Financial Outcomes Paper

FIN/419
October 26, 2015
Sarah Newton
























Financial Outcomes Paper

Intro: MEGAN TAWES
It is with incredibly accurate, reliable, and innovative products from Apple Inc. that has gained the company impressive amounts of revenue. Within the company’s third fiscal quarter the revenue is bringing in anywhere between $46 billion and $48 billion, the gross margin capping out anywhere between 38.5 to 39.5 percent and other incomes totaling about $350 million (Rosenstock, 2015). Apple carries an interesting financial strategy, which is to buy back their shares and to continue paying out quarterly dividends. Paying out quarterly dividends, let’s face it - in the perfect world, is great however in the real world, deviates that theory in quite a few ways. Apple’s judgment when it comes to their theory of dividends is meant to signify an unbiased to predictably confident expectation as to the company’s future performance. It is imperative to keep innovation going as Apple strives on this aspect, if the company were to create a ‘dud’ this is jeopardizing to the company as a whole. This is what leads us to the following proposed financial initiatives;

Financial Initiative #2: Ashley Miles- Dividends
Dividends are meant to be a great they for shareholders because this is when companies gives out returns on the profit that was made throughout that year. There are three important dividend dates, the distribution date, record date and, the ex-distribution date. These dates tell shareholders when dividends will be distributed (distribution date), list of when shareholders that will receive a payout (record date), and a date for pending transactions to be completed (InvestorGuide, 2013). Apple is paying their shareholders a quarterly dividend but in comparison to other companies it is not nearly the amount as they should. In 2012 Apple made its first dividend payback in almost 17 years. Apple gave out 2.5 billion to shareholders quarterly and has been taken in 10 billion in cash flow quarterly. Now for the shareholder when trying to figure out whether or not to invest one must consider the product and the growth of the company. Jared Cummans from Dividend.com wrote an article in which he compared Apple to other companies. It should be to no surprise that Apple gave the least back to its shareholders while Intel paid 30-40% of its free cash flow and Microsoft paid out 20%. What does that say about Apple’s growth? Apple doesn’t offer a low cost phone and companies like Samsung and Microsoft are killing the competition. How many ways can Apple reinvent the iPhone? Companies are appealing to the consumer when Samsung is creating an android phone that is lower in cost and does the same thing. We believe that profits Apple is buying back from its shareholders should be reinvested in creating a new, low cost products to consumers. This will increase Apple’s Cash flow which will in return allow for larger payouts for shareholders.

Financial Initiative #2: ANGELA BRINNEN- Beats- Positive or Negative Outcome?
In today’s financial market for a business to have continued growth and remain profitable they have to provide consumers with products and services that benefit their lifestyles. Many consumers have become attached to music services such as iTunes, Spotify and Beats, Apple has seen that the market for this product and service has had a dramatic increase in the last ten years. By paying attention to global consumer trends they were able to acquire a company that related the music to the user’s choice, not only providing a service but products that enhanced their experience. When Apple decided to purchase Beats Music and Beats Electronics for three billion dollars, they attracted a large amount of attention from the technological industry. The co-founders of Beats, Dr. Dre and Iovine, had a small following of users for their live streaming service and a larger audience for their electronics that are satisfy both fashion and function.
There is a problem however, with the acquisition of Beats they expected an increase in market share and that has not been the case. While their overall company shows “The tremendous customer demand for our products and services in the March quarter drove revenue growth of 27 percent and EPS growth of 40 percent,” ("Apple Reports Record Second Quarter Results", 2015). While many analysts say that they made a purchase unworthy