Comprehensive Analysis of Apple Inc. and Sony Corp.

Comprehensive Analysis of Apple Inc. and Sony Corp.
Apple Inc. and Sony Corp. are both international companies which have innovative spirits, and their products are leading or have led an age. Although they are marketing in different segments in electronic industry—Apple focuses on computer science and software development, while Sony focuses on almost all area in electronics industry, they have one common point: innovation is the pillar of the companies.
Historical Development of the Apple Inc. and the Sony Corp.
Apple Inc. is a multinational corporation that creates consumer electronics, computer software, and commercial servers.
Founders Steve Jobs and Steve Wozniak effectively created Apple Computer on April 1, 1976, with the release of the Apple I, and incorporated the company on January 3, 1977. In the early years, the Apple Inc. was very successful because it developed the Apple II and Apple III, which made the Apple Computers remain at the forefront of the age. However, in the later 1980s and early 1990s, the Apple Inc. fell in its low tide because of the wrong strategic decisions of the top-level managers and the increasing competitors in computer and software industries.
As Steve Jobs came back, the Apple Inc. began a renaissance in 1997. With the release of the iMac on August 15, 1998, Apple was able to put to rest some its past failures. In 2001, after several years of development, Apple released Mac OS X, an operating system that targeted both consumers and professionals. Mac OS X was a complete redesign from Mac OS 9 and was able to harness the power of UNIX while offering a streamlined user experience with a simplified Graphical User Interface. The iMac line of personal computers paired with Mac OS X returned Apple to profitability and the release of the iPod portable digital audio player later that year was the icing on the cake. The phenomenal success of the iPod set the stage for future products, including the best selling mobile device in history, the Apple iPhone, the MacBook line of portable computers, and the Apple iPad announced on January 27, 2010.
Apple Inc. uses its infinite creations attract a lot of staunch users of Apple products. Apple Inc. is bringing us the revolution of electronic science, while it is yielding big revenue and international reputation.
Sony Corp. was founded after World War II in 1946 in Tokyo under the name Tokyo Telecommunications Engineering Corp. by Masaru Ibuka and Akio Morita. The company started with less than 200,000 yen--slightly more than $1,500--and began researching. In less than a year, the company released its first product, a power megaphone. In 1950, it released Japan's first tape recorder. In 1958, the name was officially changed to Sony Corp. In 1960, Sony launched its U.S. branch.
Since then, few companies have made a journey similar to that of Sony in terms of invention and innovation. Among the significant developments include the first Trinitron color television in 1968, the color videotape in 1971, the Betamax VCR in 1975, the Walkman in 1979, the micro diskette 3.5 inches in 1989, an electronic camera in 1981, the first CD player in the world in 1982, the first camcorder for the general public in 1983, 8 mm video in 1988, and so on until today. In 2000, the successful promotion of PlayStation 2 brought Sony to a new height. In 2003, the company released the world's first Blu-ray disc player. The productions of Sony reach many different areas, including computers, game players, digital photography, even film industry.
Compared to Apple Inc., Sony Corp. suffers from its bottle-neck in these five years. Due to failure in competition of game players with Nintendo Co., and the stagnant innovation in electronic industry, Sony Inc. suffers from five-year reduction of revenue and financial deficit.
In the following three parts, I will discuss the strategic analysis, financial analysis, managerial strategy, and future directions of these two companies.

A Current Comprehensive Strategic and Financial Analysis
SWOT Analysis
As a successful company, Apple Inc. has a lot of strengths which consolidate its position in the industry. Technical savvy and brand loyalty are two most significant strengths. The product lines of Apple adapt to diverse customer base. While the pure technical expertise alone is not a valuable or rare resource, it becomes very costly to imitate when it exists within the socially complex, entrepreneurial culture of Apple. Nowadays, many people become loyal to Apple’s products because of their fashion designs and the easy operation. However, the weaknesses of Apple are very obvious—the lower market share and higher price compared to other competitors. Compared to the software of Apple, the Microsoft software is more popular and has high compatibility. The price of Mac is almost as twice even triple as the laptops of other brand. The high price leads Apple loses most of middle-class customers in PC market, while the middle-class is the large consuming group. The opportunities of Apple are the increasing needs of PC and mobile industry, and more international expansion like Asian countries. With the startling success of the iPods and iTunes, Apple entered the consumer electronics market. By expanding the iTunes concept to downloadable mobile phone features and movies, the door is now open to develop new and potentially profitable strategic alliances with peripheral component manufactures, and media transmission giants. The globalization brings Apple business opportunity around the world, and makes Apple get more profit. Certainly, the Apple must face the threats, such as competition in technology with other PC industry giants, and legal risks. In the current several months, Apple suffers from the lawsuit of iPad’s trademark in China, and the book sellers’ complaint about the price of e-books in App store.
