Table of Contents

Topic Page No.

Company Profile 3

Industry Profile (Porter’s Five Forces Included) 3

SWOT Analysis 5

Accounting Analysis 6

Key Accounting Policies 6

Vertical Common Size Analysis 7

Horizontal Common Size Analysis 7

Analysis of cash flow statement 7

Three Year Ratio Comparison 8

Cross Company Analysis 9

Ratio Analysis with the Industry 11

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Summary and Conclusion 12

Appendices 13

Company Profile

In 1939, Hewlett-Packard (HPQ) was originated as a privately owned and operated company by

William R. Hewlett and David Packard. HPQ made the transition into a publicly traded company

on November 6, 1957. In 2001, Compaq performed a merger with Hewlett-Packard. Having the

capability to provide multiple solutions (servers, access devices, imaging and printing, storage

and IT services), the new HPQ will be in a position of significant competitive advantage -

comparable to IBM. Today, HPQ is publicly traded on the New York Stock Exchange.

Currently, the company is headquartered in Palo Alto, California.1 HPQ currently operated in the

following business arena: Enterprise Storage and Servers, HP Services Software, Personal

Systems Group, Imagine and Printing Group, HP Financial Services, and Corporate Investments.

Hewlett Packard provides a wide variety of computer and peripheral products. This diverse

product line includes: personal computers, handheld computer devices, home and business

1 http://www8.hp.com/us/en/hp-information/about-hp/headquarters.html2 | P a g e 2

imaging and printing devices, publishing systems, storage and servers, a wide selection of

information technology services and software solutions.2

Industry Profile

Hewlett-Packard is operated in the Diversified Computer Systems industry of the Technology

sector and it has many high profile competitors such as: Canon, Dell, IBM, Apple, and Cisco

Systems. This industrial sector is growing very fast. In recent years, spending in the US on IT

goods and services ranged from $470 billion in 2005, up to $557 billion in 2008, before dipping

to an estimated $513 billion for 2009, $564 billion in 2010 and an estimated $609 billion for

2011Comparing these amounts to US GDP figures (from the US Department of Commerce and

estimates from Standard & Poor’s), we find IT spending represented about 3.6% of US GDP in

2009, and may rise toward 4.0% in 2011, reflecting the cyclicality of IT spending. Tech tends to

gain steam in stronger years for the economy, and shrink relatively in a bust year such as 2009.3

FIVE FORCES MODEL

Competitive Force 1: Threats of New Entrants (Low to moderate)

There is also need for high capital investment if any new competitor wants to enter in the

market.

Product differentiation: there is constant need for technology improvement.

Moderate customer switching costs: due to standardization of most of computer

components, it becomes easy for customers to change their laptops.

Competitive Force 2: Bargaining Power of Buyers (Moderate)

Moderate customer switching costs: due to standardization of most of computer

components, it becomes easy for customers to change their laptops.

Low number of suppliers: There are few number of suppliers who are providing hp

Compaq products to customers.

2 http://www8.hp.com/us/en/hp-information/analyst-relations/index.html3http://www.netadvantage.standardandpoors.com.resources.library.brandeis.edu/NASApp/NetAdvantage/cp/ companyIndustryPage.do3 | P a g e 3

Suppliers also operate with high fixed costs which is the main reason of few numbers of

suppliers.

Competitive Force 3: Bargaining Power of Suppliers (High)

A few larger suppliers: there are few suppliers which are reliable, well known and supply

high quality raw material such as NEC, Intel, and Hitachi.

There is also difficulty in imitating specialized technology which becomes source of

competitive advantage for suppliers.

Competitive Force 4: Threat of Substitute Products (Moderate to high)

However Dell, Acer, and Samsung provide even cheaper products almost at the same

quality, thereby some customers can switch to cheaper substitutes.

Competitive Force 5: Rivalry among Existing Firms (High)

High initial capital costs: cost for setup of manufacturing units increased fixed cost which

makes difficult for existing companies to leave the industry.

