However with it’s benefits 1and1 has some downsides, with time I have learned that googling things and trying to solve issues myself is much more effective than dealing with 1and1 support.

Recently I’ve decided to resurrect my website and delete bunch of stuff I didn’t need and add some links and articles. Due to that, I decided to re-install WordPress from scratch and of course, ran into some problems with 500 Internal Error pages on my wordpress.

The main reason i’m posting this is so that next time someone googles this similar issue can access this information faster than it took me as I ended up sifting through thousands of posts on wordpress support forums.

So here it is:

Specs:  1and1 Linux Shared Hosting; Mac with Transmit FTP software from Panic.

Issue: 500 Internal Error page when accessing “wp-admin/edit.php” *amongst others

Solution:

In your FTP client, (in my case Transmit) enable view of hidden files (below)

then look for .htaccess file in your wordpress root folder, open it and add the following to it below # END WordPress

Options All -Indexes
AddType x-mapp-php5 .php
AddHandler x-mapp-php5 .php

Here’s a screenshot of what my .htaccess looks like with some stuff omitted for privacy but you’ll get the idea.

EDIT: This also helps with failing upload issues in WordPress as well as a bundle of other weird issues that wordpress has on 1and1

This particular article published by Wall Street Journal on Tuesday, November 27^th was somewhat intriguing. I have always thought of Verizon Wireless as a company that lost its consumer appeal and user friendliness years ago. What was worse was the fact that company management did not seem to be doing anything to ensure company’s competitiveness in the future. But yesterday’s article in Wall Street Journal changed some of my earlier opinions.

Verizon, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, announced that it would open up its wireless network for third-party devices. This move will allow customer to purchase the handset or any other mobile device in any retail outlet they wish and be able to use it on Verizon network. Prior to the move, customers were able to use only the devices sold and outfitted by Verizon itself.

Article goes to discuss several of the US cellular companies and in essence create a side-by-side comparison that points out some of the potential implications this move might have on the company. In addition, article describes Verizon Wireless management’s reluctance to cooperate with open standards protocols proposed by Google to the FCC. Its not surprising that amidst Verizon’s opposition to the proposed “open network” standards that would allow customers use any device they wish Verizon’s latest move to open up their own network seems like a strategically reacting move.

As article continues, it reveals Verizons plans to publish the specific details of system infrastructure that will allow developers that create mobile devices to better design their devices for seamless use on the Verizon network. Although publishing company’s system specifics is not something new, typically it comes after significant litigation and normally is preceded by a court order as it was the case in Microsoft’s European monopoly proceedings. This latest move by Verizon is seen as its managements attempt to gain a corner on the market of open standards for communications that Google is so insistent on pursuing.

Although Verizons decision might have a relatively large impact in terms of managerial restructuring and customer service for the company itself. This move also marks an important stepping-stone for wireless industry as a whole. Wireless industry in the United States is perhaps on a path to become more decentralized, flexible and more compatible with its European counterparts.

1. 2. Personal Reaction

I believe that this article has great value to business management students as it points out the importance of proactive management. Although Verizon Wireless is moving towards somewhat de-centralized wireless network model, many networks that are operating in the US today area already experiencing the benefits that this model brings. For example, AT&T allows handsets that are not sold by it’s retail stores to be used on it’s wireless networks causing many customers to switch to AT&T simply due to large variety of devices the network supports. Verizon has held on to the outdated business model that did not keep the customer in mind and now the company is attempting to play catch up.

Although Verizon will undoubtedly gain some consumer confidence and perhaps a larger market share as a result of this move, I believe the company has much larger issues. Verizon seemingly has done very little to create a network that is more compatible with other worldwide carriers. As opposed to AT&T’s GSM network Verizon Wireless still uses an outdated analog signal in some of it’s towers, as well as incompatible digital spectrum that is not used anywhere also in the world. I think that these are some of the issues that Verizon Wireless management team must consider in order for company to succeed. While opening the network for third-party devices is a step in the right direction, Verizon needs to do more to ensure that consumers see the company as a viable communication choice amidst growing competition.

One positive and innovative idea that I see coming out of this article is the fact that Verizon Wireless management is considering the history in predicting the future and is trying to speculate where technology is going to end up. One of the key remarks in the article is the fact that Verizon hopes that the wireless standards become a way of life the same way the Internet has. Verizon says that it hopes to have anything that would like to be linked to the company network on board, including computers, wireless book readers, and possibly, kitchen appliances.

I think this article shows a reality of today’s competitive and dynamic market. It shows that management no longer is able to survive simply on reactive strategies and only responding to issues and challenges as they arise. Today’s technologically savvy consumers expect more from service industry, they are no longer willing to be bound by irrational company standards of limited choices. It seems to me that if a company like Verizon were to be successful, it absolutely must engage in proactive and maybe even aggressive advancements. No longer is the best quality the only factor that captures consumer spending. Today, choices and options play overwhelmingly important role in the consumer spending decisions.

Verizon as well as many other technology companies must stay sensitive to consumer needs that go beyond the obvious quality of service. As technology industry grows it continues to offer low barriers to entry thus creating healthy competition for consumer dollars. Consumers, now more than ever before focus on environmental impact psychological appeal and physical appearance when making technology purchases. Apple Inc. has been doing a great job in capturing consumer attention with its innovative products that appeal to all levels of consumer interests. Cell phone companies must shift their thinking paradigm and begin to employ a management style that would allow them to adapt quickly to consumer needs.

Reference:

Almon S. & Dionne, S. (2007). Verizon to Open Cell Networks to Other’s Phones.

Wall Street Journal Online. Retrieved November 28, 2007, from http://online.wsj.com/article/SB119617188870905241.html

1. Apple Inc., formerly known as Apple Computer, Inc., incorporated under the laws of the State of California on January 3, 19771. The company engages in design, manufacture, and marketing of personal computers and related software solutions worldwide. It also provides a line of portable digital music players, as well as related accessories and services, including the online distribution of digital content via iTunes music store. Recently Apple Inc. added to its product offerings by launching a new line of smart phones (iPhone), distributing it through an exclusive multi-year agreement with AT&T wireless division.

