I’ve been using the Pebble watch for a few months now, and I’m absolutely amazed at what the developer community has been doing with this modest little device. Turn-by-turn directions, eBay auctions, Detroit Lions touchdowns during church, or even Domino’s Pizza delivery monitoring…all on a small, black-and-white screen with relatively little processing power, and stiff-armed by iOS. 

Next to my beloved Pebble, however, the Apple Watch looks like a glossy black and silver Lamborghini with power and appeal. I can only imagine what the developers are going to do with this larger retina screen, more robust specs, and total iOS integration. But is a new product with one of their lowest starting prices going to move the needle for Apple? How many watches does Apple need to sell for the product to be relevant?

http://techcrunch.com/2014/11/24/samsung-ponders-executive-shakeup-as-galaxy-s5-sales-fall-40-short-of-expectations/?ncid=rss

The speed at which this news comes out surprises me a little. In my experience, most Boards of Directors are willing to give a management team with a pretty good track record a chance to turn things around first before they go nuclear. Although, that chance comes with the provision that they feel the management team has a good strategy going forward. Rule number one when you stand in judgement before a board with lackluster results, you always followup with the plan. You want to be prepared to pivot the conversation to questions of the future and away from what happened in the past.

It could be that Samsung’s management team didn’t show that they were planning on anything other than more of the same. This left the board with the uneasy feeling that they better step in sooner than later. Or when everyone started scrutinizing Samsung Mobile’s detailed income statements by product line everyone started asking why these guys are throwing money down ratholes with no real oversight? Now as punishment, someone will be moved into control of Samsung Mobile with the mandate of "cleaning house".

These latest headlines attributing GTA’s bankruptcy to manufacturing mismanagement are just wrong.  Anyone who’s ever been involved with starting up a new plant or product line is going to have similar stories of aimless workers and massive yield loss issues.  As I mentioned a few days ago, when we at Gateway Computers started selling plasma TV’s, we lost two thirds of our units due to yield loss. It was industry wide improvements in yield loss which was the real driver in the prices of flat screen TV’s coming down. Granted, it sounds like GTA may have fallen towards the extreme side, but I didn’t read anything that really surprised me. 

There’s an old biblical proverb that says “the borrower is slave to the lender” which immediately came to mind when I heard the reports coming out of The Korea Times.  Basically, it says that Samsung was chosen to supply Apple with 80% of their chips starting in 2015 with Taiwan Semiconductor getting the other 20%. I suppose the business equivalent to the proverb would be that “the manufacturer is slave to the customer”. 

GT Advanced Technologies is the company Apple had partnered with to produce sapphire displays for it’s smartphones and who recently filed for chapter eleven bankruptcy.  Some of the sensational accusations that GTA has made against Apple have been covered by the financial media and I’ve also seen speculation that GTA would have gone bankrupt anyway even without the Apple deal. It appears that most of GTA’s revenue (~one billion/year) was derived from solar equipment revenue that collapsed in 2013 when certain subsidies expired.

However, I thought it might be interesting to discuss how a company evaluates such a huge decision and the importance of financial modeling. 

http://www.bloomberg.com/news/2014-11-16/samsung-hunts-next-hit-with-internet-push-as-phones-fade.html


And so it begins. Samsung can't continue to dump money into low volume or downright experimental products forever. I correctly predicted that at some point, we'd see movement back to high volume products with low variation. I didn't think we'd start to see it a week later! If you ever heard the phrase "leveraging your fixed costs", that's what Samsung is doing. The board will give the management team a chance to correct their income statement shortfalls before it makes any more...severe...measures. 

It appears that in the right situation, Samsung is ok with throwing everything at the wall and seeing what sticks. That's is what they are doing with "The Internet of Things". However, in the connected home paradigm, the battle is still up for grabs so the lure of potential future profits still justifies spending money on crazy product ideas. But now that it appears that the battle in the smartphone arena has a clear victor, Apple, it's time to pivot back to the tried and true formula of spreading your costs over many units.

http://appleinsider.com/articles/14/11/16/after-losing-apples-ipad-business-intel-has-bled-7-billion-while-heavily-subsidizing-cheap-x86-atom-android-tablets

Daniel Dilger with AppleInsider writes an excellent article here that fleshes out what I touched on last week. If you dissect Apple's iPad Income Statement you are left wondering how competitors can offer sub-$199 tablets when you know that material alone has got to be close to the sell price. I figured you either use lower quality components or older tech. I didn't realize that the subsidies could be so large. Over $50!!! By my calculations, Apple probably left the iPad Mini 3 with an A7 chip to save $50!

