1

ABSTRACT
In this report, the financial health of three leaders in Computer Manufacture
industry, i.e; Apple, Dell and HP is analyzed and compared for the years 2010 and
2011. The report also discusses a financial comparison of Computer Manufacture
Industry (Apple, Dell, and HP) and Service Industry (Systemax, PCMI and Pc
connection) for the years 2010 and 2011. Using the Income Statement, Balance
Sheet and Cash flow statement of each company, this report highlights the key
financial characteristics of each computer manufacture company for the year 2010-
11 and sheds light on the difference in the financial situation of Computer
manufacture industry and Service industry.


1. INTRODUCTION
In order to better analyze the financial performance of the Computer
Manufacture Industry, three leaders of the industry are targeted and evaluated.
1.1 Apple Inc., formerly Apple Computer, Inc., is an American multinational
corporation headquartered in Cupertino, California that designs, develops, and
sells consumer electronics, computer software and personal computers. Its best-
known hardware products are the Mac line of computers, the iPod music player,
the iPhone smartphone, and the iPad tablet computer. Its software includes the OS
X and iOS operating systems, the iTunes media browser, the Safari web browser,
and the iLife and iWork creativity and production suites. The company was founded
on April 1, 1976, and incorporated as Apple Computer, Inc. on January 3, 1977.
Apple is the world's second-largest information technology company by revenue
after Samsung Electronics, and the world's third-largest mobile phone
maker after Samsung and Nokia. As of November 2012, Apple maintains 394 retail
stores in fourteen countries as well as the online Apple Store and iTunes Store. It is
the second-largest publicly traded corporation in the world by market
capitalization. As of September 29, 2012, the company had 72,800 permanent full-
time employees and 3,300 temporary full-time employees worldwide.
1.2 Dell Inc. (formerly Dell Computer) is an American multinational computer
technology corporation based in Round Rock, Texas, United States, that develops,
sells, repairs and supports computers and related products and services. Bearing the
name of its founder, Michael Dell, the company is one of the largest technological
corporations in the world, employing more than 103,300 people worldwide. Dell is
listed at number 44 in the Fortune 500list. It is the third largest PC vendor in the
world after HP and Lenovo.
2

Dell has grown by both increasing its customer base and through acquisitions since
its inception; notable mergers and acquisitions. As of 2009, the company sold
personal computers, servers, data storage devices, network switches, software, and
computer peripherals. Dell also sells HDTVs, cameras, printers, MP3 players and
other electronics built by other manufacturers. The company is well known for its
innovations in supply chain management and electronic commerce, particularly its
direct-sales model and its "build-to-order" or "configure to order" approach to
manufacturingdelivering individual PCs configured to customer specifications.

1.3 Hewlett-Packard (NYSE: HPQ) or HP is an American multinational information
technology corporation headquartered in Palo Alto, California, United States. It
provides products, technologies, software, solutions and services to consumers,
small- and medium-sized businesses (SMBs) and large enterprises, including
customers in the government, health and education sectors. The company was
founded in a one-car garage in Palo Alto by William "Bill" Redington
Hewlett and Dave Packard. HP is the world's leading PC manufacturer. It specializes
in developing and manufacturing computing, data storage, and networking hardware,
designing software and delivering services. Major product lines include personal
computing devices, enterprise, and industry standard servers, related storage
devices, networking products, software and a diverse range of printers, and other
imaging products. HP markets its products to households, small- to medium-sized
businesses and enterprises directly as well as via online distribution, consumer-
electronics and office-supply retailers, software partners and major technology
vendors. HP also has strong services and consulting business around its products
and partner products. It is the world's largest PC vendor by 2012 unit sales.

2. OBJECTIVE
The Objective of this case study is to analyze, compare and summarize the financial
performance and behaviour of the three leading companies within the Computer
manufacture industry and then to compare the financial situation of Computer
manufacture industry as a whole with Service industry. (Based on the data from
Group 7).

