case study 7 pages compare two company and analyze which one to invest

ACCT 440 Group Project

Keying Microsoftn

Cynthia Gonalez

03/15/2017

Apple Inc. versus Microsoft Corporation

From the Annual (10-K) report:

1. 1. Company profile and history.

      • Apple Inc.: The Company designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players, and sells a variety of related software, services, accessories, networking solutions and third-party digital content and applications. The Company’s products and services include iPhone®, iPad®, Mac®, iPod®, Apple Watch®, Apple TV®, a portfolio of consumer and professional software applications, iOS, OS X® and watchOS™ operating systems, iCloud®, Apple Pay® and a variety of accessory, service and support offerings. In September 2015, the Company announced a new Apple TV, tvOS™ operating system and Apple TV App Store®, which are expected to be available by the end of October 2015. The Company sells and delivers digital content and applications through the iTunes Store®, App Store, Mac App Store, iBooks Store™ and Apple Music™ (collectively “Internet Services”). The Company sells its products worldwide through its retail stores, online stores and direct sales force, as Microsoftll as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. In addition, the Company sells a variety of third-party Apple compatible products, including application software and various accessories through its online and retail stores. The Company sells to consumers, small and mid-sized businesses and education, enterprise and government customers. The Company’s fiscal year is the 52 or 53-Microsoftek period that ends on the last Saturday of September. The Company is a California corporation established in 1977.

      • Microsoft Corporation: Microsoft is a technology company whose mission is to empower every person and every organization on the planet to achieve more. Their strategy is to build best-in-class platforms and productivity services for a mobile-first, cloud-first world. The mobile-first, cloud-first world is transforming the way individuals and organizations use and interact with technology. Their worldview for mobile-first is not about the mobility of devices; it is centered on the mobility of experiences that, in turn, are orchestrated by the cloud. Cloud computing and storage solutions provide users and enterprises with various capabilities to store and process their data in third-party data centers. Mobility encompasses the rich collection of data, applications, and services that accompany Their customers as they move from setting to setting in their lives. Microsoft are transforming Their businesses to enable Microsoft to lead the direction of this transformation, and enable Their customers and partners to thrive in this evolving world. Founded in 1975, Microsoft operates worldwide in over 190 countries. Microsoft develop, license, and support a wide range of software products, services, and devices that deliver new opportunities, greater convenience, and enhanced value to people’s lives. Their products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games; and training and certification of computer system integrators and developers. Microsoft also design, manufacture, and sell devices, including PCs, tablets, gaming and entertainment consoles, phones, other intelligent devices, and related accessories, that integrate with Their cloud-based offerings. Microsoft offer an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and Microsoft provide solution support and consulting services. Microsoft also delivers relevant online advertising to a global audience.

1. 1. Financial information

1. 1. Current stock price for the companies

• Apple Inc.: 140.46 USD

• Microsoft Corporation: 64.75 USD

1. 1. Independent Auditor’s Report

• Apple Inc. 2015: unqualified opinion

• Apple Inc. 2016: unqualified opinion

• Microsoft Corporation 2015: unqualified opinion

• Microsoft Corporation 2016: unqualified opinion

From the Proxy (DEF) filings:

a. Apple Inc. DEF Report for the following years 2016/2015

Audit Fees

2015 2016

$12,414,100 $13,537,500

Audit Related Fees

2015 2016

$636,800 $653,000

Background Information of the key officers for Apple Inc.

Tim Cook, Chief Executive Officer,

Since August 2011 and was previously Apple’s Chief Operating Officer since October 2005. Tim Cook joined Apple in March 1998 and served as Executive Vice President, Worldwide Sales and Operations from 2002 to 2005. In 2004, his responsibilities were expanded to include Macintosh hardware engineering. From 2000 to 2002, Mr. Cook served as Senior Vice President, Worldwide Operations, Sales, Service and Support. From 1998 to 2000, Mr. Cook served as Senior Vice President, Worldwide Operations. Mr. Cook has served as a director of NIKE, Inc. since November 2005, where he serves as the Chair of the Compensation Committee and as a member of the Nominating and Corporate Governance Committee. Mr. Cook has served as a director of The National Football Foundation & College Hall of Fame, Inc. since February 2010, on the advisory board of Tsinghua University School of Economics and Management since October 2013, and on the board of trustees of Duke University since July 2015. Among other qualifications, Mr. Cook brings to the Board extensive executive leadership experience in the technology industry, including the management of worldwide operations, sales, service and support.

Luca Maestri, Senior Vice President, Chief Financial Officer,

Joined Apple in March 2013 and assumed his current position in May 2014. Prior to assuming his current position, Mr. Maestri served as Apple’s Vice President and Corporate Controller. Prior to joining Apple, Mr. Maestri was Executive Vice President, Chief Financial Officer of Xerox Corporation, a business services and technology company, from February 2011

Angela Ahrendts, Senior Vice President, Retail and Online Stores,

Joined Apple and assumed her current position in May 2014. Prior to joining Apple, Ms. Ahrendts served as director and Chief Executive Officer of Burberry plc, a luxury fashion company, from July 2006. Ms. Ahrendts also previously served as Executive Vice President at Liz Claiborne Inc., and as President of Donna Karan International. Ms. Ahrendts is also a member of the United Kingdom’s Prime Minister’s Business Advisory Council.