In the 2000's I watched the PC makers all play a game of chicken to see who could offer PC's at a lower gross margin and still stay solvent. You can do that while you are in an environment of increasing sales units. But when volume peaks, the shakeout begins. Once volume starts falling, those with higher break even points will start falling out of the game. You don't have to be the most efficient manufacturer to survive, but you can't be the least. The mobile electronics world is headed that way. I wondered how long it might take, but with news that Intel is going to quit subsidies, it could be sooner than I thought. 

If, like me, you’re a busy person who doesn’t always have the time to just sit and read the latest Apple news than you have *got* to check out the Apple Podcasts. Then while you’re cleaning out the garage, driving to work, or actually being productive at your day job, you can get the gist of the latest news in a format that’ll probably make you smile. Because let’s face it, if it’s not fun to listen to, you probably aren’t going to go to the trouble, right? Following are my picks in various categories.

The world of high tech manufacturing is like an alternate universe where up is down and down is up. Most other industries are consumed with trying NOT to raise their product prices to customers every year, or conversely, stocking up on manufacturing parts from suppliers before the year-end price increases hit. But high tech? No way. It was the only time in my career where the price for raw materials three months later was lower than what you paid last time. And falling faster than that, is your sales revenue that you can charge your customers. 
So if your marketing group just cut the price on your $800 computer to $700 what is your average CEO going to do? He’s going to look at his VP of Operations and ask him where he’s going to make up that shortfall so that gross margins don’t suffer. 

I should have made this point earlier, but Apple shareholders expect a certain return on their investment. I don’t know what that target percentage is, but I do know this, you won’t achieve it by allowing cash to sit in the bank. The board will tolerate a certain level of cash cushion as a safety measure, but above that, Apple is expected to put that cash to work earning a higher return than what you could get from bank interest.  If a stockholder wanted to earn what a bank was going to pay, he’d do it himself, and undertake less risk. So Apple sure as heck better put that money too work or wall street starts to sell.

And what is the big deal if shareholders decide to take their money elsewhere and sell their stock? First, many financial agreements have debt to equity agreements with their lendees that stipulate if the market cap (stock price x total shares) falls below a certain point, the loan is immediately repayable. This is why everyone panics when a stock market crash begins. Even though this money doesn’t belong to the corporations, these lending agreements can start a wave of loan repayments that companies can’t afford. Many a corporate bankruptcy has started this way. I have no idea if this is relevant to Apple but it would be my biggest concern. The second reason a share sell-off would be a problem is that the laws of supply and demand take over. With a greater supply of shares up for sale, the price of the stock will begin to fall. And the agreement that Apple has with shareholders is that they keep most of their cash, and the stockholder will get their return through stock price appreciation. Falling stock prices can lead to surly meetings with the board for CEO’s. 

Every business student has one thing that is drilled into them from day one of stepping foot onto the college of business. The sole purpose of the corporation is to serve the stockholders. You may love Company A, but make no mistake, you are not its master. The stockholders who bought and paid for every asset shoulder all the risk of loss, and they will enjoy the return of all profits. As a young accounting student in my first year at the great Harding University in the early 90’s, I remember getting slapped down by my accounting professor when he asked who the corporation served, the customer or the shareholder. I chose wrongly and have never forgotten the lesson. 

Samsung has wowed the tech industry the last three years with it’s shotgun approach to revenue growth. In the time that the tech media has been discussing whether or not Apple would even debut a smartwatch, Samsung brought at least two different models to market. There’s nothing inherently wrong with that approach if you don’t mind spending the money. It can be effective. That’s kind of like buying your wife a red, black, and white Mustang for her birthday because you’re not sure which color she’s going to like. If you don’t mind blowing the cash, hey, it’s your money. But Samsung wowed the tech industry last week for all the wrong reasons. With Samsung Mobile’s profit falling 74% year over year, everybody could see that something has gone drastically wrong.

How could something like this happen? Shouldn’t Samsung’s executive leadership have seen this coming? I think the answer lies in the way that most corporations review their monthly, quarterly, or annual results. And it’s a problem that is not unique to Samsung. It’s a system that has gone global over the last twenty years and one of it’s downsides can lead to unexpected surprises.