Constant changes in products and prices make the competition even more fierce.

KEY SUCCESS FACTORS (SWOT Analysis)

Core Strengths

It has prominent brand recognition among the people. Hewlett-Packard’s primary strength is its

business standing. The corporation has a huge amount of cash in hand about $11 billion.

Hewlett-Packard is a global enterprise and especially after its merger with Compaq, the huge

synergy was created and they became world’s biggest computer hardware and peripherals

consort in the world and has ranked 20th in the Fortune 500 list. Hewlett Packard is doing

business in more than 170 countries. Due to the fact that it is the dominating dealer of computer

hardware it also utilizes this dominating power in printers market, both laser and inkjet. Hewlett

Packard has a near to complete product portfolio.

Core Weaknesses

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The company has a long term debt which hinders it from potentially successful technologies.

Software wise HPQ has also some weaknesses. Some heavy and complicated software were

installed in slow hardware like Touch Smart.

Market Opportunities

Due to recent purchase of EDS HPQ now has more strong position in the market and make it

portfolio even more diversified. If the products by the company were supplied at more

reasonable prices, there will be more chances of growth as the demand would increase.

Market Threats

Operating in global market means many more rivals and therefore, the company has to be

alarmed of constantly altering technologies as well as addressing the changing customer

demands and needs in order to maintain its competitive position.

Dell has cheaper computers almost at the same quality. In addition Dell has more effective

inventory management system.

Many other competitors including Dell are entering the printer business whereas IBM has

become a market leader.

Accounting Analysis

HPQ is operating in the Diversified Computer Systems industry. Thereby, making it important to

focus on strategic necessities within the individual product categories and then manage across

the entire portfolio to drive growth while optimizing cost structure.4 HPQ prepares its

consolidated Financial Statements according to GAAP. Thus, its management should make

estimates, judgments and assumptions which would affect the disclosure of their assets and

liabilities. To make these estimates HPQ has followed a thorough process; in the context of the

outcome of the company these are very vital. These estimates are based on past experiences and

other assumptions that are not readily available from other sources. In the end, the Audit

4 http://www8.hp.com/us/en/hp-information/analyst-relations/index.html5 | P a g e 5

Committee and senior management of HPQ discuss the estimates at hand, and how to disclose

this information.

Key Accounting Policies

HPQ makes many significant estimates and assumptions in different areas for the overall

preparation of their Consolidated Financial Statements. The Consolidated Financial Statements

of HP include the accounts of HP and its wholly-owned subsidiaries and its controlled majority-

owned subsidiaries. The income that the HP generated from the investment in equity in other

company where the company does not hold controlling interest just as interest and other in the

income statement but not following equity method.

According to the note 19, HP has made certain organizational realignments in order to optimize

its operating structure. According to the current revenue recognition policies which HP is

following from 2009 and 2010, revenues are allocated to different elements of HP’s sales

according to selling price hierarchy.

HP is an electronic computer company which needs to make continuous innovation and

differentiation. Therefore, research and development contains a significant portion of total

expenditure. In the year 2010 it was 3.5% of net revenue. The Stock-based compensation

expense for HP is determined based on the grant-date fair value. HP uses lower of cost or market

for inventory valuation and computed cost on a first in, first out (FIFO) basis. The depreciation

for HP’s property, plant and equipment is computed based on straight line or accelerated

methods. HP recognizes deferred tax assets and liabilities for the expected tax consequences of

temporary differences between the tax bases of assets and liabilities and their reported amounts

using enacted tax rates in effect for the year the differences are expected to reverse. According to

SFAS No, 142, “Goodwill and Other Intangible Assets”, goodwill is valued with an indefinite

life with annual impairments. The goodwill is recorded at fair value and the fair value is

determined by weighting the income and market approaches.

