Morningstar Equity Research

Apple, Inc. AAPL (NAS)

Last Close Industry Sector
351.99 USD Computer Systems Hardware

Profile
Pricing data through 11 Mar 2011 Apple Inc. is a California corporation founded in 1977. The register, trademarks and service marks in the U.S. and a
Company designs, manufactures, and markets personal number of foreign countries for ‘Apple,’ the Apple logo,
computers, mobile communication devices, and portable ‘Macintosh,’ ‘Mac,’ ‘iPhone,’ ‘iPod,’ ‘iTunes,’ ‘iTunes Store,
In addition to this comprehensive
company profile, Morningstar digital music and video players and sell a variety of related ’ ‘Apple TV,’ ‘MobileMe’ and numerous other trademarks
offers in-depth analyst research and
ratings on selected companies.
software, services, peripherals, and networking solutions. and service marks. Compliance with federal, state, local and
The Company sells its products worldwide through its online foreign laws enacted for the protection of the environment
For information about our full analyst
coverage, please contact: stores, its retail stores, its direct sales force, and third-party has to date had no material effect on the Company’s capital
Morningstar Equity Research wholesalers, resellers, and value-added resellers. In expenditures, earnings, or competitive position.
+1 (312) 696-6869
nasdaqrequest@morningstar.com
addition, the Company sells a variety of third-party
Macintosh® (Mac), iPhone® and iPod® compatible
Contents products, including application software, printers, storage
devices, speakers, headphones, and various other
Company Profile 1
accessories and peripherals through its online and retail
Company Data 2
stores, and digital content and applications through the
Management & Ownership 3
iTunes Store®. The Company sells to consumer, small and
Industry Focus 4
mid-sized business (SMB), education, enterprise,
government and creative customers. The Company’s
reportable operating segments consist of the Americas,
Europe, Japan and Retail. The Americas, Europe and Japan
reportable segments do not include activities related to the
Retail segment. The Americas segment includes both North
and South America. The Company offers a range of personal
computing products, mobile communication devices, and
portable digital music and video players, as well as a variety
of related software, services, peripherals, networking
solutions and various third-party hardware and software
products. The Company designs, develops, and markets to
Mac and Windows users its iPhone mobile communication
devices and its family of iPod digital music and video players,
along with related accessories and services, including the
online distribution of third-party digital content and
applications through the Company’s iTunes Store. In
addition, the Company offers its own software products,
including Mac OS X, the Company’s proprietary operating
system software for the Mac; server software and related
solutions; professional application software; and consumer,
education, and business oriented application software. The
Company currently holds rights to patents and copyrights
relating to certain aspects of its computer systems, iPhone
and iPod devices, peripherals, software and services. In
addition, the Company has registered and/or has applied to

©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not Page 1 of 5
represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To
order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Morningstar StockResearch
Morningstar®Equity Data Sheet Pricing data thru Mar. 11, 2011 Rating updated as of Mar. 11, 2011 Fiscal year-end: September

Apple, Inc. AAPL Sales USD Mil Mkt Cap USD Mil Industry
76,283 324,281 Computer
Sector
Hardware
Systems
Apple designs consumer electronic devices, Macintosh
Apple designs consumer electronic devices, Macintosh Morningstar Rating Last Price Fair Value Uncertainty Economic Moat
TM
Stewardship Grade
computer, the iPod, and the iPhone. Apple's iTunes online
computer, the iPod, and the iPhone. Apple’s iTunes online -QQQQ 351.99 -
460.00 -
Medium -Narrow -
B
store is the largest music distributor in the world; it sells and
store is the largest music distributor in the world; it sells and per share prices in USD
rents TV shows and movies; and it sells applications for the
rents TV shows and movies; and it sells applications for the 13.56 13.09 12.51 34.78 75.46 93.16 202.96 200.26 213.95 326.66 364.90 Annual Price High
iPhone and iPad. In early 2011, Apple launched the Mac
iPhone and iPad. In early 2011, Apple launched the Mac 7.22 6.68 6.36 10.59 31.30 50.25 81.90 79.14 78.20 190.25 324.84 Low
2:1 Recent Splits
Application Store, an online store which sells first and third-
Application Store, an online store which sells first and
party applications for the Mac line of desktop and notebook Price Volatility
third-party applications for the Mac line of desktop and Monthly High/Low
computers. Apple's products are distributed online, through Rel Strength to S&P 500
notebook computers. Apple’s products are distributed online, 199.0
company-owned stores, and third-party retailers. 52 week High/Low
through company-owned stores, and third-party retailers. 59.0 364.90 - 199.25