Now, I will show the SWOT analysis of Sony Corp.. Like Apple, Sony also has strength in brand loyalty, especially in Asian market. And the other important strength is its ability to expand its markets and works to produce various products. Sony Corp. has the market shares in many different areas, including game players, televisions, digital photography, and PCs. Sony Corp. almost achieves every corner of electronics industry, and wins a wide space of development. The weakness of Sony is its Conglomerate (H form) design of organizational structure. The functional departments within the organization are not communicating with one another, and so productivity has decreased. Some low-profit product lines are wasting the resources of the organization. The opportunity of the Sony is the financial support from the government. Although Sony Corp. has been making a loss in the past five years, the Japanese government still supports the Sony and several other Japanese companies, and tries to revive these pillar industries in national economy. The threat of the Sony comes from their decentralized markets. While the diversified goods bring them more opportunities, they also consume too much resource, and competitors are achieving most of Sony’s customers due to the fact that their products are achieving various market types.
Financial Analysis of the latest quarter
In January 24, 2012, Apple announced financial results for its fiscal 2012 first quarter which spanned 14 weeks and ended December 31, 2011. The company posted record quarterly revenue of $46.33 billion, quarterly net profit of $13.06 billion, and gross margin of 44.7 percent. Compared to the year-ago quarter, the sale of iPhones increased 128 percent unit, the sale of iPads increased 111 percent unit, the sale of Macs increased 26 percent, and only the sale of iPod declined by 21 percent unit. All of the data in the financials reports show the increasing sale of Apple’s products, and the company is flush with funds.
Sony’s latest financial reports are for the third quarter, which ended in December 31, 2011. The company posted record quarterly sales revenue of $23.37 billion, a 17.4 percent decline over the year-ago quarter, and operating loss of $1.18 billion, which was due to a significant deterioration in equity in net loss of affiliated companies, deterioration in the cost of sales ratio, and a decrease in gross profit from significantly lower sales. Except Pictures Segment and Financial Services Segment, sales revenue of all other Sony’s business segments decreased compared to the year-ago quarter. The current ratio (the ratio of current assets to current liabilities) is about 0.9. All of signs indicate that Sony is deep in financial difficulties.
In the financial analysis, it is easy to see the Apple Inc. has higher sales revenue and net income than Sony Corp., although Sony Corp. contains more business segment in different fields. The Apple Inc., which lost Steve Jobs, still keeps at the top of world’s companies with its high revenue and increasing stock price.
The Impact of Managerial and Financial Decision on Stock Prices
Since the April of last year, the stock price of Apple Inc. has almost doubled. The stock price reached the highest point of $636.23 per share in April 9. Although Apple lost Steve Jobs in the October 2011, the sale of iPhone 4S and preorder of iPad 3 contributed to the high revenue and cash inflow for Apple Inc. at the end of 2011 and the beginning of 2012. The new products brought the new markets for Apple, and save its declining stock price. However, when many experts expect that the Apple’s stock will be increasing to $900 per share, even break $1000 per share in the several months, the Apple’s stock began to decrease after April 9, 2012. After keeping tracks of the news of Apple in these two months, I think there are two important reasons leading to the declining stock price.
The first reason is the reduction of the demand of iPhones and iPads. In the first-quarter financial report 2012, Apple sold 37.04 million iPhones, and 15.43 million iPads. The increasing share in smartphone market raised the confidence of the investors. The huge profit comes from the sales helped increase the Apple’s stock price. Stock price was increasing rapidly after third-generation iPads were on the market in March 16. Nevertheless, after the peak of sale, the demand of products will decline and keep stable, at the same time the stable iPhone and iPad sale will bring the stock price to the stable level.
The second reason is Apple Inc. has trouble in the legal cases in the recent two months. While Apple is dominating the smartphone market, Apple attracts more competitors. The Apple has secured two key U.S. patents on slide-to-unlock—a technology that lets users wake a dormant phone with a finger-swipe across the screen. However, it seems that more and more smartphone manufacturers have interest in these patents and this new design of phone. In early 2010, Apple sued HTC for allegedly infringing slide-to-unlock and other features. When Apple tried to sue Samsung for infringing slide-to-unlock in the February, Samsung and Apple got a surprise: an obscure Swedish touchscreen maker called Neonode Inc. disclosed that it had received a patent for a version of slide-to-unlock in 2002. Other than the patents, Apple faces a charge from the Justice Department, which sued Apple and five large book publishers over conspiring to raise e-book prices. It is obvious that these lawsuits bring the potential danger to Apple, and influence its stock price in this week.
Actually, although the stock price of Apple is decreasing, I believe the news about the new products of Apple will help the company stabilize the stock price. Most investors still keep confident on Apple Inc.