Vertical Common-Size Statement of Income (Exhibit 1)

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Earnings before taxes remain stable over the year 2008-2010. Thereby, provision for taxes is also

remains stable over the period of 2008-2010. Net income as a percentage of sales decreases a

little over the period of 2008-2010. The reason for this decrease can be explained by the increase

cost of goods sold over the period of 2008-2010.

Horizontal Common-Size Statement of Income (Exhibit 2)

Net revenue decreases in 2009 but increases in 2010 in comparison to 2008. There is a material

increase in areas of cost of sales, amortization of purchased intangible assets, restructuring

charges, and acquisition related charges. There is a decrease in areas of cost of product, selling

and administrative expense, and research and development. Net earnings increase in 2010 but

decreases in 2010.

Analysis of Statement of cash flows (Exhibit 3)

Cash provided by operations of HPQ was the major source of cash. This operating cash flow

more than offset the cash outflow for investing activities and the outflow for financing activities.

Cash flow from operations related to net income and depreciation represented substantially all of

the cash flow from operations. Cash used for additions to property, plant, equipment and

payments made in connection with business acquisitions, represented more than the total cash

used by investing activities. Cash used for repurchase of stock represented over 200% of the total

cash used for financing activities. Possibly, some of the repurchase stock was related to proceeds

from exercise of stocks options and other stock issuances. One of the reasons for expensing stock

options is that typically a company will repurchase stock and then issue stock with exercise of

options.

Three Year Ratio Comparison (Exhibit 4)

Profitability Ratio

The profitability ratios help us to evaluate four dimensions related to profitability which are,

operating efficiency, asset productivity, rate of return on assets and the rate of return on equity.

These figures will convey us how profitable HPQ is as its own company. The gross profit

margin, operating expense ratio and net profit margin convey us information about the

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companies operating efficiency. From 2008-2010, HP’s gross profit margin has been diminishing

but not so significantly. Hewlett-Packard’s operating expense ratio did not vary significantly.

Return on assets ratio shows us income as percentage of the average total assets available to

generate that income. ROA did not fluctuate significantly; it varies between 6.72 and 7.35.

Asset utilization ratios

We also looked at the asset turnover, return on assets and the return on equity for profitability

analysis. The asset turnover ratio for HPQ dropped (not significant drop) from 2008-2010 due to

the large increase in total assets. This made it difficult for HP to utilize their assets properly.

Between 2008 and 2010 HPQ has also increase the inventory turnover from 11.23 to 15.21 times

a year. So, HPQ increased its efficiency in managing the inventory over 3 year course.

Leverage Ratio

Long term debt to capital was l9.7 in 2008 but then it jumped to 34.3 and decreased to 26.35 in

2010. Total debt to common equity was fluctuating significantly. While it was 45.8 in 2008 it

decreased to 38.2 in 2009 and again increased 53.49 in 2010. Times interest earned and fixed

charge coverage was very good in all three years.

Liquidity Ratio

Quick ratio improved from 2008 to 2009 but it decreased again 2010. Current ratio improved in

2009 but again decreased in 2010. Account receivable days increased in 2009. Most probably

due to fact that it extended the credit terms or maybe it cannot collect receivables effectively as

in 2008. Inventory days held decreased significantly from 32.49 days to 24 days in 2010.

Inventory held at HPQ warehouses decreased from 32.18 days to 24 days. Its account receivable

turnover, increased but not significantly over 3 year course 6.99 to 7.2. Cash dividend coverage

ratio increased from 19.8 to 26 and then decreased to 20.51 in 2010.

Investor ratio

The Current P/E ratio increased slightly in 2010 in relation to 2008, after increasing materially in

2009. The Price/Book Ratio was relatively stable over the period of 2008-2010. EPS per year

decreased slightly in 2009 in relation to 2008, but increased materially in 2010 in relation to both

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2007 and 2009. The Dividend yield decreased materially in 2009 in relation to 2008 but

increased slightly in 2010 in relation to 2009. The Dividend payout decreased materially in 2010.