I’ve worked with two corporations in the last twenty years that have contracted Toyota manufacturing consultants to help implement lean manufacturing systems. I’m a big believer in the Toyota method and I’m in good company since most successful companies in the world have internalized parts of it. But the problem lies not with the manufacturing part as much as the financial review, aka policy deployment review.

The Toyota method stresses that you have limited time and money so you can’t afford to attack everything at once.  You must use data analysis to help you focus where your attention is needed the most. In manufacturing slang we used the phrase “Pareto it and kill it”, meaning you attack your top defects as defined by scientific data gathering.

So how does this lead to corporate executives getting blindsided by a huge drop in profitability?  Boards, CEO’s, and VP’s are all busy people who request a top down approach to financial reviews in the interest of time. When they look at profitability by category, they see rolled up results from many different products. As long as revenue and margins are strong, they probably won’t delve too deep. And subordinates generally don’t volunteer information that is unflattering to their competence unless they know it’s going to come out eventually anyway. So if you have an environment where a few products are generating enormous revenue and margin gains, all the low volume “dogs” can remain comfortably hidden. Yet all the while, sucking money out the window in the form of tooling costs, high prototype material pricing,  engineering time, etc. The CEO may see a pretty graph that shows gross margin was up 30% but never realize that if it wasn’t for all the dogs it would have been up 50%.

And since the Toyota method has ingrained the principle of focusing on the problems area’s, executives will generally jump to the divisions showing the least growth. Those guys will be given excruciating interrogations where they are asked for detailed income statements for each and every product , budget vs actual variance explanations, 30, 60, and 90 day action plans to improve performance,  and on and on.  While the other divisions listen, grateful that they’re not the ones getting hammered.

So now that Samsung Mobile is going to get the full anal review it is going to be VERY interesting to see what happens.  Samsung chairman Lee Kun-hee was already said to be paranoid about financial instability during the best of times.  They’ve got to be in full-on panic mode right now. This is where the light of day will start to shine on all those low volume pet projects that were getting subsidized by the high volume runners. The questions will be fast and furious.  Who authorized another smartwatch three months later?  How much is that curved secondary screen that nobody wants costing us? Why did you authorize a new SOC to go into production when the previous one had only made it to month six?

I’m going to predict a new, back to the basics Samsung will emerge from this. One in which the time trusted cost to benefit analysis is done prior to spending significant money. A Samsung that tries to squeeze value out of parts by going multi-platform. A Samsung that starts looking at product gross margins on a deeper level as opposed to just category.  A Samsung that lets models sit on the market a little longer, earning their return. Basic blocking and tackling.

Samsung's wild product days of 2011 to 2014 are coming to an end and I'm glad I got a chance to see it. Because something tells me it's going to be a while before we see something like this happen again. 

The tech world has already caught on to Apple’s discipline when it comes to meeting certain hardware targets like getting ten hours of battery life out of an iPad. However, it’s also apparent that they must have some pretty clear gross margin targets that product champions are expected to clear as well. Gross margin is what you have left when you deduct a products cost of goods sold from the revenue. 

Why are gross margins such a focus when it’s not the bottom line net income? Because when a company is evaluating it’s product portfolio profitability, this is the level at which all of the controllable costs associated with producing iPhones or iPads are tallied. If you start including costs further down on the income statement you end up with expenditures that don’t really have anything to do with specific products.

In my earlier blog post regarding Apple’s income statement superstars, the A5-based iDevices, I discussed the concept of depreciation. Basically it’s that all the costs of producing a new SOC such as engineering, tooling, and machinery are spread over the shortest reasonable useful life. Probably twelve months. So that after that twelve months is over, the product overhead charge for producing those SOC’s goes down dramatically.  In the world of manufacturing, labor costs and depreciation have an inverse relationship. That is when one is up, the other is down. The more automated production is, the less man-hours you have to pay for but the more you spent on machinery and software. I’ve never taken an in-depth look at SOC production specifically, my expertise is more with final product assembly,  but I doubt that SOC labor costs are very significant compared to material and overhead.