Steve Jobs, Steve Wozniak, and Ronald Wayne founded Apple on April 1, 1976. Apple was incorporated in 1977 to sell its first product, “Apple I Personal Computer Kit”. The original Apple was hand built by Steve Wozniak. Two hundred units of the initial Apple I was sold as an assembled circuits board, but lacked the basic parts we came to know now, such as keyboard and monitor. Apple differentiated itself from other major rivals by offering color graphics and open architecture, which allowed introduction of third party applications and easier integration with the device. Apple sustained growth throughout the 1980s mainly due to its leadership in the education sector. A deal negotiated by Steve Jobs established Apple’s presence in all schools throughout California.

As the company continued to grow, an internal power struggle developed between Steve Jobs and the new CEO John Sculley in 1985. Apple’s board of directors sided with the CEO and Steve Jobs resigned. After resigning, Jobs founded NeXT2, which was acquired by Apple for $400 million in 19963. As Apple continued improving product offerings and incorporating new technology, research and development costs skyrocketed. Growing development of Microsoft

1 Sabrient, AAPL Research, pg 5 2 Company founded by Stephen Jobs after leaving Apple 3 S&P AAPL Research

2Windows continued to cut deeply into Apple Inc. profits. Instead of a clear marketplace response Apple sued Microsoft for theft of intellectual property; the lawsuit dragged on for years. Although the case was later thrown out, it distracted management and caused several major product flops and missed deadlines. In 1997 Steve Jobs returned to Apple as consultant, and then became an interim CEO; in 2000, he took the CEO position full time.

Although opinions may vary on acquisitions, Apple tends to focus on small companies that can be integrated into the projects that are already being developed internally. Some of its more notable acquisitions include Final Cut Pro from Macromedia (now Adobe Inc.) as well as purchase of small German company called EMagic in 2002.

Apple Inc’s. early litigation dates back to 1978 when Apple Corps Records, owned by The Beatles record label filed suit for trademark infringement. The case was settled in 1981 for $80,000 paid to Apple Corps (Beatles owned company). In addition, Apple Inc. agreed to stay out of music business. This case came back again in 1989, Apple Inc. settled in 1991 with similar terms and additional $26.5 million. However, in September 2003, Apple Corps, sued Apple again, this time over the iTunes music store. The trial, which was held in the UK, ended in victory for Apple Inc. Similarly, in January 2007, Cisco sued Apple Inc. for the name “iPhone”. This case was settled out of court without financial damage to the company.

Apple Inc. has a rich corporate history that’s been prone to radical change. From introduction of new products to maintaining customer relations by offering rebates, Apple Inc. is continually striving to become a prominent figure in the personal technology world. Much of the recent success for Apple can be attributed to Steve Jobs who in recent years has transformed the company he once helped to build.

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2. As stated earlier, Apple Inc. engages in the design, manufacturing, and marketing of personal computers and related peripherals, software, and networking solutions worldwide. It also provides the online sale of third-party audio and video products to enhance the experience of the users of their line of portable digital music players. Apple offers products such as the Macintosh desktop and portable computers, the Mac OS X operating system, and iPod storage products, which are complimented by the iTunes store. The company has a vast array of products from computers, storage devices, software, and supplies.

Apple Inc. sells its products to education, business, consumer, and government customers. They use online stores, a direct sales force, and retail stores to sell their products. The company had 173 retail stores as of March 9, 2007 in the United States, Japan, United Kingdom, and Canada.4 3. On December 27, 2006 SEC announced that Apple was under investigation by the federal government in connection to some illegal activity with regards to backdating stock options.5

On January 17, 2007 Apple announced that it expects 2nd quarter 2007 revenue of $4.8- $4.9 billion and EPS of $0.54 to $0.56. Analysts, however, believed the company to report EPS of $0.60 on revenues of $5.24 billion during the same time period.6

Then, on February 21, 2007 and agreement was finally announced between Apple and Cisco Systems regarding their dispute over the ‘iPhone’ trademark. Within the agreement both companies are free to use the ‘iPhone’ trademark on their products.7

On April 12, 2007 Apple made an announcement to delay the launch of Leopard, Macintosh operating system.8

4 Sabrient, pg 5 5 http://money.cnn.com/2006/12/27/technology/apple_options/index.htm 6 http://www.apple.com/pr/library/2007/01/17results.html 7 http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=av_XXNfwk8KI

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Only twelve days later, on April 24, 2007 the SEC charged two former Apple Inc. executives over their alleged roles in backdating stock options. Fred Anderson, former Chief Financial Officer immediately settled and agreed to pay $3.5 million in fines and penalties. Nancy Heinen’s attorneys fought the charges.9

Good news struck for Apple on May 17, 2007 when it announced the U.S. FCC approval of the iPhone for sale in the United States. The iPhones were sold by AT&T in late June.10

On July 25, 2007 Apple announced 4th quarter expectations below that of what analysts expect. Apple expected fourth quarter 2007 revenues of $5.7 billion with earnings of about $0.65 per share. Analysts expected the company to earn $6.03 billion in revenues and generated $0.82 earnings per share.11

Apple Inc. introduced new iPod Nano, iPod Touch, and iPod Classic on September 5, 2007. New features were brought to these devices offering more user-friendly capabilities.12 4. A ticker symbol is a tool used to identify a mutual fund or stock. These symbols may be made up of 3-5 letters depending on what market they are traded on13. Apple Incorporated’s ticker symbol is “AAPL”. Apple’s stock is traded on NASDAQ. 5. Apple Computer Inc. was incorporated on January 3, 1977 in the state of California . In January 2007 Apple Computer Inc. changed its name to Apple Inc. and today they are headquartered in Cupertino, California15.

