Best stocks to invest in – The Core Guide to Apple Inc.

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When people think Apple Inc. (AAPL), they primarily associate the multinational, Silicon Valley-based corporation with iPods, MacBook Pros, iTunes, and the company’s founder Steve Jobs. Some people believe Mr. Jobs to be a visionary who revolutionized the way individuals interact with technology, while others do not quite understand the hype. 

What Apple Inc. is not always associated with is its multiple subsidiaries, the number of companies it purchases, and how the corporation is organized. This is due to the company being rather secretive with its finances.

As of January 2016, Apple is publically known to have acquired 70 companies. The actual total is potentially larger as Apple does not reveal the majority of its acquisitions, unless they are discovered by journals. The purchased companies, for the most part, are then integrated into existing projects.

Due to Apple’s concealment of its business operations, the following is a guide to what is known about how Apple Inc. is organized.

1.       Anobit

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Information about Anobit is relatively small. Anobit is a fabless semiconductor company based in Israel that makes a key component that improves the performance of NAND flash memory chips, which are used in iPhones, iPads, iPods, and MacBook Airs. Apple bought the company back in 2012 for an unconfirmed price; it is speculated to be between $400 million and $500 million.

Apple bought Anobit for two reasons: one, Anobit’s flash memory controllers are a key component of aforementioned Apple products, and two, Apple added a large team of chip engineers to its payroll. Apple had at least 1,000 chip engineers, and according to TechCrunch, roughly 160 of Anobit’s 200 employees were engineers.

2.       Apple Operations International, Et. Al

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According to a 2013 report by a Congressional panel per The New York Times, Apple has avoided billions of dollars in taxes through the use of international subsidiaries. These subsidiaries are: Apple Operations International (AOI), Apple Operations Europe (AOE), and Apple Sales International (ASI).  These subsidiaries are headquartered in Ireland where the company has negotiated a special tax rate of 2%.

These subsidiaries contract manufacturers to assemble Apple products, sell the products to other subsidiaries for distribution, and then return the profits back to the three main subsidiaries, in the form of dividends. Furthermore, some of these other smaller subsidiaries do not have a stated tax residence and pay no taxes at all.

Here is the breakdown: AOI is fully owned by Apple Inc., and is the holding company that receives the dividends from most of Apple’s offshore affiliates. It has no physical presence and has never had any employees. AOE is a subsidiary of Apple Operations International, and manufactured a line of specialty computers for sale in Europe.

Finally, ASI is the company that contracts with third-party manufacturers in China to make Apple products. Those products are then sold to Apple Distribution International. Apple Sales International paid little or no tax on $74 billion in profit made from 2009 to 2012.

3.       Apple Store

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It is rather safe to claim that most individuals in the world are at least faintly aware of the existence of this aspect of Apple’s business and therefore, there is not too much information to detail. The Apple Store is the physical retail store that sells Apple products. The stores sell Macintosh computers, software, iPods, iPads, iPhones, Apple Watches, Apple TV, and select third-party accessories.

If you have never been into an Apple Store, bless your heart. Depending on the time and day, these stores can become very hectic and overwhelming. There are people everywhere, either perusing the products to come to a decision of whether to purchase an item or not, or simply hanging out to exploit the free Internet access. Purchasing an Apple product can be rather expensive for individuals who simply use a computer for basic computing tasks like Internet browsing, email, and word processing. The perusing is necessary.

Apple Store revenues played an important role in the company’s 2015 fourth quarter earnings. Apple reported quarterly revenue of $51.5 billion and quarterly net profit of $11.1 billion, compared to revenue of $42.1 billion and net profit of $8.5 billion in the prior year’s quarter.

The company contributes this 22% increase in revenues to records sales of the iPhone, Apple Watch, and Mac computers, which are all available at the Apple Store.

4.       Beats Electronic

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Back on August 1st, 2014, Apple Inc. officially announced its acquisition of Beats Electronic LLC. This acquisition was the largest in the company’s history. The deal was worth $3 billion for the company founded by music industry moguls Jimmy Iovine and Dr. Dre.

“Music has always held a special place in our hearts, and we’re thrilled to join forces with a group of people who love it as much as we do,” Apple said in a statement on its website. “We’re delighted to be working with the team to elevate that experience even further.”

Just in case you are not familiar with Beats Electronic, this division of Apple produces trendy, yet overpriced, audio products – primarily headphones and speakers. You know the colorful headphones you see many athletes wear on their heads during warm up or entering the arena? Those are made by Beats.

5.       Braeburn Capital

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Named after the Granny Smith and Lady Hamilton apple hybrid, Braeburn Capital’s sole purpose – just like Apple Operations International – is to avoid paying taxes. Apple created the Reno, Nevada-based company in 2006 as an asset management company.

Apple’s headquarters may be located in Cupertino, Calif, but by placing an office in Reno – roughly 200 miles away from headquarters – to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.

California’s corporate tax rate is 8.84%, compared to Nevada’s whopping 0%. Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year.

6.       FileMaker Inc.

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If you were to visit the FileMaker website, wondering what the company offers, you will find it “makes software that transforms businesses by enabling users to create and run custom solutions that work seamlessly across iPad, iPhone, Windows, Mac and the web. Millions of people worldwide rely on the FileMaker Platform to share information, manage projects, track assets and more.” This description can be labeled as “vague.”

To simplify, FileMaker offers products to manage a company’s data.

The company’s premier product, FileMaker Pro, is capable of performing the following tasks: creating customizable databases, can automate certain tasks like generating email reports in PDF and Excel formats, publish information from a database onto the Internet, and can share information with Mac and Windows users.

According to the company’s website, there have been over 20 million copies of FileMaker software have “delivered,” over 1.5 million downloads of FileMaker Go for iPad and iPhone, and there are over 50,000 members of the FileMaker Community.

Final Thoughts

It is important to note that the purpose of two of these six Apple subsidiaries is to mitigate the amount of taxes the corporation must pay. If you are someone who finds Apple’s manipulation of tax laws appalling, keep in mind that under the current financial system created, corporations like Apple are allowed to make business moves like creating Braeburn Capital and AOI to avoid paying taxes.

The primary goal for any business is to maximize profits, and if there are some loopholes in tax codes that allows them to not pay billions of dollars in taxes, so be it. 

Nevertheless, Apple has a history of acquiring companies – either fusing them into projects or turning them into subsidiaries – to then develop some of the most popular gadgets in the world. Whether it is a headphone company, a face recognition company, a voice recognition company, or a company created by Steve Jobs whose technology became the basis of the OSX and iOS operating systems, Apple Inc. usually invests well.

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