Financial analysis for smartphone industry

later on a heat discussion, our team chose the chic auditory sensation manufacturing for the following ii reasons. Firstly, tele foretell is a signifi postt communicating instrument around the world today. planetary Telecommunication Union predicts that the number of electric cell addresss would exceed the number of human beings in 2014. Secondly, with the change magnitudely functions of motilityy skirt, it plays a alert role in the relevant industries. The boom surfacement of hurt resound effort overly accele locates the victimisation of much or less new(prenominal) industries much(prenominal) as the cell phone stamp battery labor and cell phone spirited sedulousness. . 1 Industry Analysis We argon talking close to chichi phone industry specifically. The fresh formed belligerent foodstuff includes hardwargon manufacturing, operating clays and content. spirit screening on the storey, touchers of those handle declargon changed a lot, as Monika, Motorola and bound make water been transc wind uped by apple, Samsung and other brands. turn over Porters five force depth psychology to tonic phone industry. Starting from affright of entry, package faces this to a greater extent beca practice session of open platforms. Floods of large(p)s argon rented for R and opeproportionn levels, thus this threat is mode markly soaring.Substitutes equivalent Pads, watch overbook and laptops have entered the merchandise causing the threat. Threat to a fault comes from suppliers, fragmented put up and the difficulty of erect integproportionn have impeded come with profiting. But the threat is low overall. Mean maculation, buyers besides impact threat by conglome regularize demands and high up bar achieveing power. All these quaternity threats result in a high threat of rivalry. Brand and c oncentrated commercializeplace also matter. For the industry status, in 2011, the smart phone application market was roughly USED 6. 7 one meg million million which is anticipate to be USED 1 55 billion with CARR of almost 55% from 2011 to 2017.In addition, worldwide sales level offts of smart phones to end accustomrs number 968 million units in 2013, an plus of 42. grappleage from 2012. Sales of smart phones accounted for 53. 6 sh be of overall supple phone sales in 2013 which accounts for 75. 8% of the overall mobile handset r steadyue. 1. 3 Firm rendering We recognize six companies in smart phone industry to do most analytic thinking. They argon Sony, orchard apple tree, Samsung, ETC, B miss Berry and Monika. The firms we choose represent different level of execution of instrument in the industry. Apple and Samsung be heavy(p) firms with higher net income and greater profit readiness.MONIKA, SONY and blackberry are firms once created brilliant achievements just now suffer from ailing stemma in the retiring(a) 3 years. ETC is a newfangledly brought-in competitor with advanced tech nology in developing smart phones. The six firms run into different types of history. Samsung struggled with inadequate quality and lacking(p) wares in its earlier beats. Apple postvassmed to set well-nigh gradually since it was accomplished. On the contrary, blackberry and MONIKA were once bystanding in the industry. SONY (SONY Ericson) left rotter when transforming from mobile phones to smart phones.ETC has a nearsighted history. most of the firms experienced several outstanding mergers or acquisition in the historic tense 5 years. Badly-performed firms shrink while well-performed ones overdraw their equines by proper interchange plans or acquisitions. Some important events are as follows. Microsoft say to germinate Ionians mobile business and large amounts of patent portfolios with 7. 17 billion dollars. Blackberry do an announcement that the conjunction agreed to be acquired by Fairfax pecuniary Holdings at the hurt of 47 billion, though the selling pl an turns out to be failed.SONY and Ericson were incorporated into Sony Mobile Communications. 2. Past surgical process analysis Note Risk easy rate US. Government trammel net rate for 5 years Expected market bring forth historical industry hand for 5 years 2. 1 Samsung 013 is a fancy year for Samsung, possessing the biggest market function in smart phone for 31. 5% ahead of 15. 5% for Apple. For the depressi just sq in 2013, take in symmetry rock-bottom from 9. 09% to 6. 99% and it rose to 7. 30% in SQ. For the peachy structure, 93. 2% was financed by justice and bond took up 6. 7%. Stock reappearance for 2013 is -3. 7%. Move to preceding(a) areas. PIE balance experienced biggest decrease from 1 1. 88% to 7. 04%. Stock wages is waving from 2. 98% to 28. 53%. Now focus on former(prenominal) areas. PEE symmetry as 1 1. 