8 http://www.macworld.com/news/2007/04/12/leopard_reax/index.php 9 http://www.msnbc.msn.com/id/18279935 10 http://www.wirelessinfo.com/content/FCC-Approves-iPhone.htm 11 http://www.apple.com/pr/library/2007/07/25results.html

12 http://www.apple.com/pr/library/2007/09/05classic.html 13 Investorwords.com 14 Rochdale Securities, AAPL Research, pg 1 15 Sabrient, AAPL Research, pg 5

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Report of the Independent Accountant / Auditor

6. The independent Auditors for apple are KPMG LLP. KPMG is a member of KPMG international they are located in 148 countries and in 731 cities worldwide.16 Apple Inc. conducts extensive business with KPMG’s San Francisco branch located at 55 Second Street, San Francisco. However certain auditing activities are performed abroad via numerous KPMG offices worldwide.

7. The Auditors report dated December 29, 2006 covers the three year period ending September 30, 200617 which includes the re-statement reports for fiscal years 2004 and 2005. The Auditors report for fiscal year 2005 is dated November 29, 2005 and the report for fiscal year 2004 is dated November 30, 2004.

8.

The independent auditors are responsible for: Assuring that the financial statements give a true and fair view of, the financial position

of the company, their expenses and income for the year in question; They make sure that the statements have been prepared properly in accordance with relevant legislation and applicable accounting standards; The auditors make sure that the statements are free from material “misstatement” due to fraud or irregularity; Auditors also make sure that the company has complied with the relevant requirements for accounting presentation;18

•

•

•

•

16 Source: www.apple.com/investor 17 Source: www.apple.com/investor 18 http://www.audit-commission.gov.uk/reports/NATIONAL-REPORT.asp?CategoryID=&ProdID=A9F9AD95-

AE7D-4755-935B-94700E020A9E&SectionID=sect3#

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These responsibilities differ from the company’s management responsibilities in that auditors provide an outside and presumably untainted picture of company records the true amount of the company’s value in their financial statements. In addition, auditing company operates with a significant amount of freedom from organization and its management.

Based on the reviews and discussions above, the Audit Committee recommended to the Board of Directors that the financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 27, 2003.

9. The auditor’s report points out that Apple Computer, Inc. used incorrect measurement dates for its stock option grants. Therefore the company re-stated its 2004 and 2005 financial statements in 2006 Form 10-K. The auditors also added four specific matters pertaining to stock options that occurred during the period:

• The procedures that the company used for granting, accounting, and reporting of stock option grants did not include adequate protections that were important in order to prevent manipulation

• The selected grant dates for a number of grants were used or picked to attain favorable exercise prices

• Two former officers of the company were involved in some questionable transactions related to granting, accounting, recording, and reporting of stock options

• Steve Jobs, the company’s CEO, was well informed about the selection of some favorable grant dates. He recommended this action even though he did not receive any financial benefit from these grants.

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These specific matters should be included in auditor’s report so that the public would know whether or not the company follows the appropriate accounting principles. From an auditor report, public would know about some unusual aspects that happened in the company.

10. “In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the company as of September 30, 2006 and September 24, 2005 and the results of their operations and their cash flows for each of the years in the three-year fiscal period ended September 30, 2006, in conformity with accounting principles generally accepted in the United States of America.”19 This shows that the audit report is an unqualified audit report because it contains and unqualified opinion which means the auditors are not calling attention to anything wrong with the financial statements.

The Financial Statements

11. The company’s fiscal year end date is September 30th. 12. Changes in Revenues over the Last 2 Years.

During 2006, the net revenues/net sales of Apple Computer increased by $5.4 billion or 39% from 2005. One of the reasons for this increase was that 2006 comprised 53 weeks whereas 2005 comprised 52 weeks. Another reason was the net sales’ increase in most of the company’s products during 2006 compared to 2005.20

iPod net sales experienced a $3.1 billion increase or a 69% increase from 2005 to 2006. The company sold 39.4 million units of iPods in 2006. In comparison, the company only sold 22.5 million units of iPods in 2005. This 75% increase in unit sales during 2006 was due to the

19 http://media.corporate-ir.net/media_files/irol/10/107357/reports/10K_FY2006.pdf pg. 118 20Apple Inc. 10-K 2006 Form, Pg. 55

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introduction of iPod video in October 2005, the introduction of iPod nano in September 2005, and the expansion of iPod distribution points. 21

Macintosh net sales experienced a $1.1 billion increase or an 18% increase from 2005 to 2006. The company sold 769,000 units more of Macintosh products in 2006 than it did in 2005. This 17% increase in unit sales was due to the strong demand for the Intel-based MacBook and MacBook Pro systems. While the portable products such as MacBook, iBook, MacBook Pro, and PowerBook increased by 42% in 2006; desktop products such as iMac, eMac, Mac mini, Mac Pro, Power Mac, and Xserve decreased by 3% in 2006. The sales of the Macintosh desktops decreased in 2006 because many customers delayed their purchases of the company’s professional-oriented desktop products in anticipation of the Intel-based Mac Pro. Also, many consumers preferred portable computers to desktop computers.22

Other music related products and services consist of iTunes Store sales, iPod services, Apple-branded iPod accessories, and third-party iPod accessories. The net sales of other music related products and services experienced a $986 million increase or 110% increase from 2005 to 2006. The increase of these products was primarily due to the increase in net sales from the iTunes Store. iTunes Store opened in Japan during August 2005 and in Australia during October 2005. These openings affected the company’s 2006 net sales of other music related products and services greatly. The availability of videos, television shows, and feature-length movie downloads in iTunes Store also affected the increase in the company’s 2006 net sales of other music related products and services.23

Software, service, and other sales products consist of Apple-branded operating system, application software, third-party software, AppleCare, and Internet services. The net sales of

21 Apple Inc. 10-K 2006 Form, Pg. 55 22 Apple Inc. 10-K 2006 Form, Pg. 55 23 Apple Inc. 10-K 2006 Form, Pgs. 59-60

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these products experienced a $188 million or a 17% increase from 2005 to 2006. This increase was mainly due to the sales of AppleCare Protection Plan and the sales of application software. The sales of Mac OS X were lower in 2006 than in 2005 because the company released Mac OS Tiger in April 2005 so that the sales of Mac OS X were very high in 2005.24

Peripheral and other hardware products consist of Apple-branded displays, third-party displays, wireless connectivity, networking solutions, and other hardware accessories. Unlike the other products mentioned above, peripheral and other hardware products experienced a decrease of $26 million or 2% in 2006 net sales. This decrease was primarily due to price decrease in 2006. Also, the shift in mix from desktop to portable systems caused the sales of displays to drop in 200625.