The stock price of Sony Corp. has been decreasing from the beginning of this April. Actually, the stock price decreased rapidly early in 2008, and the Sony has suffered the net losses for five years. The Sony’s stock price now is only one seventh of the highest Sony’s stock price in 2008. Although Sony changes its CEO at the beginning of this April, the stock price continues to decrease without signs of stopping. Unlike the Apple, the reason, leading steady declining of Sony’s stock, is more simply. The most important reason is the huge loss in operating.
Kazuo Hirai, the new CEO of Sony, said he would implement major changes at the struggling Japanese electronics conglomerate, including deep cost cuts at its unprofitable television business, and outlined the company’s need for a “sense of urgency” in executing those changes. Just as he claimed, Sony plans to reduce its workforce by an estimated 10,000 jobs, or about 6% of its global workforce. The new CEO wants to restructure the company from cutting some unuseful workforce. However, cutting cost now cannot change the fact that Sony has about $6.4 billion in the just-ended fiscal year. The huge loss makes Sony have no ability to invest in researching and developing new technologies.
Under the force of the Japanese government, the display-panel operations of Sony Corp., Toshiba Corp., and Hitachi Ltd. combined at the start of this April. The government tries to invest in its national pillar industry— electronics industry, and expects the market of small displays will increase because of booming market for smartphone. The combination of Sony’s most potential business sector with other companies indicates the company begins to lose the control on its businesses.
I think the stock of Sony will continue to decrease, if the company cannot find out the key problem of the company. Only the profit can help the company win the confidence and fund from the investors. And only the sufficient funds can help the company continue innovative research and development.
Future Direction of Two Companies
Like most investors, I have confidence on Apple, and the investment on Apply is worth. The biggest risk of Apple is whether the company can keep its innovative sprit in the future, even though it lost Steve Jobs. Apple brought out iPhone 4S at the end of 2011, and third-generation iPad and beginning of 2012. It seems that Apple always brings surprise to us and never disappoints Apple funs. However, actually, the difference between iPhone 4 and iPhone 4S is not too much, as the same as the difference between iPad 2 and the third-generation iPad. Now, most investors care about the information of iPhone5, which is estimated to be on market in this October. If iPhone5 has not qualitative changes in terms of technology and appearance, it is hard to capture the interest of customers. Therefore, iPhone5 is the most important product, which is used to show us whether Apple can bring us new exciting high-tech product without Steve Jobs. The success of iPhone5 or a new series of Apple product can help Apple to stabilize the stock price, and brings stock price to a new peak.
Consequently, the direction of Apple Inc. is keeping its innovative spirit, and remains at the forefront of the new age with the new technologies.
The direction of Sony is more obscure and complex than that of Apple. In my view, the key problem is Sony invest in too many business sectors, such as computers, game players, televisions, music, movies, and financial service. Now facing the shortage of fund, Sony should find out the most potential sector, and focus on it, rather than putting the fund in diversified baskets.
The failure of Sony in these five years shows us the shortcoming of the H form organization. The H form design achieves only average-to-weak financial performance, and it is hard to associate with holding diverse and unrelated businesses. I think Sony has two alternatives now. One is focus on the profitable segments of business. The financial statements show the net income in Music and Picture segments; therefore, Sony can focus on entertainment industry. However, if Sony chooses this, it must give up its traditional segment of business in electronics industry. I do not think it is a perfect idea. Certainly, Sony can focus on its traditional segment. But it must face many competitors. Sony has wanted to make PlayStation as its pillar product. Although PS2 got the success, the Nintendo recovered the most of game players market immediately. After failure in sales of PSP and PS3, Sony has almost lost the competitiveness in game players market. In computer market, Apple and Dell are its strong competitors, which are hard to catch up with. The only market, Sony has a competitive advantage, is television market. If Sony can invest more funds to develop LCD screen, it can expect to recapture the share of television market. The other choice is restructure the company, which is the choice of the Sony’s new CEO. Cutting the segments with high losses, making a clean sweep in the departments, or merging the departments which have the same functions can help Sony reduce the cost in short-term, and reduce the losses.
Sony needs at least two years to recover from its five-year loss. Although it a hard process, Sony is still a potential company, which possesses the pillar industry of Japanese government, and have a wide market in Asian. Sony needs a smart leader to lead it to walk out from dark, and it also needs the supports from government and consumers.
In conclusion, the Apple Inc. and Sony Corp. have something in common. Both of them, now or once, represent the high technology in one age. Apple Inc. is absorbed in technology and electronics industry, while Sony wants to expand to diversified businesses. You can say they have the different difficulties, or you can say they have the same difficulty. The development is the key in technology and electronics industry. New technology, which brings the revolution of technology around the world, is the sustainable development for both companies.