Eddy Cue, Senior Vice President, Internet Software and Services,

Joined Apple in January 1989 and assumed his current position in September 2011. Mr. Cue’s previous positions with Apple include Vice President of Internet Services and Senior Director of iTunes Operations. Mr. Cue has also served as a director of Ferrari S.p.A., a luxury sports car company, since November 2012.

Dan Riccio, Senior Vice President, Hardware Engineering,

Joined Apple in June 1998 and assumed his current position in August 2012. Mr. Riccio’s previous positions with Apple include Vice President of Product Design and Vice President of iPad Hardware Engineering. Prior to joining Apple, Mr. Riccio worked at Compaq Computer Corporation as Senior Manager of Mechanical Engineering.

Bruce Sewell, Senior Vice President, General Counsel and Secretary,

Joined Apple and assumed his current position in September 2009. Prior to joining Apple, Mr. Sewell served as Senior Vice President, General Counsel of Intel Corporation from 2005. Mr. Sewell also served as Intel’s Vice President, General Counsel from 2004 to 2005 and Vice President of Legal and Government Affairs, Deputy General Counsel from 2001 to 2004. Prior to joining Intel in 1995, Mr. Sewell was a partner in the law firm of Brown and Bain PC. Mr. Sewell has also served as a director of Vail Resorts Management Company, an operator of mountain resorts, since January 2013.

Apple Inc. Report Changes

The changes that the audit report reported were the changes of cash retainer of each officer. Tim Cook received an increase base salary of $3,000,000 million dollars for the year of 2016. In 2015 Tim Cook base salary was $2,000,000 million dollars. The reason given why he got an increase was due to his remarkable leadership and great increase in revenue.

b. Microsoft Corporation DEF Report for the following years 2016/2015

Audit Fees

2016 2015

$34,258,000 $35,622,000

Audit Related Fees

2016 2015

$16,735,000 $19,193,000

Background Information of the key officers for Microsoft Corporation

William H. Gates III., Co-founder of Microsoft

Served as Chairman from our incorporation in 1981 until 2014. He currently acts as a Technical Advisor to Mr. Nadella on key development projects. Mr. Gates retired as an employee in 2008. Mr. Gates served as Chief Software Architect from 2000 until 2006, when he announced his two-year plan to transition out of a full-time employee role. Mr. Gates served as Chief Executive Officer from 1981 until 2000, when he resigned as Chief Executive Officer and assumed the position of Chief Software Architect. As co-chair of the Bill & Melinda Gates Foundation, Mr. Gates shapes and approves grant-making strategies, advocates for the foundation’s issues, and helps set the overall direction of the organization.

Satya Nadella- Chief Executive Officer

Mr. Nadella was appointed Chief Executive Officer and a Director in February 2014. He served as Executive Vice President, Cloud and Enterprise from July 2013 to February 2014. From 2011 to 2013, Mr. Nadella served as President, Server and Tools. From 2009 to 2011, he was Senior Vice President, Online Services Division. From 2008 to 2009, he was Senior Vice President, Search, Portal and Advertising. Since joining Microsoft in 1992, Mr. Nadella’s roles also included Vice President of the Business Division.

Amy Hood,Executive Vice President & Chief Financial Officer

Ms. Hood led Microsoft’s worldwide financial organization, including acquisitions and divestitures, treasury, tax planning, accounting and reporting, internal audit, investor relations, global procurement, and facilities.

Margaret L. Johnson,Executive Vice President, Business Development,

Ms. Johnson led Microsoft’s strategic partnerships and business transactions across various industries with key customers, strategic innovation partners, original equipment manufacturers, key accounts, third-party publishers, and industry influencers. She managed the Company’s relationship with the venture capital community and oversaw strategic investments through our corporate venture fund, Microsoft Ventures

Bradford L. Smith,President and Chief Legal Officer

Previously, he was Executive Vice President, Legal and Corporate Affairs and General Counsel. Besides his prior responsibilities overseeing Microsoft’s legal work, intellectual property portfolio and patent licensing business, and its government affairs, public policy, and corporate social responsibility and philanthropic work, he assumed a key leadership role, including representing the Company externally on critical issues such as privacy, security, accessibility, environmental sustainability, and digital inclusion. He also serves as Microsoft’s Chief Compliance Officer.

Kevin Turner ,Chief Operating Officer

Mr. Turner handled the operational leadership of Microsoft’s worldwide sales, field marketing, and services organization. Mr. Turner also managed support and partner channels, Microsoft stores, and corporate support functions for Information Technology, Worldwide Licensing & Pricing, and Operations.

Microsoft Corporation Report Changes

The change that the audit firm Deloitte & Touche recommended Microsoft to change is to consolidate financial statements. Also, they recommended that it should be included in the Microsoft annual Report on Form 10-k for the fiscal year ending June 30,2016 when they file with the SEC.

Analysis:

The better company to invest in is Apple Inc. compared to Microsoft Corporation. Comparing booth companies’ apple has a greater return to their shareholders. From September 2013 to September 2016 their total return percentage to their shareholders is 73.6%. Compared to Microsoft their return for last year is 60.9%. Also, apple has higher revenue than Microsoft. Apple revenue is $215.6 Billion dollars in 2016 and Operating income of $60.0 billion. The last comparable is their Earning per share is higher compared to Microsoft. Apple has shown in increase in revenue in the past years except for 2016. They had a loss in income but have shown a more steady increase in their revenue compared to Microsoft. Therefore, Apple Inc. is a better company to invest compared to Microsoft .