Changes in Profits over the Last 2 Years

Apple Computer’s gross profit increased by $1.6 billion during 2006 compared to 2005. However, the gross profit percentage remained 29% in 2006 and in 2005. The company had higher overall revenue, which was offset by higher cost of sales during 2006. The company experienced more favorable pricing on LCD flat-panel displays and DRAM memory but the company had more production costs from these commodity components. On the other hand, the company’s average selling prices for all iPods decreased during 2006 but the company was able to sell 75% more iPods in 2006 compare to 2005. Thus, the company’s gross margin percentage stayed the same in 2006 even though the company’s gross profit increased in dollars.

24 Apple Inc. 10-K 2006 Form, Pgs. 59-60 25 Apple Inc. 10-K 2006 Form, Pgs. 59-60

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The company’s net income increased by 50% during 2006 compared to 2005. This was because the company generated higher net sales even though the company had to cover higher operating expenses, other expenses, and taxes in 2006. 26 13. Since Apple Computer, Inc. had to restate its consolidated financial statements due to stock-based compensation and the related tax adjustments, some of the information needed to calculate common-size balance sheet in 2004 is not available. Also, the 2004 balance sheet report on Form 10-K would not be reliable because it did not reflect the stock-based compensation and the related tax adjustments.

Common-size balance sheet analysis is very effective in identifying changes in a company’s asset mix and financial structure. Common-size income statement analysis is very useful in identifying changes in a company’s cost structure and profitability. Common-size information reveals something that is not apparent in the raw numbers from a review of a balance sheet and an income statement in a particular year. Common-size financial statements are the easiest, most intuitive, and fastest tool available to analyze a company’s comprehensive financial statements.27 The company’s common-size balance sheet and common-size income statement for the past three years are located on page 13 and page 14 of this paper.

Apple Inc.’s common-size income statement shows that the company’s operating income and net income has continued to grow in the past 3 years. The company has been able to keep its cost of sales in the same percentage range in the past 3 years. The company’s common-size balance sheet shows that the company has been efficient in generating its cash and cash equivalents. The company’s cash and cash equivalents jumped by 6.84% in 2006 compared to 2005. The company’s current assets in 2006 were lower than in 2005 because its short-term

26 Information for question 12 was derived from www.apple.com/investor (2006 10-K Annual Report) 27 Financial Accounting Reporting & Analysis 7th Edition by Stice, pg 81-86

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investments dropped dramatically in 2006 compared to 2005 since many of its short-term investments matured in 2005. Moreover, the company’s current liabilities during 2006 were higher than they were during 2005 and the company’s common stocks in 2006 were lower than they were in 2005.

14. As shown in the 10-K form Apple Inc. did not have any extraordinary items or discontinued operations reported on the income statement. However, some financial data was restated on the most recent statement to reflect adjustments related to stock-based compensation expense and associated tax impact. Cumulative effects of accounting changes, net of income tax as restated for fiscal year 2003 was reduced by $12 million and for fiscal year 2002 income was reduced by $23 million. These items are reported separately on the income statement to reflect the adjustments to income statement and to allow shareholders to evaluate the restated figures. 15. Apple Inc. uses straight-line method to compute depreciation for the Property, Plant and Equipment (PP&E). All PP&E assets are stated at cost. Apple Inc. reported following on the most recent income statement filing:

Depreciation and amortization expense on property and equipment for year 2006 was $180 million.

Depreciation Method

Depreciation Terms

Buildings

Straight-Line

Lesser of 30 years or remaining useful life

Equipment

Straight-Line

Up to 5 years

Leasehold Improvements

Straight-Line

Lesser of lease terms of 10 Years

Internal Use Software

Straight-Line

From 3 to 5 Years

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16. Debt a. In February of 2004 Apple inc. repaid the complete amount of their notes upon maturity

resulting in the elimination of their total long term debt. b. Presently speaking Apple Inc. does not operate with a high number of contingent liabilities, the company states the following, “In the opinion of the management, the Company does not have a potential liability related to any current legal proceedings and claims that would individually or in the aggregate have a material adverse on its financial condition, liquidity or results of operations.28 Being that there is very little risk of any legal implications and the fact that Apple has not been forced to make any payments the company did not record these costs as of either September 30, 2006 or September 24, 2005.

However, though Apple may at the moment not have any legal liabilities, one form of contingent liabilities they do operate with are limited parts and labor warranties and the cost for the last three years are presented below and can also be found in Note to Consolidated Financial Statements29.

2006 2005 2004

Beginning accrued…………………………………………$188 Cost of warranty claims……………………………………(267) Accruals for product warranties…………………………….363 Ending accrued warranty and related costs………………..$284

$105 $ 67 (188) (105) 271 143

$ 188 $ 105

17. Common Stock a. As of September 30, 2006 Apple’s balance sheet informs us that the company was authorized to issue 1,800,000,000 shares of common stock and in comparison to the last four years the numbers have not seen significant change. On September 24, 2005 the number of

28 Notes to Consolidated Financial Statements pg. 108 Note 10- Commitments and Contingencies. 29 Apple Inc. Form 10-K 2006 Note 10 pg. 107

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shares was authorized 1,800,000,000. On September 25, 2004 there were shares authorized 900,000,000. On September 27, 2003 the numbers of shares authorized were 900,000,000. The changes in authorization of shares in the last four years are due to the stock splits. b. The number of shares the company had issued at the end of each the four fiscal years has not changed much. They had issued 835,019,364 shares of common stock in 2006. They had issued 835, 019,364 shares in 2005. They had issued 391,443,617 shares in 2004. They issued 366,958,989 shares in 2003.

c. There were 358,958,989 shares outstanding in 2003. There were 366,726,584 shares outstanding in 2004. Due to the stock splits in February 2005, there were 782,887,234 shares outstanding in 2005. In 2006, there were 835,019,364 shares outstanding. d. Apple does not pay dividends. Moreover, they state, “The Company did not declare pay of cash dividends in either 2006 or 2005. The company anticipates that, for the foreseeable future, it will retain any earnings for use in the operation of its business.”30