88% breaker pointed in 2011 standing out from a ecumenic downward trend. Besides, the releasing of GALAXY contraceptive pill 3 and GALAXY Note 10 . drive line of descent overthrow proportionality higher. The charge for debt to loveliness dimension appeared in 2011 which is 0. 1446 and the trend is downward. Stock pay in 2009 is highest for 64. 42%. The worth of equity for Samsung is 27. 63% effrontery its period beta is 1. 12.For the dividend policy, the overcompensateout proportions are 12. 3%, 9. 3%, 6. 0%, 5. 1% and 7. 11%respectively since 2009. The most new-fangled dividend pay date is on August 26, word picture out 75. 4 million USED. On July 17 2012, Samsung acquired the handset ope symmetryns of CARS Pl, and invested a 4. 9% stake in the caller-up later. It is the largest acquisition case for Samsung since the 1997 uncial crisis. Actually, Samsung unblemished 5 acquisitions in 2012 which is much habitual than before. Acquisitions progress appears in net income revolt from in 2011 to and to in 2012 and 2013.Inventions also declined from 3,859,994 to 2,918,234 until 2013. Samsung sell a record 86 mil lion smart phones in Quaff 2013 and widened its lead over Apple selling 51 million for phone 5. 2. 2 Monika In 2013, Monika had a disallow PEPS, suggesting that Monika didnt do well in 2013. The contain certificate derangement was nearly 6. 0, lower than the industry modal(a) (about). hard roe was negative. The debt/asset ratio was 72. 59%. The dividend per mete out was O in 2013. The carnation return was 97% in 2013 and the equal of equity for Monika is 8. 66%, given its current beta is 1. 3. flavor at the quondam(prenominal) 3 years, we find Debt/Equity ratio of Monika was increasing constantly. The roe ratio was forever and a day negative over the past 3 years, decreasing from 2011 to 2012 and increasing from 2012 to 2013. The dividend per appoint diminish from 0. 33 in 2011 to 0. 13 in 2012, then too in 2013. The armory return add-on from -55% in 2011 to -23% in 2012, then to 97% in 2013. Considering the past five years movement, we find that Monika did sor t of an a reasoned Job in 2009 and 010 because its PIE ratios were positive and really high.The dividend per deal decreased from 0. 41 in 2009 to 0. 31 in 2010. The trend of dividend per share from 2009 to 2013 is declining. The melodic line return change magnitude from 2009 to 2013 while it was negative from 2009 to 2012. As for important events, on family line 3rd, 2013, Microsoft declared to acquire Ionians mobile business and a large amount of patent portfolios with 7. 17 billion dollars. The course price of Monika soared from about 3 dollars per share to about 8 dollars per share from August 29th, 2013 to November 18th, 2013.We compare the monetary implementation of the third ninny and one-fourth quarter of 2013 and find that net income append a lot from -91 millions to -millions of dollars. 2. 3 Apple In 2013, Apple had a unadulterated performance. The ROE (about 0. 3064) and PIE ratio (about 15. 21) are both three times higher than the industry average, Besides, t he inventory disturbance of Apple is about 83, Apple is already well-known for its supply chain. The beau mondes 40. 31% of assets came from debt and 59. 69% of assets came from equity. The of pontifical in 2013 is 0. 74, and the address of capital for apostolic is 22. 3 percent in 2013.In the past 3 years, the current ratio and price-earnings ratio did non change a lot, pull up stakesd ROE decrease shrewdly in 2013, and the debt/equity decreased in 2012 and increased in 2013, meaning that the community recurrenced much stocks than bonds in 2012. The annual stock return 0. 013 in 2013, 0. Tent 2012, and 0. 243 in 2011. Looking fanny over 5 years, the ROE increased from 2009 to 2012 and decreased in 2013. The inventory disturbance went up astutely from 2012 and went down a little in 2013, which is partially because of the phone asss huge success. In addition, PAPAL began fine-looking share live oners a quarterly dividend of $2. Per share in 2012. This dividend yield i s about 1. 2% higher than the industry average. Apples business philosophy is to acquire low-pitched companies that hind end be comfortably integrated into existing company projects, so Apple did more than 60 small acquisitions in the last decades. Apple incorporated plenty of software makers including Sir. After the acquisition, Sir has been an reasoning(a) personal assistant and was introduced as a feature of the phone AS. This technical innovation has been a huge success so that more than 50% profit of Apple company came from phone in 2012. 2. ETC 013 is a attempt year for ETC, we can see that most of the describe ratios of the company are under the industry average, profit qualification measures are almost all negative, and ROE are -1. 67, indicating that ETC failed to earn enough profit to even cover its expense. The high Debt/equity ratio (1. 22) makes its stock bumpy. The of ETC in 2013 is 1. 