Company Comparison

Aware™ Technology -- 1st Financials, Visual Analysis

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1st Financials -- Company Comparison

Apple Computer vs Microsoft Corporation

The following financial analysis visually compares Apple Computer and Microsoft Corportation. This analysis exemplifies the use of the 1st Financials software visual displays to compare the financial performance of these two companies. In this comparison we display Apple Computer and Microsoft Corporation financial results side by side. We also use the scaling controls on both company's charts so that the side by side comparisons have comprable proportions, i.e., have the same scale

Sales Component Comparison: Apple vs Microsoft

While Apple Computer sales are 40% greater than Microsoft, Microsoft's profits are 400% greater than Apple Computer's. One possible explanation for this is the fact that the profit margins on hardware are much smaller than on software. Apple Computer’s sales are mainly hardware sales enhanced by software while Microsoft specializes 100% in software where the margins are higher.

It should be noted that we have 13 years of historical data for Apple Computer ending in 1994, while we have only ten years of data for Microsoft through the 1994. Perhaps the reader would be interested to enter the data for 1995 and see what happened. The 1995 data is printed at the end of this section for your use.

Cash Flow Component Comparison

Of greatest interest is the net cash flow. Shown in light blue, Apple Computer's net cash flow for 1994 is negative, while the same color net cash flow for Microsoft's is gigantic and positive. The net negative cash flow for Apple Computer should have a detrimental impact on the balance sheet. The net positive cash flow for Microsoft should have a positive impact on the balance sheet. In case you are curious, the Microsoft net cash flow for 1994 was 1.324 Billion dollars. Apple’s negative cash flow was ($544 Million).

It should also be noted that we are not making any speculation with regard to the meaning of these numbers. That process is entirely up to the beholder. We are simply using Value Line Data to illustrate how two companies that may be of interest to you can be compared visually using the 1st Financials software.

Balance Sheet HiLo Chart Comparison

The appearance of Microsoft's balance sheet is extraordinary. For every dollar of equity there is nearly a dollar of cash. Liabilities are minimal. Their cash balance is gargantuan. Normally, a company in this kind of cash position is vulnerable to a corporate takeover. However, there are few companies in a position to attempt a takeover when there is 3.5 billion dollars of cash in reserve to fight that bid.

With Apple Computer, you can see the impact of the net negative cash flow as reduced cash and reduced equity. Thus, the total assets in 1994 have shrunken since the previous year.

Microsoft: Return on Asset and Profit Margin Comparison

The magenta lines from the origin are profit margin lines. The slope of this line corresponds with the increase or decrease in profit margins. The vertical green lines are Asset Turnover lines. They correspond with the asset turnover ratio and show relative marketing effectiveness by period. Along the right, vertically, are the return on asset values that correspond to each data point. Return on assets is a composite ratio created by multiplying profit margin times asset turnover ratio.

Microsoft's profit margins ranged from 17 to 25.5%. Their asset productivity, with one exception, was in the range of 1 to 1.2. Their performance in both profitability and productivity is very stable over the years and yields a return on assets in the 25% range.

Apple Computer: Return on Asset and Profit Margin Comparison

Apple Computer profits ranged from 1% to 11.7%, significantly lower than Microsoft's. Apple Computer's productivity ranged from 1.2 to 2.0. their average productivity is 25% greater than Microsoft's. However, with their lower profit margins and more erratic performance, return on assets was varied. When you compare Apple with Microsoft, Apple's performance is more volatile from year to year.

Microsoft:Cash Based Return on Asset and Cash Margin Comparison

It is important to consider cash performance, as well as the traditional accrual view of return on assets and profits. This chart views the cash statement accounts relative to the balance sheet accounts. Cash statement accounts include deposits, checks, dividends, and net cash flow. Microsoft's cash based performance has been positive, consistent, and very high

Apple Computer:Cash Based Return on Asset and Cash Margin Comparison

The scales on this chart have changed as a result of the negative net cash flow that Apple experienced this past year. The center line is now across the middle of the page to allow the visual presentation of that negative value. Again, Apple's overall productivity is higher than Microsoft's, ranging from 1.0 to 2.1 compared to an average of 0.9 for Microsoft.

However, when you compare cash based margins, Apple ranges from -6% to +14.3%, compared to Microsoft's 12% to 47%. On a cash basis it would be hard to imagine a company with a better performance than Microsoft has had over the past several years.

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Balance Sheet HiLo Chart Comparison
	The appearance of Microsoft's balance sheet is extraordinary. For every dollar of equity there is nearly a dollar of cash. Liabilities are minimal. Their cash balance is gargantuan. Normally, a company in this kind of cash position is vulnerable to a corporate takeover. However, there are few companies in a position to attempt a takeover when there is 3.5 billion dollars of cash in reserve to fight that bid.
With Apple Computer, you can see the impact of the net negative cash flow as reduced cash and reduced equity. Thus, the total assets in 1994 have shrunken since the previous year.


Microsoft: Return on Asset and Profit Margin Comparison
	The magenta lines from the origin are profit margin lines. The slope of this line corresponds with the increase or decrease in profit margins. The vertical green lines are Asset Turnover lines. They correspond with the asset turnover ratio and show relative marketing effectiveness by period. Along the right, vertically, are the return on asset values that correspond to each data point. Return on assets is a composite ratio created by multiplying profit margin times asset turnover ratio.
Microsoft's profit margins ranged from 17 to 25.5%. Their asset productivity, with one exception, was in the range of 1 to 1.2. Their performance in both profitability and productivity is very stable over the years and yields a return on assets in the 25% range.