The cash Dividend Coverage ratio increased materially in 2009 in relation to both 2008 and2010.

Cross company analysis (Exhibit 5)

Profitability Ratio

Return on Equity: It is bottom line measures for the investors. ROE measures the profit earned

for each dollar invested in the firm’s stock by investors. As apple retired all its debt in 2004, it

can save its interest cost. Therefore, Apple has shown a positive trend in ROE since 2004, and

thus appreciates its value. IBM, HP and Dell all show an erratic trend, with Dell having the best

performance of the three firms in this ratio for 2006 and 2008.

Earnings per Share: EPS measures by the net income over no. of outstanding shares. Over the

years EPS for IBM, Apple and HP has steadily increased from 2005 to 2010. Dell has fluctuating

EPS with an average EPS of $1.18.

Liquidity

In terms of liquidity measures (figure 1), we can observe that the four firms do not move in

synch when we analyze the trends over the last six years. In this area, this is due to the

company’s having different approaches to their short term operations, in terms of inventory

turnover, short term assets and short term liabilities.

2005 2006 2007 2008 2009 2010

0

1

2

3

4Figure 1: Liquidity Ratio - Trends

IBMDELLAP-PLEHP

Years

Ra

tio

s

2005 2006 2007 2008 2009 2010

0

0.1

0.2

0.3

0.4

Figure 2: Leverage Ratio - Trends

IBM

DELL

APPLE

HP

Year

Ra

tio

Leverage Ratio

Regarding the leverage ratio (figure 2), we see a similar trend between Hewlett Packard and Dell during

the five year period being analyzed; these two companies show a tendency to the increased use of debt to

finance their investment. But the leverage ratio for IBM has steadily increased from 2005 to 2010. But in

2009, for IBM debt totaled $26.1 billion, compared with $33.9 billion at year-end 2008.The drop was

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largely due to decreases in the short-term debt from $11236 million to $4168 million. Compared to cash

account from $12741 million to $12183 million, these reflected that IBM was in very wealthy financial

health and have enough cash to pay off its short-term debts. For IBM Apple, as we saw in previous

sections, does not have outstanding debt during these years and thus has a different trend.

Investor Ratio:

Price-Earnings Ratio: It can be estimated by market price per share over EPS. IBM, Dell, Apple and HP

all have fluctuating Price-Earnings Ratio with an average of 13.85, 19.55, 27.93, and 16.09 respectively

(figure 3). Therefore, clearly Apple is ahead of the other companies in terms of average Price/Earnings

Ratio from 2005 to 2010.

2005 2006 2007 2008 2009 2010

0

10

20

30

40

50

Figure 3: Price/Earning Ratio - Trend

IBMDELLAPPLEHP

Year

Ra

tio

2005 2006 2007 2008 2009 2010

-

100

200

300

Figure 4: Year End Stock price- Trend

IBMDELLAP-PLE

Year

Pri

ce p

er s

ha

re

Year End stock Price: Finally, all the performance of the company can be usually observed through its

stocks prices, as presented in the table 1. It is important to notice how the stock prices fell for all four of

the firms during 2008 (figure 4). This can be attributed to the effects of the financial crisis.

Ratio Comparison with the Industry (Exhibit 6)

Profitability

Return on assets decreased materially from 2008 to 2009 but recovered somewhat again in 2010.