18. Cash Flows. a. Operating Activities

i) In 2006, 2005 and 2004 the company’s operations were a source of cash being that numbers were positive.31

Cash generated by operating activities ii) Operating Income32

2006 2005 2004 2,220 2,535 934

2006 2005 2004 2,453 1,643 313

30 United States Securities And Exchange Commission Annual Report Pursuant To Section 13 or 159(d) of the securities exchange act of 1934. Apple Computer, INC. pg 46. 31 Consolidated Statements of Cash Flows pg. 76 32 United States Securities And Exchange Commission Annual Report Pursuant To Section 13 or 159(d) of the securities exchange act of 1934. Apple Computer, INC. Consolidated Statement of operations pg.74

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Operating income differs from cash generated by operating activities in that the cash flow from operations is what’s generated from the day to day business transactions in addition the numbers for cash flow are derived at by alterations to the net income. Moreover, depreciation is added back in the operating income as opposed operating activities where it is recorded as a deduction in the cash flow.

iii) The cash flow information can tell us specific data regarding the cash position in a company where as net income is calculated through earnings not in how much cash was received and spent. For example, the income statement could show positive earnings but not the ability to pay debt, after all the cash flow is what pays the bills. b. Investing Activities

i) The Company’s major sources and uses of cash from investing activities in the

most recent fiscal year as follow:

Purchases of short-term investment……………………………………………… (7,255) Proceeds from maturities of short-term investment……………………………….. 7,226

ii) Observing the fact that most of the sources and use of cash are deriving from the purchase of short-term investment and the proceeds from maturities it is safe to assume that this is a growing company. In addition it is not necessary for them to sell their assets in order to continue their operations. c. Financing Activities

i) The company’s major sources and uses of cash from financing activities in the

most recent fiscal year is the following:

Proceeds from issuance of common stock…………………………………………………..318 Excess tax benefits from stock-based compensation………………………………………. 361 Repurchases of common stock……………………………………………………………..(355)

ii) The company has not paid dividends to preferred stockholders since 1996. 17

iii) The company has not paid dividends to common stockholders since 1996. d. The cash flow statement shows that the company is prosperous and growing. Apple uses cash flow from operations and inflows from financing activities to acquire investments and the repurchase of stocks. 19. Ratio Analysis.33 a. Profitability

Overall, the financial health of the company seems to be very good. There is an obvious increase in profitability over the last three years and a significant jump in profitability during the first two. The profit margin ratio for Apple indicates in the last two years that for each dollar of sales the company is able to contribute about ten cents towards net income. However, in 2004, the profit margin was only about three cents for each dollar in sales. The return on assets ratio indicates that in the last two years Apple has earned over an eleven percent profit on the amount that is invested in assets. This return is favorable as long as it is higher than the rate that these assets are financed for. Since Apple, for the most part, uses no long term debt this yield is very favorable. Return on equity indicates that Apple shareholders earned a 19.92% return in 2006, a favorable 17.88% in 2005, and in 2004 a 3.21% was realized. The high sales revenue that Apple has generated in 2005 and 2006 helps to explain the difference in 2004. Net income was increased because of the larger volume of sales more so than the increase in shareholder’s equity in the years following 2004. Because Apple uses no long term debt, all assets are financed using

33 All information is based on figures taken from Apple Inc. Financial Statements as reported in 10-K forms. 18

Profitability:

2006

2005

2004

Profit Margin

10.30%

9.53%

3.21%

ROE

19.92%

17.88%

5.24%

ROA

11.56%

11.53%

3.30%

EPS-Basic

$2.36

$1.64

$0.36

EPS-Diluted

$2.27

$1.55

$0.34

owner’s equity and sales revenue. Earnings per share have increased from 2004 through 2006 to indicate more profits per share of outstanding stock.

Apple uses a model of business that does not include long-term debt. Since assets equals liabilities & owner’s equity the ROE ratio is higher than ROA since the assets are primarily financed using owners equity. b. Short-term Liquidity

Over the last three years the liquidity position of the company has declined some. In the year 2005 Apple seems to be the most liquid. While current assets have increased over the past three years so have current liabilities. The most significant change seems to be in accounts payable. Accounts payable has almost tripled in the last three years. c. Efficiency

At first look at these calculations the first thing that stands out is the number of days’ sales in inventory numbers. During the last three years this number has been close to 5 for each year. Fixed asset turnover has also fluctuated relatively little. Meaning, sales have increased, but so have the fixed assets. The average collection period has managed to decrease over the last three years. In 2004 a 40 day average has been cut in half by 2006 to a 20 day period of time. In either case this is a relatively short collection period. Also, while sales are increasing the

Short-Term Liquidity:

2006

2005

2004

Current Ratio

2.24

2.95

2.66

Quick Ratio

1.76

2.63

2.46

Efficiency:

2006

2005

2004

Average Collection Period

20.29

25.48

40.03

# of Days’ Sales in Inventory

5.79

4.91

4.76

Fixed Asset Turnover

1.61

1.56

1.51

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company has been able to collect the revenue in a shorter period of time and increase their efficiency by almost 100 percent in this category. d. Solvency and Leverage

Apple is able to pay it’s debts by a fair margin. Total debt to equity has increased in year 2006 to about 72 percent. The two years prior the ratio was between 55 and 59 percent. The company uses no long term debt so current liabilities are the only obligations that must be accounted for. Apple has had in the last three years about a 40% debt to total assets ratio. Because Apple hasn’t used much on any long term debt the times interest earned ratio is not definable. However, in 2004 some interest expense was recorded, because in February 2004 all secured long-term notes payable were paid off. e. Cash Flow Ratios

There is always some kind of textbook standard that is necessary. However, by looking at Apple’s numbers and the numbers of other profitable businesses in different industries that ratio may be a little harsh. The standard of 0.4 for the CFO to CL ratio for each of these companies has never been reached in the last three years. The company seems to be healthy

Solvency & Leverage:

2006

2005

2004

Total Debt to Equity Ratio

72.33%

55.04%

58.59%

Long-term Debt to Equity Ratio

0.00%

0.00%

0.00%

Debt to Total Assets

41.97%

35.50%

36.94%

Times Interest Earned

N/A

N/A

128.67

Cash Flow:

2006

2005

2004

Cash Flows to Net Income

1.12

1.90

3.38

Cash Flow Adequacy

3.38

9.75

5.31

Cash Times Interest Earned

N/A

N/A

348.00

Cash Flows from Operations to Current Liabilities

0.34

0.73

0.35

Other Industries:

Honda

0.21

0.14

0.20

Wal-Mart

0.39

0.36

0.35

20

judging by other ratios. For instance, the cash flows to net income ratio indicate that cash flows from operating activities exceed net income.