If I bring back my theoretical iPad Income Statements based on the Apple Inc.  Income Statement percentages we see the following. By virtue of charging $100 less for an iPad Mini 3, that product has a lower budget with which to pay for materials.  That means for a $399 iPad versus a $499 iPad, you just lost $55 to buy components. And when your total material cost was $275 to begin with, that is huge. I’m guessing that the SOC is probably the most expensive component in an iPad. So any product manager trying to meet internal gross margin targets is forced to evaluate the need for using the latest, most expensive, SOC available. Could Apple simply offer the latest SOC and accept a lower gross margin? Yes, but when you’re total estimated net income on an iPad Mini is around $83 dollars and you decide to absorb a material increase as high as $55, you just lost 65% of your profitability. 

When the iPad product manager stood before Tim Cook to go over his 2013 product performance I’m sure gross margins came up. Financial performance at all levels is always compared to the previous year and when this was done for the iPad, you would have seen a significant drop in gross margins due to the parity of specs introduced with the iPad Mini Retina. The product guys caught the financial guys flat footed and slid through some nice upgrades to the iPad Mini. But when the financial results for the year came in, top management found out exactly what the financial ramifications for that decision would be.

So if Apple isn’t going to accept lower gross margins than they either have to use older tech or charge a higher price. The onus now moves to the buying public, would they vote with their wallets and pay a higher price for A8 equipped iPad Mini’s? I think Apple has calculated that in a world of $199 small tablets, that is a risk too big to take. 

There are a couple things about this whole fiasco that trouble me. One, that GT Advanced is citing the fact that they could only sell to Apple as some draconian measure that is unreasonable. And two, that Apple wouldn’t allow GTA to make any kind of changes to the product specifications. I’m not going to state an opinion on who is right or who is wrong overall in this situation because I think an entire room full of lawyers could sift through the data for a week and still end up not agreeing on anything. But here are my thoughts which should ring true for anyone who’s spent time in the world of Fortune 500 manufacturing.

Selling only to Apple

First, not only did no one force GTA to sign this contract, GTA probably had to beat back other corporations with a stick and convince Apple to choose them so sign it. Why? Because in the world of manufacturing, reduced complexity equals reduced cost. Corporations are always trying to reduce the number of parts in a product, the number of vendors for a part, the variations of a part, etc. With Apple as the sole customer for all their products, you need to spend less money on customer service personnel to service all your customers. Manufacturing schedules are greatly simplified because you don’t have multiple customers screaming for their parts first on a tight timeframe. And the biggest prize of all with the cost of diesel perpetually over $3.00 these days, you can count on a huge reduction in your transportation costs. If GTA could have simply figured out how to produce on time, they would have been in manufacturing nirvana with only one customer. 

Apple had to sign off on any product spec changes

I used to work for an automotive supplier to Toyota and distinctly remember a situation where our manufacturing engineers approached Toyota with a cost savings idea that would have reduced their price by 30%. However, it involved switching one of our suppliers. Toyota informed us that even though we were completely within spec regarding the product itself that even changing one of our suppliers was going to entail restarting the entire Toyota accreditation process. Not only could we not change any product specs, but we weren’t even allowed to change any of the agreed upon suppliers. And I don’t blame them for that. If anything should go wrong with a Camry or Corolla due to the part that we supplied, it was Toyota’s reputation that was going to be dragged through the mud, and whose pockets do you think the lawyers are going to go after? Apple is in a similar situation with GTA and can’t afford to leave something so critical as product spec changes up to a third party. This is pretty much par for the course in the manufacturing world. 

Even GTA attacking Apple for financing their purchase of furnaces and not wanting to buy them back comes across as quite crass. Again, this is nothing new in the manufacturing world. If there is anything uncommon here, it is the fact that a corporation with no proven track record has someone who willingly will finance their purchase of a great deal of capital equipment. Most upstart businesses would be thrilled to have this problem. 

This whole situation seems so preposterous that I can’t help but think that there must be more to the story that is still untold. Surely there must be more than what GTA has alleged thus far because that is laughable and they know it. 

But perhaps their intended audience is not the court of law? My theory is that GTA knows that if there is one thing that will go supernova in the media world it is taking Apple down a notch. Why would they want to do that? To find a buyer. They dug themselves into a hole so deep that it’s about to collapse and unless someone throws them a lifeline, quick, they are going to be permanently buried. Sure, they know that they don’t have a leg to stand on in court, but the press doesn’t understand the ins-and-outs of inter-company commerce and GTA seems to be getting the benefit of the doubt. 
 