88, while the industry average is only 1. 12. High makes the hail to raise capital high too. The cost of capital for ETC is 10. 13 percent in 2013. Looking ski binding over 3 years, we found that Itchs profit has been declining since 2011, inventory disorder declined from 12. 8 to 7. 0 collect to the poor sale and management problem. The annual stock return -0. 525 in 2013, 0. 064 2012, and -0. 392 in 2011. Looking back over 5 years, it is understand that the business boomed during 2009 and 2011, and started to fall poop since then. The sale increased by about 1 11% from 2009 to 2010, but stock price has fallen by 90 percent since then. Besides, the company prescribed at least(prenominal) 50% of the total dividend be distributed as cash dividend, it pay dividend in July or August any year. ETC believe that acquisitions are the key to help ETC quickly germinate to compete with its competitors.So ETC spent more than $700 lions on acquisition in 2010 and 2011 trying to gain market share. Major mergers include SO Graphics, Beats Electronics LLC, and et c. However, Itchs acquisition dodging didnt work well as judge. Those deals neither helped ETC to boost its brand image or to win the law suit, the sale have also been decreasing since the requested of 2011. 2. 5 Sony From 2009 to 2013, Sony had gone through a route of difficult and twists. In 2013, Sony didnt have a well performance. Its current ratio, ROE and inventory perturbation ratio is under industry average.To be specific, its inventory turnover ratio is the lowest. Through its PEE ratio is oddly high, I think it mostly related to the small profit number. Looking back over 3 years, we can see most ratio, including ROE and inventory turnover ratio, had a peak in 2012. oddly ROE had a soaring from 2011 to 2012. at that place are four reasons. First, Sony Corp. acquired the remaining 50% stake from ELM Ericson Telethon ABA on February 15, 2012, which made mobile phone sales increased a lot. Last, the yen de placed. Looking back over 5 years, the current ratio and ROE had a drop until 2011.The inventory turnover ratio had a peak in 2010 while he debt-equity ratio increased until 2012. Actually, Sony had negative net income for sequential four years. Not only it is a result of disasters such as JP Tsunami, but also it is because the yen appreciate and digital products from Japan were shocked by other grievouss. The stock return ratio of Sony from 2009 to 2011 has dropped from 0. 5 to -0. 47. However, it began to increase then. The ratio in 2013 is about 0. 15. It is consistent with what ROE shows. The cost of equity is 52. 72%. It is large due to the high Arm (29. 64%) and high luck (beta-?I . 2). 2. 6 Blackberry 2013 is non a pleasant year for Blackberry. The tycoon to generate profit is far behind its peer competitors. PEPS and ROE of the firm are -1. 23 and -6. 61% due to the negative net income. However, the current ratio highly above the industry average (about 1. 09). Stocks lay on the line of Blackberry is low, measured in of 0. 48. base on p, the cost of capital is 3. 70%. On account of the bad performance over the year, annual stock return in 2013 is -0. 426. Looking back to the past three-year performance, Blackberry dropped from its recent peak in 2011 to historical worst.Blackberry experienced a awing service interrupt in Cot, 2011, which mischievously damaged the rim reputation and at once caused the following bad performances. Business declined sharply in 2012, with falling ROE and PEE ratio. In retrospect the performance in last five years, we could see that even under unpleasant financial crisis, Blackberry still could hold itself. PEE ratio was 17. 1 in 2009 and 10. 0 in 2012, both showing a good prospect, however, the ratio then began to decrease sharply after 2010. Annual stock return was at first positive in 2009(0. 19), but it has fallen below zero ever since. Inventory turnover is quite s dining table during the whole period. No dividend has been strutted during recent five years because of the dis appointing performance. well-nigh important series of restructuring events in Blackberrys history appeared in the year 2013. BlackBerry first announced to have reached a possible acquisition agreement with its biggest shareholder Fairfax financial on Seep 23rd, after this good news, the stock price of BlackBerry tanginess up 0. 6 dollars. But the dominance acquisition plan didnt last for a long time.In Novena, 2013 BlackBerry declared the division of the selling plan. By pm Novo 4th, the stock price of BlackBerry has dropped 1. 44 dollars (18. 53%). 3. Future performance analysis . 1 Pro clump Pro chunk of Cash Flow Pro buckram of Balance Sheet &038 Income Statement Note Erg ( reversion) W-M ( burden- mournful-average method) Final (final prognosticate) We complete the pro formal by three pure tones. First step is to do an autoregressive analysis to forecast the entropy of 2014 and 201 5 through the historical entropy from 2009 to 2013. Then, we computed the weighted av erage by prominent the weight of 0. 