The largest industry characteristic that seems to be a factor in this ratio is the cost of inventories & equipment. These expensive assets must be financed and as a result liabilities increase. For Honda the cost of these assets is much greater than for Apple and Wal-Mart. It is interesting to see the similarities between Wal-Mart in this ratio. f. Market & Dividend Ratios (Using end of fiscal year as market price)

20. The Competition. Apple’s primary competitor is Dell.

21. Apple vs. Dell Key Ratios

Apple’s key ratios and Dell’s key ratios in the past three years are provided on page 25 of this paper.

i. Profit Margin

Gradually, Apple has been able to generate greater profit on each dollar of its sales from 2004 to 2006. On the other hand, Dell has been able to maintain the amount of profit that the company generated on each dollar of its sales. Dell was more profitable in 2004 but Apple was more profitable in 2005 and 2006.

Market & Dividend Ratios:

2006

2005

2004

Price-Earnings Ratio

30.80

46.10

90.90

Market-to-Book Value

6.50

7.20

4.50

Dividend Yield

0.00

0.00

0.00

Dividend Payout Ratio

0.00

0.00

0.00

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ii. Earnings per Share

EPS for both Apple and Dell increased from 2004 to 2006. Compared to Dells’ shareholders, however, Apple‘s shareholders associated greater amount of net income with each share of their stocks. Apple was more profitable than Dell. iii. Return on Assets

In 2004, Apple only generated 3.30 cents of net income by each dollar of its assets compared to Dell that generated 13.70 of net income for each dollar of its assets. There was a big difference in 2004. However, Apple was optimizing the use of its assets to generate income in 2005 and 2006. Apple generated close to 12 cents of net income by each dollar of its assets during those years. iv. Return on Equity

Even though both Apple and Dell have gradually increased the amount of profits that their investors earn from their investment, Dell’s investors have earned more profits than Apple’s investors have for each dollar that they invest. In 2006, Dell’s investors earned four times as much of profits as Apple’s investors for each dollar that they invest. v. Current Ratio

Compare to Dell, Apple had smaller ability to pay its debts in the short run. This is not necessarily a bad thing consider the fact that Apple had no long-term debts. Dell had greater ability to pay its debts because Dell also financed its company using long-term debts. vi. Cash Flows from Operations to Current Liabilities

Apple’s Cash Flow from Operations to Current Liabilities ratio has been higher than that of Dell. This shows that Apple has lower short-term liquidity risks than Dell does.

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vii. Total Debt to Equity

Looking at the overall debts of Apple and Dell, Apple’s shareholders had greater potential return than Dell’s investors did in 2004 through 2006. In 2006, for example, Apple’s shareholders only borrowed $0.72 for every dollar that they own in the company. In contrast, Dell’s shareholders borrowed $4.60 for every dollar that they own in the company in 2006. viii. Long-term Debt to Equity

Since Apple do not finance its company with long-term debts. Apple’s long-term debt to equity ratio is zero. Meanwhile, Dell investors had 12 cents of long-term liability in 2006 for every dollar that they invested in the company. ix. Times Interest Earned

Since Apple did not have long-term liabilities, they did not have interest expense. They had interest expense in 2004 since they paid off all of their long-term notes in February 2004. In 2004, Apple could cover 128 times of its interest payments with its operating earnings while Dell could cover 267 times of interest payment with its operating earnings. In 2004, Dell was doing better in terms of Times Interest Earned but Apple was doing better in 2006 since they didn’t even have to pay interest at all. x. Cash Times Interest Earned

Apple did not have interest expense in 2005 and 2006 and Dell did not have interest expense in 2005. In 2004, however, Apple could pay 348 times of its interest from the cash that it had from its operating activities before it paid interest expense and tax expense. Dell could only pay 340 times of its interest from the cash that it had form its operating activities before it paid interest expense and tax expense. That is why Apple seemed to be more efficient than Dell did in using its cash.

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xi. Price-Earnings Ratio

Dell’s P-E ratio has been going down from 2004 to 2006, which is not a very good indication of the company’s growth potential. In 2006, Apple’s P-E ratio was 30.80 and Dell’s P- E ratio was only 17.70. This shows that Apple’s investors were willing to pay more than Dell’s investors were for each dollar of earnings. Thus, Apple has more potential growth than Dell does. xii.

xiii.

Dividend Yield

Both Apple and Dell do not pay dividends.

Dividend Payout Ratio

Both Apple and Dell do not pay dividends.

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25

22. Executive Compensation a. The compensation of the Apple’s CEO, Steve Jobs, was $1.00 for each year of the three

years under study.34 b. Steve Jobs does not receive any other forms of compensation besides the $1.00 salary per year.35 c. CEO Stock Ownership

i. As of March 20, 2007, Steve Jobs own 5,546,451 shares of Apple’s stock, which includes the 120,000 shares of common stock that he has the right to acquire by exercise of stock options.36

ii. The CEO owns 0.64% of the total shares outstanding.37

iii. The level of CEO stock ownership should influence the CEO’s management of the company to maximize the value of the shareholders’ investment. Since the market value of the company is a direct measure of the shareholder wealth, CEO would be interested in increasing the stock price when the CEO owns shares in the company.38

iv. The level of the CEO stock ownership can influence CEO or top management decision-making in a negative way because it can cause an unhealthy fixation on short-term stock fluctuations. CEO and/or top management might try to increase profits in the short term to boost the stock price and maximize the value of their stocks. Moreover, some boards might grant excessive stock options to top managers since the same CEO usually chair the top management and the boards of directors.39