In 2010 its return on assets was lower than industry average. Costs of Goods Sold to Sales were

not fluctuating significantly over the 3 year course. And it was lower than industry average

which puts HPQ ahead of competitors. Gross Profit Margin decreased from 2008 to 2009 but not

too significantly. It recovered somewhat in 2010 and it was still above the industry average Net

profit margin decreased materially from 2008 to 2009. It recovered somewhat in 2010. Pretax

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margin decreased materially from 2008 to 2009 but again showed small amount of recovery in

2010. Operating profit margin was constant in 2008 and 2009, but increased to 9.11% in 2010.

Asset Utilization

There were not significant changes in asset turnover from 2008 to 2009. It decreased from 2008

to 2009 materially and recovered from 1.00 to 1.05 in 2010. But asset turnover was significantly

below the industry average. Inventory turnover ratio improved significantly over the 2 year

period from 11.23 to 15.21 Accounts receivable turnover ratio worsened in 2009 but it improved

somewhat in 2010. However it was far below the industry average in 2010 which was 23.26

Liquidity

Quick ratio improved from 2008 to 2009 but it decreased again 2010. This ratio was below the

industry average in 2010 which was 1.04. Current ratio improved in 2009 but again decreased in

2010. It has the lowest current among its main rival companies. Its ratio is lower than industry’s

average. Account receivable days increased in 2009. Most probably due to fact that it extended

the credit terms or maybe it cannot collect receivables effectively as in 2008. But this ratio was

better than industry average in 2010. Inventory days held decreased significantly from 32.49

days to 24 days in 2010 and in terms of this metric HPQ was performing better than its peers.

Cash dividend coverage ratio increased from 19.8 to 26 and then decreased to 20.51 in 2010. It

was below industry average which was 25.17

Leverage Ratio

Long term debt to capital was l9.7 in 2008 but then it jumped to 34.3 and decreased to 26.35 in

2010 which was close to industry average. Total debt to common equity was fluctuating

significantly. While it was 45.8 in 2008 it decreased to 38.2 in 2009 and again increased 53.49 in

2010 which was still below the industry average.

Investor Analysis

Total debt to common equity and long term debt to common equity is materially lower for HP

than for the industry. The price/earnings ratio is slightly lower for the HP than for the industry

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and considering the profitability ratio the price/earnings ratio is justified. The EPS for HP is

slightly higher than the industry. The dividend payout is materially lower than the industry which

means HP is retaining their earnings for making investment in R&D and continuous innovation

that is essential for the survival for HP in this highly competitive industry.

Summary and Conclusion

In general, among the years 2009 appears to be good for HP in terms of liquidity. The debt

position appears to be good. This appears to be the case from both an income statement and a

balance sheet viewpoint. Profitability appears to be good.

In the profitability area, there were a numbers of slight decline in 2010 in relation to both 2008

and 2009. The profitability declines were not substantial as related restructuring charges and

acquisition charges were not increase materially. The investor analysis is favorable towards HP.

According to all above mentioned and the tables presented below HP was performing slightly

above industry average. It was outperforming most of the rivals in terms of profitability, leverage

and liquidity ratios. After thorough thought and analysis (Even though, HP seems logical

investment to make) we arrived to one logical conclusion. Sell HP stock and buy APPLE stock!

Appendices

Exhibit 1: Vertical Common-Size Statement of Earnings

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Consolidated Statements of Earnings

For the fiscal years ended October 31

  2010 2009 2008

Net revenue:

Products 67.28% 64.64% 77.47%

Services 32.39% 35.03% 22.22%

Financing income 0.33% 0.33% 0.31%

Total net revenue 100.00% 100.00% 100.00%

Costs and expenses:

Cost of products 51.62% 49.33% 58.58%

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Cost of services 24.38% 26.80% 16.92%

COGS 76.00% 76.12% 75.50%

Financing interest 0.24% 0.28% 0.28%

Research and development 2.35% 2.46% 2.99%

Selling, general and administrative 9.99% 10.14% 11.26%

Amortization of purchased intangible assets 1.18% 1.38% 0.85%

Restructuring charges 0.91% 0.56% 0.23%

Acquisition-related charges 0.23% 0.21% 0.03%

Total operating expenses 90.89% 91.15% 91.15%

Earnings from operations 9.11% 8.85% 8.85%

Interest and other, net -0.40% -0.63%

Earnings before taxes 8.71% 8.22% 8.85%

Provision for taxes 1.76% 1.53% 1.81%

Net earnings 6.95% 6.69% 7.04%

Exhibit 2: Horizontal Common Size Statement of Earnings

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Consolidated Statements of Earnings