5, 0. 1, 0. 15, 0. 3, and 0. 4. Finally, we find some onwards looking data predicted by stinting forecasters on the internet and use moving weighted average method to prevail final data which are more efficient. What is more, if in that respect is no forward looking data, we use weighted average on the regressive result and average result. We combine 2 different methods to do the forecast. Because every method has it is own drawback. For the throwback method, it cannot show that the in style(p) data, which indicates the trends more accurately, is more decisive than the previous one.And the weighted average can overcome this drawback by giving the latest data more weights. But for some items homogeneous income, we think the result of regression method is more accurately. So we unite these two methods by using weighted average. 3. 2 Recommendation We divided the analysis of afterlife performance of PAPAL into two parts The analysis of d ata and the analysis of reality. Firstly, Let us focus on the forecast data. We analyze three kinds of snappy data measuring the performance of PAPAL. The first one is earnings per share (PEPS), which reflects the ability of company to generating profit.We forecast this data by regression, which is to estimate the net income and shares and do a Multivariate regression. The result is around 45. Then, there are five websites give out the PEPS estimate around 47. 9. We give them weights and formulate the final data of 47. . PEPS is the dollar value of earnings per each outstanding share of a companys common stock. Higher PEPS manner that the company can generate more net income by each share and it can use less capital to stun higher profit. Besides, the dividend may be high because of the high PEPS. The forecast data 47. In 201 5 is higher than todays data and it is reliable, because the net income and the shares are both increasing and the increasing step on it of shares is slow ly. So the performance of PAPAL pass on be remedy in the future. The second one is PIE ratio. We use the weighted average method to redeem PIE in 201 5, which is 13. 2, and we also use the regression method to take hold of it, which is 13. 44. We find that the forecast PIE ratio in Yahoo is 13. 07, which is not a high one. Theoretically speaking, a stock with low PIE ratio is a good one to investment, because the purchase cost is low.Besides, we think the value of PAPAL is underestimated now because of the high PEPS and the low PIE ratio. The price of stock will go up in the future. The third one is ROE, which shows how well PAPAL uses investment funds to earnings growth. We use the weighted average method to get ROE in 201 5, which is 36. 34%, and we also use the regression method to get it, which is 38. 6%. The average number is 37. 6%. ROE measures the rate of return on the shareholders equity of the stock owners, which measures a firms ability of generating profits from eve ry unit of shareholders equity.Generally speaking, ROES more than 10% are considered good. Besides, the ROE of PAPAL is a reliable one, because the debt asset ratio is not high. In conclusion, we recommend that stockholders could hold Pals stock for a long time because of the low PIE ratio and the high ROE. surgical procedure we forecasted originates from two reality parts, one is expect increase based on past and current built in beds and the other is unexpected hangs including systematic and unsystematic risks align with future. The anticipated two opportunities for Apple are analyzed as following.The global market for smart phone will grow in hardly a(prenominal) years based on fizgig prediction and the annual sale is expected to increase from 1 billion in 2013 to 1 . Billion in 2017. Until the end of 2013, the SIS system accounted for 41. 2% and mechanical man is 51. 9% comparatively. This intense rising substance abuser trend will amplify the market pie. The other is the cooperation with China Mobile. Above million regular customers of China Mobile will assist the sales rise for Apple. surprising systematic risk consists of interest rate risk and foreign currency risk. The company typically invests in highly-rated securities and changes in U.S. af bewitching rates accept the interest realise on the companys cash, cash equivalents and marketable securities, the fair value of those securities, as well as costs associated with hedging. In the third quarter of 2013, the company issued $17. 0 billion of long-term debt, which included $3. 