34 http://www.sec.gov/Archives/edgar/data/320193/000110465907028382/a07-9991_1def14a.htm 35 http://www.sec.gov/Archives/edgar/data/320193/000110465907028382/a07-9991_1def14a.htm 36 http://www.sec.gov/Archives/edgar/data/320193/000110465907028382/a07-9991_1def14a.htm 37 http://www.sec.gov/Archives/edgar/data/320193/000110465907028382/a07-9991_1def14a.htm 38 Financial Accounting book, page 712

39 Financial Accounting book, page 712

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d. Stock Options i. The value of the stock options granted to the CEO is $8,547,600.40 ii. The CEO acquired 120,000 shares upon the exercise of stock options. The value

realize from the exercise was $71.2341 e. Given my analysis of the financial data and stock prices of the company, I believe that the executives of Apple Company are appropriately compensated. As a matter of fact, the CEO of the company only received $1.00 of compensation each year. The CEO was granted 120,000 stock options that he voluntarily cancelled in March 2003. All current executive officers and directors own 1.00% of common stocks outstanding as of March 20, 2007. This means that the company does not grant excessive options to the top managers.42

23. (a) Stock Price Analysis

40 http://www.sec.gov/Archives/edgar/data/320193/000110465907028382/a07-9991_1def14a.htm 41 http://www.sec.gov/Archives/edgar/data/320193/000110465907028382/a07-9991_1def14a.htm 42 http://www.sec.gov/Archives/edgar/data/320193/000110465907028382/a07-9991_1def14a.htm

27

b. If Apple stock was purchased on Jan 1, 2003 (or Jan 13 as it was the first day of trading in 2003) and held until 31st of October 2007 this very wise investor would of accrued investment gains of approximately 2150%.

Although if purchased in January 2004 Apple stock would have value of approximately $12, almost double of that from a year before, this would still be a lucrative deal as it continued to rise and reached $32 by end of the year. Further, if purchased in 2005 AAPL would boast a price tag of around $34, which is three times as much as it would have cost early 2004. However considering the increase in price of the stock we still believe Apple would have been a great investment as the stock went on to 2:1 split on February 28, 2005, hence virtually doubling the original investment overnight. If purchased on January 2006, Apple stock would carry a price tag of $76 and go on to finish of the year with modest 25 % increase in stock value with closing price on December 29, 2006 at $85.40. Purchase on January 2007, would have been one of the smartest moves for any investor. From starting on January 3rd at $86.29 Apple sees market gains upwards of %100. Although most recent market downturn caused Apple to shed some of its value, if stock was purchased on January 2007 and sold on 31st of October 2007 the sale would occur prior to the downturn, thus insuring a return of over %115. c. As shown on the chart below AAPL increased in value in access of 2000% since early 2003. However all of the major indexes (S&P500, NASDAQ, DOW) remained flat in comparison.

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24. Conclusions a. Conservative of value

Apple is a stock that has a great track record over the past years. However, as with many technology stock companies it may not be the first pick for a conservative investor. Technology is a fast changing environment for a business. Lately, Apple has been able to stay ahead of the curve by introducing new products that the market loves. This could be something that may not always be the case and to a conservative investor may create an element of risk. Also, at the current price around $172 per share an investor would need a large amount of financial resources in order to purchase this stock and yet diversify the portfolio through other purchases. For a conservative investor the recommendation would be a hold. If the stock is currently held then it has probably been a great performer. There is nothing that indicates a reason to doubt that this performance won’t continue to provide great returns.

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b. Aggressive/Speculation With Apple’s innovative products there is plenty of room for speculation of new products

with even more features. Apple Inc. is a great investment for an aggressive investor. High returns have been realized and as with all stocks it greatly fluctuates due to publicity and the new product announcements. The announcement of new products provides a good opportunity for speculation. For this investor the stock would be rated as a buy. Apple is entering the holidays and represented are products in great demand for the shopping season. Stock price may benefit as a result of the holiday shopping and provide good returns for the investor. c. Growth

Apple would be a great growth stock if purchased five years ago. The stock price has increased from about $7 per share to $172 per share. For the growth investor that has purchased this stock, a hold is recommended. With the stock price at $172 per share the typical growth investor may view this stock to be too inflated to purchase for the long haul. Apple will have its market swings, but long-term investors may not realize the returns that they would like to see in their growth stock. 25. This project would be more beneficial in the future if it was done by a group no larger than three people. The primary reason for this is because it was very difficult to get everyone’s schedules to line up.

Another recommendation to help this project be more advantageous in the future is for peer evaluations to be given at each submission of a draft of the paper. This would give a sense of responsibility to each member for every part of the project. This would also allow the group to overcome some problems and operate more effectively in the submissions yet to come. Learning to be work in a team and accountability is a valuable part of this project.

Download PDF of the entire project in preserved formatting:

Current Issue Assignment – Netflix

As described in this case, change at Cargill, just as it would be in any large company is slow to occur. The new CEO Warren Staley is the driving force in creating a clear plan of action for the company to reach the goals of higher profitability and decreasing the numbers of unprofitable divisions. The main driving force for change in this case is the CEO himself. Staley is creating a new array of opportunities for his company by reorganizing, selling off and replacing management when needed. However, the members of the founding family that still own 88% of this privately held company favor this particular path of change at Cargill and are confident that Staley is taking their company in the right direction.
Question 2 (What are the reasons for resistance to change at Cargill? What can Cargill managers do to overcome this resistance? In your opinion, are these actions likely to be successful in overcoming resistance to change?)