19.0
10 Year High/Low
364.90 - 6.36
1 Infinite Loop Employees: 49400 6.0 Bear-Market Rank
1 Infinite Loop
Cupertino, CA 95014 6 (10=worst)
Cupertino,
Phone: CA996-1010
1 408 95014 1.0
Trading Volume Million
Phone: 1 408
Website: 996-1010Website: http://www.apple.com
http://www.apple.com 39.0
19.0

Growth Rates Compound Annual 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD Stock Performance
Grade: A 1 Yr 3 Yr 5 Yr 10 Yr 47.2 -34.6 49.1 201.4 123.3 18.0 133.5 -56.9 146.9 53.1 9.1 Total Return %
Revenue % 52.0 39.5 36.2 23.4 60.2 -11.2 22.7 192.4 120.3 4.4 130.0 -18.4 123.5 40.3 5.4 +/- Market
Operating Income % 56.6 61.0 62.0 42.8 21.7 -12.9 21.9 189.0 125.0 0.5 101.4 -19.3 75.5 29.3 0.4 +/- Industry
Earnings/Share % 66.8 56.8 57.6 30.1 . . . . . . . . . . 0.0 Dividend Yield %
Dividends % . . . . 7703 5146 7859 25893 60587 72901 173427 75997 190983 297089 324281 Market Cap USD Mil
Book Value/Share % 48.4 46.2 42.1 23.7
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM Financials
Stock Total Return % 56.1 40.3 41.0 44.1
5363 5742 6207 8279 13931 19315 24006 32479 42905 65225 76283 Revenue USD Mil
+/- Industry 24.3 22.2 24.0 33.7
23.0 27.9 27.5 27.3 29.0 29.0 34.0 34.3 40.1 39.4 38.8 Gross Margin %
+/- Market 42.7 40.7 40.7 43.4
-344 17 -1 326 1650 2453 4409 6275 11740 18385 21487 Oper Income USD Mil
Profitability Analysis -6.4 0.3 0 3.9 11.8 12.7 18.4 19.3 27.4 28.2 28.2 Operating Margin %
Grade: A Current 5 Yr Avg Ind Mkt -25 65 69 276 1335 1989 3496 4834 8235 14013 16639 Net Income USD Mil
Return on Equity % 36.8 29.0 13.0 22.4 -0.04 0.09 0.10 0.36 1.56 2.27 3.93 5.36 9.08 15.15 17.93 Earnings Per Share USD
Return on Assets % 23.7 17.4 4.5 8.5 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Dividends USD
Fixed Asset Turns 17.0 16.4 10.6 7.3 691 724 727 775 857 878 889 902 907 925 928 Shares Mil
Inventory Turns 64.0 54.0 19.7 14.6 5.64 5.73 5.89 7.20 9.94 13.07 19.19 25.73 39.47 59.35 59.34 Book Value Per Share USD
Revenue/Employee USD K1544.2 1137.2 * . 935.7
185 89 289 934 2535 2220 5470 9596 10159 18595 22587 Oper Cash Flow USD Mil
Gross Margin % 38.8 35.4 32.5 40.2 -232 -174 -164 -176 -260 -657 -986 -1199 -1144 -2005 -2843 Cap Spending USD Mil
Operating Margin % 28.2 21.2 14.3 14.7 -47 -85 125 758 2275 1563 4484 8397 9015 16590 19744 Free Cash Flow USD Mil
Net Margin % 21.8 16.1 4.4 9.9
Free Cash Flow/Rev % 25.9 19.8 12.5 0.1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM Profitability
R&D/Rev % 2.6 0.0 . 9.8 -0.4 1.1 1.1 3.7 13.6 13.8 16.4 14.9 18.9 22.8 23.7 Return on Assets %