0 billion of floating-rate comments. In addition, Apple is a net pass catcher of foreign currencies and changes in exchange rates, especially strengthening of U. S. Lars will negatively affect its net sales and gross margins explicit as U. S. Dollars originally. Unsystematic risk involves Apples privileged specific performance.New products release like will be a main source. The attractive feature of next genera tion Apple phone is controversial and based on past dis pleasurable sales of phone and pad, their growth rate nearly held constant. Some concourse job its innovation without Jobs but some analysts note that the bigger size for phones will extend advantage of Android system brands like Samsung. Charm of wearing new product which is twitch concretely is also expenditure anticipating ND we may get some indicts from the coming WAD held in Los Angels. beyond this, Apple will increase buyback of stocks and issuance of dividends.According to Sanford C. Bernstein prediction, Apple will issue BIB dollars dividends in 2015. This will increase the value of stocks held on shareholders if the PEE ratio increased after the issuance. 4. Relative mathematical process According to the comparison of 5 key ratios, the underperforming corporations are SONY, Blackberry, ETC and MONIKA. Most of the firm share common problems in several aspects as lack of innovative products and inventory managemen t, while mom have critical faults in designing strategies. Relative performance and passports are as follows.According to the lowest inventory turnover ratio of Sony among its industry peers, one recommendation for Sony is to turn over its inventory quickly. It can improve its supply chain, manage efficiently to product appropriately. Due to the fast update of digital products, long inventory turnover period will enlarge the risk and the cost. Besides, 3. 1% of the market share is so small compared with Samsung and Apple that its ROE cant increase smoothly. The key to increase its market share is to launch the new production. Only by creating great mobile phones like phone, can Sony rebuild its Sony Time.Similar problems appeared in Blackberry and Monika. Most of Blackberrys profitability ratios as PEE, ROE and PEPS are under industry average due to firms negative net income. The reasons are lack of attractive application programs and disappointing new product. Apples phone and Goo gles Android squeezed the market share of Blackberry smart phone. The newly launched table PC was also not satisfying with simple functions but high selling price. Blackberry should not only aim on its good reputation in E-mail recessing system, but focus more on users entertainment experience like fancy interface and programs.Besides, Blackberry is the only one who ignores the prospect in China. To deduct from declining tendency, a competitive product is required to open its Chinese market. The negative ROE and low inventory turnover ratio indicates that MONIKA is losing money . The reason is that the product of Monika is not as popular as that of other leading companies like Apple and considered to be lack of innovation, and its Simian operating system (until 2013) is not advocated by developers. So Monika should increase funding for research and develop products that spell the consumers.Given that the mobile phone business of Monika was acquired by Microsoft on April 5th, 2014 (the acquisition was started on September 3rd, 2013), Microsoft should learn a lesson from the failure of Monika. ETC has been struggling in China due to price competition and limited distribution. Many people think the wrong high-end market schema got ETC into trouble. To get out of woods, ETC may need to forget its strategy on high-end market and consider a partnership (merger) with other smart phone company that could provide synergy.Chinese smart phone makers sell products domestically because they have weak brand sensory faculty in other regions, but ETC has established solid brand awareness in the United States and Europe, which Chinese handset makers could capitalise on. And ETC could get resources to get through this situation and look for new chances for development. So a merger with Chinese films could be a win-win. 5. Conclusion From the perspective of companies in the smart phone industry Considering the fast speed of development of Asia-Pacific market, each company should reach out to evolve Asia-Pacific market.Moreover, the target market of the company must be effective. As for products, companies should develop the products that satisfy consumers gustation. From the perspective of investors The smart phone industry has a great development potential, so investors have substantial investment opportunities in this industry. But investors should cautiously mold the invested companies. We recommend selecting invested companies according to their past and future financial performance, the fitness between their products and the preference f the market, the market strategies and so on.