3. FINANCIAL STATEMENT ANALYSIS (APPLE, DELL, HP; )
In Millions of U$ dollars;
Apple Inc. - Income Statement Analysis
The following table and graph shows a decrease of 84.9% in Net income in 2011
with respect to 2010 and an increase of 37.1% in Total Operating expense in 2011
with respect to 2010.
3

In the same way, the Cost of Revenue and the Total revenue of Apple increased
38.6% and 39.7% respectively in 2011compared to the previous year. We can see
that Apple made a significant investment in Research & Development area in 2011.
And, there are no dividends paid both in 2010 and 2011.
I/S Apple 2011 2010
Net Income 14,013 25,922
Total Operating Expense 74,459 46,840
Research & Development 2,429 1,782
Cost of Revenue, Total
(CGS) 64,431 39,541
Total Revenue 108,249 65,225
Dividends paid 0 0



Apple Inc. Balance Sheet Analysis
The following table and chart shows that the assets of Apple Inc. are balanced with
its liabilities and equity combined, in 2010 and 2011.
In 2011, Apple increased its Assets by 35.4%, its liabilities increased by 31.1% and
total equity by 37.6% with respect to 2010 and thereby maintained a balance.

B/S Apple 2011 2010
Total Assets
116,371.00 75,183.00
Total Liabilities
39,756.00 27,392.00
Total Equity
76,615.00 47,791.00
108,249
64,431
2,429
74,459
14,013.00
65,225
39,541
1,782
46,840
25,922.00
0 20,000 40,000 60,000 80,000 100,000 120,000
Total Revenue
Cost of Revenue, Total (CGS)
Research & Development
Total Operating Expense
Net Income
$
Apple Inc - Income Statement
2010
2011
4




Apple Inc Cash flow Statement Analysis
Apples cash flow from operating and financing activities increased significantly in
2011but there is a sharp decline in its cash from investing activities. Thus, this
resulted in its net cash flow to suffer 75.9% in 2011 compared to previous year.
Apples depreciation increased by 43.4% in 2011, which is due to its higher inventory
turnover than in previous year,

C/F Apple 2011 2010
Cash from Operating Activities 37529 18595
Cash from Investing Activities -40419 -13854
Cash from Financing Activities 1444 1257
Net Cash Flow Per Year -1446 5998
Depreciation 1814 1027


27,392.00
39,756.00
47,791.00
76,615.00
0.00
20,000.00
40,000.00
60,000.00
80,000.00
100,000.00
120,000.00
140,000.00
2010 2011
Apple Inc - Total Assets
Total Equity
Total Liabilities
5





Dell - Income Statement Analysis
The following table and graph shows how in 2011 the Net Income has increased
83% with respect to 2010. In the same way, the total revenue of Dell increased in
16% with respect to the previous year. Also, there are not dividend are paid neither
2010 nor 2011.



18595
-13854
1257
37529
-40419
1444
-50000
-40000
-30000
-20000
-10000
0
10000
20000
30000
40000
50000
Cash from Operating
Activities
Cash from Investing
Activities
Cash from Financing
Activities
$

Apple inc - Cash flow
2010
2011
5998
-1446
-2000
-1000
0
1000
2000
3000
4000
5000
6000
7000
2010 2011
Apple Inc - Net Cash flow
Net Cash flow
6

I/S DELL 2011 2010
Net Income 2,635.00 1,433.00
Total Operating Expense 57,989.00 50,730.00
Research & Development 653.00 617.00
Cost of Revenue, Total
(CGS) 50,098.00 43,641.00
Total Revenue 61,494.00 52,902.00
Dividends paid 0 0


Dell - Balance Sheet Analysis
In 2011, DELL Inc. Balance Sheet shows an increase of Assets and Liability of
14.7% and 10.1% respectively. Thus, DELLs Total equity has also an increment of
37.7%.

B/S DELL 2011 2010
Total Assets
38,599.00 33,652.00
Total Liabilities
30,833.00 28,011.00
Total Equity
7,766.00 5,641.00

0
61,494.00
50,098.00
653.00
57,989.00
2,635.00
0
52,902.00
43,641.00
617.00
50,730.00
1,433.00
0 20000 40000 60000
Dividends paid
Total Revenue
Cost of Revenue, Total (CGS)
Research & Development
Total Operating Expense
Net Income
Dell- Income Statement
2010
2011
7



Dell - Cash Flow Analysis
There is no much variation between the cash flow of operating activities between
2010 and 2011 in Dells Cash Flow statement. On the other hand, the cash from
Investing Activities 2011 were reduced more than half in comparison with the
previous year. Thus, the cash flow in 2011 has a growth of 44%. Also, depreciation
increased in 2011 by 13.5%.
C/F DELL 2011 2010
Cash from Operating Activities 3,969.00 3,906.00
Cash from Investing Activities -1,165.00 -3,809.00
Cash from Financing Activities 477 2,012
Net Cash Flow Per Year 3,278.00 2,283.00
Depreciation 970.00 852.00