So in the meantime, all the press is broadcasting that you can buy some top notch assets, or an entire company, at a decent price right now. For free.

Earlier in my career while at Gateway Computers there was a lot of debate in the executive suites over whether we should “play the margin game”. That is, a willingness to take reduced profit margins in order to increase volume. At one point, Gateway and Dell Computer weren’t too different in size but their pricing philosophy was quite different. Gateway believed that long-term success meant protecting it’s gross margins even if meant losing out on some larger deals. Dell seemed to be following the path of “purchasing” volume by accepting a reduced margin. 

But a funny thing started to happen in the trenches as the foot soldiers did battle. In protecting their margins, Gateway had left their rear flank unguarded and open to sneak attack. As Dell’s volume grew, so did their purchasing power, and Gateway’s purchasing department found themselves having to pay higher prices for the same hard drives and memory chips that were going into essentially the same PC’s from Dell. I remember the Director of Manufacturing Financial Analysis coming back from a “spirited” meeting with the marketing group in which he returned with a handout that showed Gateway and Dell PC’s side-by-side with the same specs and Gateway on the wrong end of a $100 price differential.  As Dell demanded pricing concessions from their vendors, OUR same vendors, they reluctantly agreed for fear of losing Dell’s business. And what did they do in the short term to protect their cash flow? They charged higher prices to all the chumps, the smaller customers with no clout.

And then came the “reverse auctions”. A trend in which large institutional customers would send the required specs to PC companies and invite them to their big conference call. They would sit in their conference room and go around in a circle to each vendor to see if they would beat the previous vendors price and by how much. When you were unwilling to go any lower you were out of the game. The last man standing got the deal. 

Which brings me to my point. Manufacturing is an endeavour in which you are either winning or losing: there is no static middle ground. Small advantages or disadvantages will be magnified and grow over time if not corrected before it’s too late. 

In light of OS market share,  Android is always portrayed as the Goliath to Apple’s David. However, measured in terms of what really matters, purchasing power, it is actually Apple that is the market giant. With such a large portion of the smartphone industry concentrated in such a relatively few models, no one wields the clout that Apple does. It is virtually guaranteed that whatever they are buying, they are getting a better price than anyone else in the world on that component. And unlike Dell Computer, they aren’t giving up gross margins to get that purchasing power. On the contrary, they are charging premium prices from customers while demanding lower prices from suppliers. Amazing.

And what about all those Android manufacturers? With volume that is dwarfed by Apple, they are left paying higher prices for comparable components so anyone playing the low price game is forced into cheaper components. That means either lower quality or older tech.

All the while, Apple seems to be enjoying this public perception that they are the plucky little upstart standing alone against the behemoth, when in reality, nothing is further from the truth. It is Apple that is the eight hundred pound gorilla and the Android manufacturer’s are more akin to the orphans from Oliver Twist fighting for scraps of whatever is left over from Apple’s table.

It was recently reported that Apple’s estimated material cost on their entry level iPad was $275 and the internet immediately exploded with articles insinuating that the rest was pure profit for Apple. While Apple’s nearly 29% profit margin dwarfs arch rival Samsung who finished last year at 13% or the JR Ewing of the business world, Exxon Mobil whose profit margin came in at 7.7%. There is no way that Apple is making anywhere near $224 per iPad ($499 - $275).  So how much would I guess? Well, no one outside of Apple really knows because they don’t release product line income statements.

But we do know that outside of material costs they have all the usual costs of production, distribution, and administration. They have to pay for factories full of employees to assemble their parts, shipment of products to customers, and they have to allocate all those corporate salaries among every product sold etc.

What Apple will do is divide all their costs into two main buckets. The first is costs which are directly traceable to the products. That would be the material, labor, and factory overhead to produce an iPad. Material is the easiest and that is why you see internet articles only about this segment. Because you can obviously break open an iPad and see what is inside. Labor is fairly simple too because Apple knows how much time goes into each iPad and what that hourly rate is.  Overhead is a little harder because you are now allocating the electric bill and plant manager’s salary for the month over every item produced. That can be more of an art than a science at times.  These are the “costs of goods sold”.