For the fiscal years ended October 31

  2010 2009 2008

Net revenue:

Products 92.48% 80.76% 100%Services 155.21% 152.58% 100%Financing income 112.97% 101.89% 100%Total net revenue 106.48% 96.78% 100%

Costs and expenses:

Cost of products 93.83% 81.48% 100%

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Cost of services 153.40% 153.26% 100%COGS 107.18% 97.57% 100%Financing interest 91.79% 99.09% 100%Research and development 83.52% 79.57% 100%Selling, general and administrative 94.44% 87.15% 100%Amortization of purchased intangible assets 146.64% 155.93% 100%Restructuring charges 423.70% 237.04% 100%Acquisition-related charges 714.63% 590.24% 100%Total operating expenses 106.18% 96.78% 100%Earnings from operations 109.61% 96.78% 100%Interest and other, net

Earnings before taxes 104.78% 89.90% 100%Provision for taxes 103.22% 81.86% 100%

Net earnings 105.19% 91.97% 100%

Exhibit 3: Analysis of Statement of Statement of Cash Flows

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

For the fiscal years ended October 31

 In millions Total 2010 2009 2008

Cash flows from operating activities:

Net earnings $24,750 $8,761 $7,660 $8,329

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization $13,001 4,820 4,780 3,401

Stock-based compensation expense $1,909 668 635 606

Provision for doubtful accounts—accounts and financing receivables $776 156 345 275

Provision for inventory $624 189 221 214

Restructuring charges $2,054 1,144 640 270

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Deferred taxes on earnings $1,349 197 379 773

Excess tax benefit from stock-based compensation -$749 -294 -162 -293

Other, net $130 169 22 -61

Changes in assets and liabilities:

Accounts and financing receivables -$3,211 -2,398 -549 -264

Inventory $1,351 -270 1,532 89

Accounts payable $898 -698 -153 1,749

Taxes on earnings $1,691 723 733 235

Restructuring -$2,736 -1,334 -1,237 -165

Other assets and liabilities -$1,945 89 -1,467 -567

Net cash provided by operating activities $39,892 11,922 13,379 14,591Cash flows from investing activities:

Investment in property, plant and equipment -$10,818 -4,133 -3,695 -2,990

Proceeds from sale of property, plant and equipment $1,522 602 495 425

Purchases of available-for-sale securities and other investments -$389 -51 -160 -178

Maturities and sales of available-for-sale securities and other investments $651 200 171 280

Payments made in connection with business acquisitions, net -$19,741 -8,102 -391 -11,248

Proceeds from business divestiture, net $125 125 — —

Net cash used in investing activities -$28,650 -11,359 -3,580 -13,711

Cash flows from financing activities:

Issuance (repayment) of commercial paper and notes payable, net $2,315 4,156 -6,856 5,015

Issuance of debt $13,077 3,156 6,800 3,121

Payment of debt -$5,876 -1,323 -2,710 -1,843

Issuance of common stock under employee stock plans $6,264 2,617 1,837 1,810

Repurchase of common stock -$25,802 -11,042 -5,140 -9,620

Excess tax benefit from stock-based compensation $749 294 162 293

Dividends -$2,333 -771 -766 -796

Net cash used in financing activities -$11,606 -2,913 -6,673 -2,020

(Decrease) increase in cash and cash equivalents -$364 -2,350 3,126 -1,140

Cash and cash equivalents at beginning of period $34,725 13,279 10,153 11,293

Cash and cash equivalents at end of period $34,361$10,92

9 $13,279 $10,153

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Exhibit 4: Three-year Ratio Comparison