-0.6 1.6 1.7 5.9 21.3 22.8 28.5 27.2 31.3 35.3 36.8 Return on Equity %
Financial Position -0.5 1.1 1.1 3.3 9.6 10.3 14.6 14.9 19.2 21.5 21.8 Net Margin %
Grade: A 09-10 USD Mil 12-10 USD Mil
0.84 0.93 0.95 1.11 1.42 1.34 1.13 1.00 0.99 1.06 1.08 Asset Turnover
Cash 11261 10734 1.5 1.5 1.6 1.6 1.6 1.7 1.7 1.9 1.5 1.6 1.6 Financial Leverage
Inventories 1051 885
Receivables 9924 10874 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 12-10 Financial Health
Current Assets 41678 43927 3625 3730 3530 4375 6816 8038 12657 20598 20049 20956 20132 Working Capital USD Mil
317 316 . . . . . . . . . Long-Term Debt USD Mil
Fixed Assets 4768 5868
3920 4095 4223 5076 7466 9984 14532 21030 31640 47791 54666 Total Equity USD Mil
Intangibles 1083 1263
0.08 0.08 . . . . . . . . . Debt/Equity
Total Assets 75183 86742
Payables 12225 14453 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TTM Valuation
Short-Term Debt . . 36.9 . 57.1 50.5 38.8 30.8 43.5 15.9 20.5 18.0 19.6 Price/Earnings
Current Liabilities 20722 23795 . . . . . . . . . 1.0 1.2 P/E vs. Market
Long-Term Debt . . 1.3 0.9 1.2 2.6 3.8 3.6 6.7 2.3 4.1 3.9 4.3 Price/Sales
Total Liabilities 27392 32076 1.9 1.3 1.8 4.5 7.2 6.5 10.3 3.3 5.3 5.4 5.9 Price/Book
32.0 33.0 19.7 17.2 30.1 19.8 27.5 7.2 16.0 13.3 14.5 Price/Cash Flow
Total Equity 47791 54666
Valuation Analysis Quarterly Results Industry Peers by Market Cap
Current 5 Yr Avg Ind Mkt Revenue USD Mil Mar 10 Jun 10 Sep 10 Dec 10 Mkt Cap USD Mil Rev USD Mil P/E ROE%
Price/Earnings 19.6 25.7 17.4 16.3 Most Recent Period 13499.0 15700.0 20343.0 26741.0 Apple, Inc. 324281 76283 19.6 36.8
Forward P/E 13.4 . . 13.2 Prior Year Period 8163.0 8337.0 16238.0 15683.0 Microsoft Corporatio 215773 66690 10.9 44.3
Price/Cash Flow 14.5 16.8 12.4 8.5 Rev Growth % Mar 10 Jun 10 Sep 10 Dec 10 Hewlett-Packard Comp 91406 126033 11.3 21.6
Price/Free Cash Flow 16.6 19.8 15.4 17.7
Most Recent Period 65.4 88.3 25.3 70.5
Dividend Yield % . . 0.7 1.8 Major Fund Holders
Prior Year Period 8.7 11.7 105.7 54.3
Price/Book 5.9 6.2 5.0 2.2 % of shares
Price/Sales 4.3 4.1 1.9 1.4 Earnings Per Share USD Mar 10 Jun 10 Sep 10 Dec 10 Fidelity Contrafund 1.77
PEG Ratio 0.8 . . 1.8 Most Recent Period 3.33 3.51 4.64 6.43 American Funds Growth Fund of Amer A 1.13
Prior Year Period 1.33 1.35 4.61 3.67 Vanguard Total Stock Mkt Idx Inv 1.04
*3Yr Avg data is displayed in place of 5Yr Avg TTM data based on rolling quarterly data if available; otherwise most recent annual data shown.

