microprocessors built by Intel is subject to numerous risks.

In June 2 2005, the Company announced its intention to transition from the use of PowerPC micro processors to the use of Intel microprocessors in all of its Macintosh computers by the end of calendar year 2007.

This transition is subject to numerous risks and uncertainties, including the Company’s ability to timely develop and deliver new products using Intel microprocessors, the timely innovation and delivery of related hardware and software products, including the Company’s applications, to support Intel micro processors, market acceptance of Intel-based Macintosh computers, the development and availability on acceptable terms of components and services essential to enable able the Company to timely deliver Intel-based Macintosh computers, and the effective management of inventory levels in line with anticipated product demand for both PowerPC and Intel-base based Macintosh computers.

In addition the Company is dependent on third-party software developers such as Microsoft and Adobe be continuing to support current applications that run on PowerPC-based computers and timely developing versions of current and future applications that run on Intel and PowerPC-based Macintosh computers.

The Company’s inability to timely deliver new Intel-based products or obtain developer commitment both to continue supporting applications that run on PowerPC microprocessors and timely transition of their applications to run natively on Intel-based products may have an adverse impact on the Company’s results of operations.

The Company’s announcement of its intention to transition to Intel microprocessors may negatively impact sales of current and future Macintosh products containing PowerPC micro processors, as customers may elect to delay purchases until the Intel-based products are available.

Additionally, there can be no assurance that the Company will be able to maintain its historical gross margin percentages on its products, including Intel-based Macintosh computers, which may adversely impact the Company’s results of operations.


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