30,833.00
28,011.00
7,766.00
5,641.00
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00
45,000.00
2011 2010
Dell - Total Assets
Total Equity
Total Liabilities
8












3,969.00
-1,165.00
477
3,906.00
-3,809.00
2,012
-5,000.00
-4,000.00
-3,000.00
-2,000.00
-1,000.00
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
Cash from
Operating Activities
Cash from Investing
Activities
Cash from Financing
Activities
Dell - Cash Flow
2011
2010
3,278.00
2,283.00
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
2011 2010
Dell - Net Cash Flow Per Year
NET CASH FLOW PER YEAR
9

HP Income statement Analysis
As shown in the income statement of Hewlett Packard, the total Revenue in 2011
had a 0.96% growth comparing to the year of 2010. However the net income in 2011
is lower than 2010, due to lower operation expenses in 2010.
I/S HP 2011 2010
Net Income
7,074.00 8,761.00
Total Operating Expense
117,568.00 114,554.00
Research & Development
3,254.00 2,959.00
Cost of Revenue, Total
(CGS)
97,418.00 95,852.00
Total Revenue
127,245.00 126,033.00

Dividends paid 796.204 705.248






7.07
117.57
3.25
97.42
127.25
8.76
114.55
2.96
95.85
126.03
0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00
Net Income
Total Operating Expense
Research & Development
Cost of Revenue, Total (CGS)
Total Revenue
Thousands
I/S - HP
2010
2011
10

HP Balance sheet Analysis
The balance sheet of Hewlett Packard shows that, the total assets in 2011 had a
4.03% growth comparing to the year of 2010. The total liabilities increased 8.14%,
but the Total equity has declined 4.51%.
B/S - HP 2011 2010
Total Assets
129,517.00 124,503.00
Total Liabilities
90,892.00 84,054.00
Total Equity
38,625.00 40,449.00


HP Cash flow Analysis
From the Cash Flow Statement of Hewlett Packard, the cash from operating
activities in 2011 had a 6.01% growth comparing to the year of 2010. The cash from
investing expenses decreased 22.89%. However, the cash from financing increased
46.24%. The final result of the C/F is a negative value. The company is working on
debt.
C/F HP 2011 2010
Cash from Operating Activities
12,639.00 11,922.00
Cash from Investing Activities
-
13,959.00
-
11,359.00
Cash from Financing Activities
-1,566.00 -2,913.00
NET CASH FLOW PER
YEAR -2,886.00 -2,350.00

90,892.00
84,054.00
38,625.00
40,449.00
0.00
20,000.00
40,000.00
60,000.00
80,000.00
100,000.00
120,000.00
140,000.00
2011 2010
Total Assets - HP
Total Equity
Total Liabilities
11











12,639.00
-13,959.00
-1,566.00
11,922.00
-11,359.00
-2,913.00
-20,000.00
-15,000.00
-10,000.00
-5,000.00
0.00
5,000.00
10,000.00
15,000.00
Cash from Operating
Activities
Cash from Investing
Activities
Cash from Financing
Activities
CASH FLOW - HP
2011
2010
-2,886.00
-2,350.00
-3,500.00
-3,000.00
-2,500.00
-2,000.00
-1,500.00
-1,000.00
-500.00
0.00
2011 2010
NET CASH FLOW PER YEAR - HP
NET CASH FLOW PER YEAR
12

4. COMPARISON OF FINANCIAL STATEMENTS WITHIN INDUSTRY
Liquidity Ratios
The following graph shows Apple in 2010 reaching 2 times of its current assets.
Then Apples ratio decreases in 2011 to 1.6 times. On the other hand, Dell has its
highest current asset ratio in 2010 near 1.5 times and HP in 2011 with 1.1 times.

Profitability Ratio
All companies have a positive earnings ratio; therefore, a positive profit ratio.
Nevertheless, it is Apple, which has had the highest profitability.