© 2011 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. ®
The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security.
Redistribution is prohibited without written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
ß
Morningstar Equity Research

Apple, Inc. AAPL (NAS)

Last Close Industry Sector
351.99 USD Computer Systems Hardware

Management & Ownership

Management Activity

Name Position Shares Held Report Date* InsiderActivity

ARTHUR D. LEVINSON, Director 223,728 01 Feb 2011 -
PHD
BERTRAND SERLET,PHD Senior VP, Divisional 111,309 08 Feb 2011 20,000
ROBERT MANSFIELD Senior VP, Divisional 39,364 31 Jan 2011 -
TIMOTHY D. COOK CEO/COO 13,754 31 Jan 2011 -
PETER OPPENHEIMER CFO/Senior VP 6,880 31 Jan 2011 -
MR. JEFFERY E. Senior VP, Divisional 4,587 01 Mar 2011 62,596
WILLIAMS
MR. ALBERT A. GORE,JR Director 1,990 01 Feb 2011 -
MILLARD S. DREXLER Director 990 01 Feb 2011 -

*Report date represents the date on which the owner's common shares held was audited.

Fund Ownership
Morningstar % of Shares % of Fund Change
Top Owners Rating Held Assets (k) Portfolio Date

Fidelity Contrafund QQQQQ 1.79 7.04 24 31 Dec 2010

PowerShares QQQ QQQ 1.66 20.51 1,551 31 Jan 2011
Vanguard US Total Market Shares (AU) ETF 1.05 2.07 -177 31 Dec 2010
VA CollegeAmerica Grth Fund of Amer 529F QQQ 1.00 1.95 1,000 31 Dec 2010
Vanguard 500 Index Investor QQQ 0.90 2.58 -94 31 Dec 2010

Concentrated Holders

Internet Architecture HOLDRs 0.00 23.41 0 28 Feb 2011

Prudential Jennison Market Neutral A 0.00 21.37 -1 31 Jan 2011
BMO NASDAQ 100 Equity Hedged CAD Idx ETF 0.00 20.59 2 31 Jan 2011
PowerShares QQQ QQQ 1.66 20.51 1,551 31 Jan 2011

Institutional Transactions
Shares
Morningstar % of Shares % of Fund Bought/
Top 5 Buyers Rating Held Assets Sold (k) Portfolio Date
PowerShares QQQ QQQ 1.66 20.51 1,551 31 Jan 2011
VA CollegeAmerica Grth Fund of Amer 529F QQQ 1.00 1.95 1,000 31 Dec 2010
Vanguard Institutional Index Instl QQQ 0.77 2.58 348 31 Dec 2010
GMO Quality III QQQQ 0.17 3.37 323 30 Nov 2010
Hartford Capital Appreciation A QQQ 0.07 1.01 303 31 Jan 2011

Top 5 Sellers

Janus Twenty D QQQ 0.33 10.51 -649 31 Dec 2010

CGM Focus QQ 0.01 1.12 -595 30 Sep 2010
Janus Forty S QQQ 0.23 10.23 -467 31 Dec 2010
Waddell & Reed Core Investment A QQQQ 0.01 1.24 -262 31 Dec 2010

©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not Page 3 of 5
represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To
order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Morningstar Equity Research

Apple, Inc. AAPL (NAS)