Unit 2010 2009 2008Profitability RatiosReturn on Per Share % 21.36 21.20 21.29Return on Assets % 7.32 6.72 8.25Cash Flow To Sales % 12.58 12.68 11.66Gross Profit Margin % 22.30 23.88 24.50Operating Profit Margin % 9.11 8.85 8.85Pretax Margin % 8.71 8.22 8.85Net profit Margin % 6.95 6.69 7.04Cost of Goods Sold To Sales % 76.00 76.12 75.50ROE % 21.49 19.22 21.30Asset Utilization RatiosAsset Turnover Times per year 1.05 1.00 1.17

Inventory Turnover Times per year 15.21 12.45 11.23

Leverage RatiosTotal Debt to Common Equity % 53.49 38.20 45.80Long Term Debt to Common Equity % 36.07 33.60 19.70Long Term Debt to Total Capital % 26.35 34.30 19.70Total Debt to Total Assets % 67.20 64.50 65.60Total Capital to Total Assets % 32.80 35.50 34.40Times Interest Earned Times per year 37.33 29.88 32.83Fixed charge coverage Times per year 27.31 16.77 23.42Liquidity RatiosQuick Ratio N/A 0.66 0.76 0.56Current Ratio N/A 1.10 1.22 0.98Cash & Equivalent to Current Assets N/A 0.20 0.25 0.20Accounts Receivable Days Days 50.71 53.32 46.79Receivables to current assets N/A 0.34 0.31 0.33Inventories Days Held Days 23.99 29.32 32.49Investor AnalysisCurrent P/E Ratio N/A 11.63 14.18 10.86Price/Book Ratio N/A 2.41 2.66 2.11EPS $ 3.78 3.21 3.35Dividend yield % 0.7 0.68 0.92Dividend Payout % 8.80 10.00 9.60Cash Dividend Coverage Ratio % 20.51 26.00 19.80

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Exhibit 5: Competitor Analysis

Table 1: Financial Ratios (2005-2007)

Ratios 2005 2006 2007

  IBM DELL APPLE HP IBM DELLAPPLE HP IBM DELL APPLE HP

Size - Total Assets(Million USD) 105748 23215 11516 77317 103234 23109 17205 81981 120431 25635 25347 88699

Size - Total Sales(Million USD) 91134 49205 13931 86696 9124 55908 19315 91658 98786 57420 24006 104552

Age (Number of years in operation) 95 21 29 67 96 22 30 68 97 23 31 69

Liquidity/Current Ratio 1.30 1.20 2.95 1.38 1.11 1.11 2.24 1.35 1.20 1.12 2.36 1.21

Acid/Quick Ratio (Cash/Current Liabilities) 0.36 0.31 1.00 0.44 0.20 0.44 0.99 0.46 0.34 0.54 1.01 0.29

Leverage Ratio - Total Debt/Total Assets 0.21 0.02 0 0.06 0.22 0.02 0 0.06 0.29 0.03 0 0.09

Leverage Ratio - Long-term Debt/Total Assets 0.15 0.02 0 0.03 0.13 0.02 0 0.03 0.19 0.02 0 0.06

Leverage Ratio - Short-term Debt/Total Assets 0.07 0 0 0.02 0.09 0 0 0.03 0.10 0.01 0 0.04

Leverage Ratio - Total Debt / Equity 0.68 0.08 0 0.12 0.80 0.12 0 0.14 1.24 0.17 0 0.21

Return on Equity (ROE)(%) 24.29 46.92 17.9 6.11 30.82 86.51 19.9 16.25 36.57 59.68 24.1 18.85

Earnings per Share 4.87 1.18 1.56 0.84 6.11 1.46 2.3 2.2 7.18 1.14 3.9 2.7

Price-Earnings Ratio (P/E) 16.78 35.39 34.37 33.38 16.03 20.08 33.91 17.6 15.06 21.25 39.05 19.1

Year-end stock prices for the last five years 82.20 41.76 53.61 28.04 97.15 29.31 76.98 38.7 108.10 24.22 153.47 51.7

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Exhibit 5: Competitor Analysis (Cont.)