The next bucket are corporate costs which need to be shouldered by all the products. The advertising budget, cost of building a new spaceship, or Johnny Ive’s skunk works design team have nothing to do with building an iPad Air 2. Yet, it is the sale of those iPads and iPhones which pay the bills. So all those oddball corporate charges get allocated to each iPad, Macbook, or iPhone sold as Selling, General, & Administrative (SG&A) or Research and Development (R&D). 

Out of curiousity, I decided to take Apple’s reported percentages for the company as a whole and apply it specifically to an iPad Air 2 and see just how much money was left on the other end.  My gut tells me that it is probably fairly close, but I don’t know. The overall numbers reported by Apple would be skewed towards their largest product category, the iPhone, which would have better margins due to greater economies of scale and lower distribution costs. Yet, that could be offset by potentially lower margins on Macbooks or iTunes downloads.

The final result came to $105 of profit per iPad after taxes. Which strikes me as about right. That means it would be impossible  for Apple to sell an iPad for less than $394 per unit without losing money.

Which begs the question, how can other manufacturers charge less or close to what is Apple’s material cost only? You can’t quickly dismiss Apple’s selling price as simply the “Apple Tax”. Because if you remove $105 for profit and $49 to fund R&D and pay for any corporate largesse, you still end up with a manufactured cost of $306 per unit. And other manufacturers are going to have similar labor costs and most likely HIGHER overhead costs due to lower volume. That leaves us with either cheaper material or negative margins.

I think it all boils down to “you get what you pay for”. 

One of the most commonly misunderstood words in the business world is “depreciation”. Everyone instinctively knows that it’s a deduction from revenue but they seem to miss the purpose of drawing it out. It all boils down to one word, matching. This is the accounting principle that says you must match revenues with the costs it took to generate it. Just because you paid a hundred grand for a manufacturing machine last year does’t mean you get a free ride on the income statement this year. 

At the end of each month, the accountants will tally up the sales receipts and start the deductions. Since the purchase of the machine was a one time expenditure, they will divide that cost by the number of months it will be helping to generate revenue. This matches the revenue with the money it cost to buy that machine. But they don’t take the actual months it will be in service, they will use the shortest generally accepted time frame they can get away with. For instance, they might actually use the machine for the next three years, but if they can depreciate it for only one year, they will. The reason for front loading the depreciation is to shield revenue from income taxes and thereby increase cash flow. It’s kind of like itemizing your deductions from income when you do your taxes. The less income you can show the IRS, the lower your tax bill. 

This is relevant to Apple’s iDevices because if a company is very lucky, and there is still market demand for an older product line that has been fully depreciated, they enter a sweet spot where profit margins take a huge jump because they are no longer getting a monthly deduction for machinery, tooling, and R&D. And in a high volume, high depreciation business model like Apple’s, these unglamorous has-been’s of the tech world become Income Statement superstars that outshine the latest products by far. 

Everybody likes to talk about how Apple’s profit margins are higher than Samsung’s but it’s a little fuzzy as to actually why. I don’t have any inside information on Apple product line income statements, so this is just conjecture, but I would guess that this is a significant reason. Apple just announced that the iPad Mini’s launched in 2012 are part of their product portfolio for 2015. The iPod Touch and iPhone 4s in other parts of the developing world come to mind as well.  I don’t think you’re going to find any Samsung phones or tablets from 2012 still actively sold. So every sale that Samsung makes comes with a hefty charge for depreciation and amortization. Samsung products never go out in a financial blaze of glory like Apple products often do. 

Show me a company that is constantly tossing out old designs in favor of new ones and I’ll show you a company that has a laid back board of directors. Tossing out products that have millions of dollars of R&D, tooling, and machinery is like hauling a car off to the junk yard as soon as you pay off the loan. You may be able to get away with it while sales are good and profit margins are high. But mark my words, once the twin pillars of revenue and margins go down, that board of directors will start demanding to see income statements for individual products. When sales go down all of a sudden everyone starts asking questions. I know, I’ve spent the last 20+ years trying to help management explain the trends. Then will come the inevitable product portfolio consolidation. What always makes the headlines is the layoffs, but it is often the products which are cut that drives the headcount reductions. 

I can understand the arguments as to why Apple shouldn’t be selling the "iPad Zombies”. Questionable user experience, app developer hell, etc. However, from a numbers analysis standpoint, I stand in sheer awe of what Apple has achieved and how financially well managed this company is.