Last Close Industry Sector
351.99 USD Computer Systems Hardware

Industry Focus: Computer Hardware

Shining a Light on Global Solar Growth installation activity, concern surfaced that demand would
04 October 2010 be pulled into the first half of the year, with weakness
emerging in Germany after the subsidy cuts, and with it, the
resumption of module pricing declines. With the second
Stephen Simko, CFA quarter's solar results now in, it is abundantly clear that
Senior Equity Analyst
During 2009's fourth quarter, the solar industry was just demand has remained relatively robust in Germany post-
recovering from the brutal declines in silicon and module subsidy cuts, and will remain so for the rest of 2010.
average selling prices, or ASPs. Companies and analysts Additionally, attractive project internal rates of return in
were predicting 2009 global installations would be flat at other countries have fueled strong installation growth
2010 was a white- six gigawatts (GW). At the same time, the more optimistic elsewhere all year long. Examples would include Belgium,
hot year for solar. projections for 2010 were largely falling in the range of the Czech Republic, France, and Italy, all of which boast
between nine and 11 GW. double-digit returns. Every major solar market seems poised
Will the wattage to post annual growth rates of at least 50% this year.
keep pace in 2011? However, as installation data for the fourth quarter began Reflecting these trends, we have updated our 2010
to be publicized in early 2010, it became clear that the end installations estimate to 13.6 GW, 88% above the 7.2 GW
of 2009 saw demand spike to far higher levels than almost installed in 2009. Germany will again account for half of the
anyone anticipated. The prime example of this was global market, with 6.7 GW of installations occurring this
Germany, the world's largest solar market, which installed year.
1.46 GW in the month of December alone, or 38% of the
total capacity (3.8 GW) it brought online last year. German
capacity additions wound up doubling last year, and the
country wound up accounting for 53% of installations 2011 Demand and Pricing Projections
worldwide. With a slowdown prior the end of 2010 becoming highly
unlikely, the focus is shifting to 2011. Multiple variables will
As a result, when the German government announced a come into play that could materially impact global demand
special subsidy cut to occur in July of this year to cool levels as well as market pricing for modules (these, along
with a company's cost structure, are the three major
variables that move solar stocks).

On the demand side, subsidy reductions will be occurring in

several key European markets. In Germany, subsidies will
decline by an additional 10% on January 1. Cuts are also
set to occur in other major markets such as Italy, where four
separate reductions that will lower tariffs 25% by the end
of 2011, and in the Czech Republic, where the government
is still debating specifics. As a result, the high returns project
investors are currently enjoying will come under pressure,
unless a corresponding decline in the pricing of solar
projects occurs. This implies that both system installers and
module makers will have to reduce pricing to maintain
strong demand. Furthermore, the industry has not only been

©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not Page 4 of 5
represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To
order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.
Morningstar Equity Research

Apple, Inc. AAPL (NAS)

Last Close Industry Sector
351.99 USD Computer Systems Hardware

Industry Focus: Computer Hardware

bringing production capacity on line all year, but companies modules below spot pricing, due to signing customer
have recently been increasing their expansion plans in contracts before it was evident how strong solar demand
response to current demand levels. Even if demand remains would be in 2010. Though these companies are missing out
robust in 2011, there is risk that supply will overshoot on profits in the current period, their margins will be less
demand, creating pressure on module pricing. impacted from 2011 spot pricing declines.

With these considerations in mind, we expect ASP declines On the other side of the spectrum are the higher-cost
to resume in the first quarter of 2011 after being flat for the manufacturers in Europe. These companies, such as
last six months. However, the magnitude of ASP declines is Renewable Energy Corp and Solarworld SWV, have long
likely to vary significantly by company. The industry's cost sold their modules at a premium to their low-cost
leaders, First Solar FSLR , Trina Solar TSL , and counterparts, largely since a perception remains in solar
Yingli Green Energy YGE all are currently selling their that modules made in Europe are of superior quality,
especially compared to Chinese-made product. This may
have been the case five years ago, but it certainly is not
anymore for tier-one Chinese modules. Reports are
emerging that this "European premium" has started to erode
in response to the lower project returns now available in
Germany.

For low-cost module manufacturers--which represent the

majority of our coverage list--we are projecting 2011 ASP
declines of 10-13%. For Renewable Energy Corp, our lone
producer from Europe, we have updated our ASP
projections, and now are forecasting ASP declines of 20%.
We continue to view the pricing premiums that European
manufacturers enjoy as unsustainable, and believe these
will disappear completely within a few years time.

©2009 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained herein is not Page 5 of 5
represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission. To
order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.