Table 1: Financial Ratios Cont. (2007-2008)Ratios 2008 2009 2010

  IBM DELLAPPLE HP IBM DELL

APPLE HP IBM DELL

APPLE HP

Size - Total Assets(Million USD) 109524 27561 39572 113331 109022 26500 47501 114799 113452 33652 75183 124503Size - Total Sales(Million USD) 103630 61133 32479 118364 95758 61101 42905 114552 99870 52902 65225 126033Age (Number of years in operation) 97 24 32 70 99 25 33 71 100 26 34 72Liquidity/Current Ratio 1.15 1.07 2.46 0.98 1.36 1.36 2.74 1.22 1.18 1.28 2.01 1.1Acid/Quick Ratio (Cash/Current Liabilities) 0.30 0.42 0.84 0.19 0.34 0.56 0.46 0.31 0.26 0.56 0.54 0.66Leverage Ratio - Total Debt/Total Assets 0.31 0.02 0 0.16 0.24 0.08 0 0.14 0.25 0.12 0 0.18Leverage Ratio - Long-term Debt/Total Assets 0.21 0.01 0 0.07 0.20 0.07 0 0.12 0.19 0.1 0 0.12Leverage Ratio - Short-term Debt/Total Assets 0.10 0.01 0 0.09 0.04 0 0 0.02 0.06 0.02 0 0.06Leverage Ratio - Total Debt / Equity 2.52 0.16 0 0.46 1.15 0.47 0 0.39 1.24 0.72 0 0.55Return on Equity (ROE)(%) 58.83 78.90 23.0 21.39 74.37 58.01 26.0 18.91 64.93 25.4 29.3 21.66Earnings per Share ($) 8.93 1.31 5.4 3.3 10.01 1.25 9.1 3.1 11.52 0.73 15.1 3.7Price-Earnings Ratio (P/E) 9.42 15.3 21.21 11.6 13.08 7.6 20.41 15.3 12.74 17.67 18.66 11.4Year-end stock prices for the last five years ($) 84.16 20.04 113.66 38.3 130.90 9.5 185.35 47.5 146.76 12.9 283.75 42.0

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Exhibit 6: Ratio Comparison with Industry

  Unit 2010 Industry average 2010

Profitability RatiosReturn on Per Share % 21.36 22.18Return on Assets % 7.32 7.73Cash Flow To Sales % 12.58 9.86Gross Profit Margin % 22.30 22.21Operating Profit Margin % 9.11 8.55Pretax Margin % 8.71Net profit Margin % 6.95Cost of Goods Sold To Sales % 76.00 81.00ROE % 21.49 10.70Asset Utilization RatiosAsset Turnover Times per year 1.05 1.41

Inventory Turnover Times per year 15.21 23.26

Leverage RatiosTotal Debt to Common Equity % 53.49 84.78Long Term Debt to Common Equity % 36.07 49.86Long Term Debt to Total Capital % 26.35 26.95 Total Debt to Total Assets % 67.20 68.00Total Capital to Total Assets % 32.80 28.97Times Interest Earned Times per yearFixed charge coverage Times per yearLiquidity RatiosQuick Ratio N/A 0.66 1.04Current Ratio N/A 1.10 1.36Cash & Equivalent to Current Assets N/A 20.00 33.78Accounts Receivable Days Days 50.71 62.03Receivables to current assets N/A 0.34 35.66Inventories Days Held Days 23.99 26.82Investor AnalysisCurrent P/E Ratio N/A 5.59Price/Book Ratio N/A 1.26 2.46Price/Cash Flow Ratio N/A 3.42 6.85EPS $ 3.70 2.86Dividend yield % 1.90Dividend Payout % 8.80 20.48Cash Dividend Coverage Ratio % 20.51 25.17

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