2.01
1.61
1.49
1.28
1.01
1.1
1.96
1.58
1.42
1.22
0.86
0.97
0.00
0.50
1.00
1.50
2.00
2.50
Apple
2010
Apple
2011
DELL
2010
DELL
2011
HP
2010
HP
2011
Liquidity Ratios
Current Ratio
Quick Ratio
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Apple
2010
Apple
2011
DELL
2010
DELL
2011
HP
2010
HP
2011
21.5%
23.9%
4.3%
2.7%
5.6%
7.0%
24.7%
29.4%
8.7%
6.0%
6.9%
8.0%
Profit vs. Earning Ratio
Profit Ratio
Earning Power
13


Asset Ratio
The inventory Turnover is high for all companies. However, Dell and HP are able to
maintain similar level in years 2010 and 2011. On the other hand, Apple has an
increased of 80 time from 2010 to 2011. This indicates that inventory level is high as
its response time to its customers.

Debt Ratios
From the following graphs can be observed that even though all of the three
companies have larger debt to net worth, external financing from loans and sale of
bonds, it is Apple which has bigger debt of assets to vendors.


62.06
139.50
47.27
50.33
16.98
19.49
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
Apple
2010
Apple
2011
DELL
2010
DELL
2011
HP 2010 HP 2011
Inventory Turnover
36.4%
34.2%
15.5%
12.1%
23.7%
17.9%
57.3%
51.9%
77.2%
72.3%
79.3%
55.1%
0.0% 20.0% 40.0% 60.0% 80.0% 100.0%
Apple 2010
Apple 2011
DELL 2010
DELL 2011
HP 2010
HP 2011
Debt Ratios
Debt to Net worth
Debt to Assets
14


Security Ratios
The following graph compares the Earnings per share, short term success of the
company, and the book value of the shares, long term, if the company would be
liquidated.
















15.30
27.89
1.50
0.75
3.55 3.97
52.18
82.45
4.41
2.94
19.40
18.35
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
Apple
2010
Apple
2011
DELL
2010
DELL
2011
HP
2010
HP
2011
Earning per share vs Book Value
Earnings per share
Book Value
15

5. COMPARISON OF COMPUTER MANUFACTURE INDUSTRY WITH
SERVICE INDUSTRY

The following table 8.1 represents all the important values for calculation of the ratios
for the service industry. To do a comparison with the computer manufacturer industry
our group decided to come up with an average performance of those two industries.



*In millions of $USD
SYSTEMAX
PC
CONNECTION
PCMI

2010 2011 2010 2011 2010 2011
TOTAL CURRENT ASSETS 766.22 765.24 388.32 357.19 310.54 272.06
TOTAL CURRENT LIABILITIES 411.51 464.37 181.00 152.12 265.27 219.42
INVENTORIES 372.24 370.38 77.44 74.29 79.46 63.58
ACCOUNTS RECEIVABLE 268.98 276.34 297.12 239.50 207.99 183.94
TOTAL ASSETS 889.66 894.1 468.02 420.94

TOTAL LIABILITIES (DEBT) 9.69 10.04 7.23 2.83 104.44 55.69
TOTAL COMMON EQUITY (NET
WORTH)
454.29 409.27 273.53 257.64 110.83 107.29

SALES
3,682.0
4
3,589.9
9
2,103.3
0
1,974.2
0
1,455.2
2
1,368.3
1
PROFIT BEFORE TAX, INTEREST 78.68 66.03 47.43 38.39 6.17 12.45
NET INCOME 54.41 42.55 28.79 22.96 3.13 7.57

NUMBER OF SHARES 36.4 36.75 26.36 26.65 12 12.15
MARKET PRICE PER SHARE 389.00 389.00 276.00 275.00 14.00 14.00
DIVIDENDS 0.00 0.00 0.00 0.00 0.00 0.00
EARNINGS PER SHARE 1.49 1.16 1.09 0.86 0.26 0.62
Table 8.1 Values from I/S,B/S,C/F for service industry

The average of the industry ratios is represented on table 8.2. Once comparing the
number on table 8.1, with the respective numbers for Apple, Dell, HO, we get to the
conclusion that the computer manufacturing industry is bigger than the service
industry (i.e. total assets for Apple in 2011 is 116,371.0 but for SYSTEMAX is 894.1).
Even though the there is a difference on the size of the industry, the ratio
comparison result is fair enough, showing that these two sector are doing pretty
good.



16



COMPARISON BETWEEN INDUSTRIES - GROUPS 3 AND 7
Computer Manufacture Service
LIQUIDITY RATIOS
CURRENT RATIO 1.41662166 1.735656363
QUICK RATIO 1.335211151 1.038760433

PROFITABILITY RATIOS
PROFIT RATIO 10.84% 0.99%
EARNING POWER 13.94% 8.07%
RETURN ON INVESTMENT OF ASSETS 10.75% 5.05%
RETURN ON COMMON EQUITY 27.08% 8.62%

ASSET RATIO
INVENTORY TURNOVER 55.93767949 18.85897651
DAYS O RECEIVABLES OUTSTANDING 61.72714556 41.97263819
REVENUE TO ASSETS 1.157959304 5.025960495

DEBT RATIOS
DEBT TO ASSETS 23.30% 9.89%
DEBT TO NET WORTH 65.52% 25.74%

SECURITY RATIO
EARNING PER SHARE 8.826115252 0.915034257
PRICE EARNING 13.20063361 207.3765814
BOOK VALUE 29.95347314 10.28793808
PAYOUT 0.032092263 0
YIELD 0.005 0
Table 8.2 Average performance of industries


5.1 RATIO COMPARISON CHARTS
For analytical purpose, the group decide to generate a comparison chart for
each type o ratio, The liquidity ratios for both sectors are almost the same, showing
that the proportion between the assets and the liabilities are at the same level.

17



The profitability ratios chart, shows that the computer manufactures is way more
profitable than the service industry.


The asset ratios implies that there is a difference between computer and service,
because the inventory turnover and the revenue to assets, they have different
behaviour for each sector. This difference is given by the kind of product that both
sectors offer.
1.41662166
1.735656363
1.335211151
1.038760433
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Computer Manufacture Service
LIQUIDITY RATIOS
CURRENT RATIO
QUICK RATIO
10.84%
0.99%
13.94%
8.07%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Computer Manufacture Service
PROFITABILITY RATIOS
PROFIT RATIO
EARNING POWER
18


The debt ratios chart shows that the service industry is in less debt than the computer manufacturer


The security ratios chart states that the computer manufacturer is the most attractive investment in
case you decide buying stocks, because the book value and the earning per shares are significantly
higher.
55.93767949
18.85897651
1.157959304
5.025960495
0
10
20
30
40
50
60
Computer Manufacture Service
ASSET RATIOS
INVENTORY TURNOVER
REVENUE TO ASSETS
23.30%
9.89%
65.52%
25.74%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
Computer Manufacture Service
DEBT RATIOS
DEBT TO ASSETS
DEBT TO NET WORTH
19



6. DEPRECIATION METHODS USED
Apple Inc.s property, plant and equipment are stated at cost. Depreciation is
computed by use of the straight-line method over the estimated useful lives of the
assets. Capitalized costs related to internal-use software are amortized using the
straight-line method over the estimated useful lives of the assets, which range from
three to five years.
Dell does not disclose it depreciation method, so base on the similar behaviour as
HP in term of inventory turnover and asset ratio, we assume that the depreciation
method use can be either straight-line or accelerated methods over the estimated
useful lives of the assets.
HP states property, plant and equipment at cost less accumulated depreciation. HP
capitalizes additions and improvements and expenses maintenance and repairs as
incurred. Depreciation is computed using straight-line or accelerated methods over
the estimated useful lives of the assets.
8.826115252
0.915034257
29.95347314
10.28793808
0
5
10
15
20
25
30
35
Computer Manufacture Service
SECURITY RATIOS
EARNING PER SHARE
BOOK VALUE
20





1,027.00
1,814.00
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
1,800.00
2,000.00
2010 2011
Apple Inc - Depreciation
Depreciation
970
852
770
840
910
980
2011 2010
Dell - Depreciation
Depreciation
21


7. CONCLUSION
The computer manufacturing industry has shown to have a strong financial
situation. After analysing the Income statement, Balance Sheet, Cash flow
statements, we reach the conclusion that the companies in the computer
manufacturing sector are very significant to the USA economy. In addition, we can
state that Apple has the higher performance among HP and Dell.
Also in this report, a comparison between the service and the computer
manufacture were made. From the ratio analysis we can see that the performance of
the service industry is satisfying, however there profit margin is below the computer
manufacture.
So, analysing the charts, it is possible to conclude that the Computer
manufacturer industry is doing pretty well compared to the Service industry.










4984
4820
4700
4750
4800
4850
4900
4950
5000
2011 2010
HP - Depreciation
Depreciation
22

8. APPENDIX

23



24
















25

DELL - INCOME STATEMENT











26

DELL BALANCE SHEET

27

DELL - CASH FLOW STATEMENT

28


29


30


31



32