Although many businesses today must adhere to frequent change, it is the single most difficult task within an organization. Often time’s change within an organization is meet with resistance, skepticism and simple unwillingness by management to comply. This case seems to be no different. According to the Cargill case, although the owners backed the CEO’s vision for the company the management within various divisions was slow and reluctant to respond. It seems that the reason for this resistance to change was simply management’s lack of foresight and perhaps lack of understanding of the new vision that CEO Staley was executing. Also this case mentions that implementation of Staley’s vision meant that management within various divisions work as a team instead of working as though they were competitors only worrying about their business. Cargill managers can overcome this resistance by simply having an open mind and accepting that change in the workplace is something that is becoming more and more frequent. Although I believe that approaching the vision laid out by CEO Staley with open mind will help some managers to overcome their resistance to change, some managers will simply not be able to do that. There are many variables that could play part in manager’s unwillingness to adhere to organizational change, some are easy to overcome and with time they would no longer play a role in the decision making process. However, some managers would simply not be able to do that and the only option I see in solving this problem is replacing those managers that are not able to deal with corporate change in the organization. I see a potentially large problem in leaving managers that are unwilling to change as they might only jeopardize successfully completing organization’s goals. I believe that if managers understand the process and realize the benefits that will be realized once the company is on the right path they will be more likely to support the top administration in implementing the changes throughout the company.

Question 3 (What areas of Cargill need to be changed? On the basis of your response, predict how easy or how hard it will be to make the required changes. Then predict some outcomes that are likely for Cargill if the changes do not succeed.)

According to the case Cargill needs to change it’s business structure to be more profitable. As CEO Staley demonstrated, in some cases that might be selling of unprofitable businesses, participating in joint ventures, increasing research and development. In essence Cargill needs to focus on its strengths and opportunities and capitalize on those. It seems as though in the past company engaged in buying up businesses that were somewhat related and was expanding by adding more divisions under its name. However, I think that Cargill will be more successful if the company capitalizes on a smaller number of segments and maximizes it’s earning potential by eliminating investment in divisions that bring losses. The needed change will most likely be difficult due to the fact that change of such large scale requires complete management participation and it is hard to teach managers, especially those that have been accustomed to doing things “the old way” for many years. If Cargill is not successful in implementing the changes proposed, company will most likely begin seeing stagnant growth and will most likely begin to loose money in more of it’s divisions. Further, if Cargill does not successfully implement the organizational change the company will not be able to compete in today’s dynamic marketplace.

First root issue I see in this case deals with the management structure of the organization. At the very beginning case mentions that secretary gives Bill Young heads up with regards to his placement in the company and some of the expectations. The fact that administrative assistants would carelessly distribute sensitive information from the main office is worrisome, a healthy company must have trustworthy employees, in such healthy companies “grapevine” phenomenon is non-existent.

Second issue that I see is more or less a symptomatic issue and deals with management as well. The fact that VP of personnel was not being consistent in his information is a problem. Although he mentioned that the Columbia Federal Savings Bank (CFSB) employees are “one happy family” and that “we take care of each other”. He continued on to say things that implied former branch manager was fired due to his inability to “handle” the situation at hand.

As case goes on another root issue that comes to mind is the fact that employees at Bill’s branch do not follow the conflict resolution protocols (assuming there are some). As described in the case an employee rushed into Bill’s office, spewed off complaints and stormed out, that’s not acceptable.

Fourth issue in this case is symptomatic. I would like to address it because I feel that the people doing the evaluation are seemingly confused about the purpose of evaluations. As Bill indicates after Bernadette appeared to be workings towards gender re-assignment her evaluations were negative although the performance seemed to have gone unmentioned.

Lastly another symptomatic issue that I would be concerned with is the fact that according to the secretary, VP of personnel at CFSB wants to fire Bernadette. Action like that especially without merit will put the whole organization in legal jeopardy and it seems to me that a VP of personnel would know that better than anyone.

Although the issues are plentiful, there are several of them that must be dealt with right away. First root problem that needs to be addressed immediately is the leak of information. Even though Bill is a friend with the secretary she had no business divulging anything that she overhears in the office. I think that this problem is one that must be corrected immediately because leaks within an organization are not good for the over all health of the organization.

Second issue that must be dealt with promptly is the fact that employee discrimination against Bernadette is somewhat unwarranted and after the final gender re-assignment operation it will become illegal as well. The longer this behavior continues the less desensitized people become and it will be more difficult to remedy this situation if it continues. Although the discrimination issues are important I believe that they are symptomatic and once the employees are educated and are taught to be more tolerant the problem will no longer persist.

Thirdly, a root problem that I see as needed to be dealt with right away assuming it’s true is the fact that a VP of personnel would want to fire an individual that’s been a loyal and knowledgeable employee because of sexual orientation. Even though this particular case is a little out of ordinary, sexual orientations as well as gender issues are not under control of a company and are not considered to be work-related items. In fact questions about sexual orientation and other social aspects of people’s life’s are some of the topics that are off the table during interview and so forth. Hence an employee should be evaluated largely on performance, as it is pertains to the reasons why he or she is there in the first place.
Problem One: Leak of information from the main offices.

Alternatives: Notify all administrative personal about liability that will be inquired if they are to be found engaging in gossiping. Second, educate administrative assistants about confidentiality of their work.

Problem Two: Management Inconsistencies

Alternatives: Seminar on upper management behavior. Second, informing management on how their image reflects on the organization as a whole. Third, work with upper management on individual basis to achieve synergy of operations and procedures.

Problem Three: Grievance Reporting Procedures

Alternatives: Revising policy and making it a mandatory read for all employees. Second, provide a seminar on conflict resolution and/or proper way of dealing with conflict in workplace.

Problem Four: Performance Evaluation Issues

Alternatives: Educate employees on reason why work evaluations are done. Second, implementing a suggestion box on overall workplace improvement. Thirdly, working with people on one to one basis to help with tolerance in workplace.

Problem Five: VP’s reasons for termination.

Alternatives: Educating upper management about legal ramification of unjust termination. Second, implementing an evaluation process prior to termination that will deal with reasons for termination and their relevance.
My first recommendation would be to make certain that Marie knows that leaks of information from main office will not be tolerated. I would also be sure to make it widely known that employees are expected to adhere to privacy policy and are not to share interdepartmental information.

Because it is more difficult to educate upper management, I would hire an independent consultant to do some sort of training about what it means to be a consistent and trustworthy boss. I would urge the management of the CFSB to use discretion when communicating with employees and know that everything they say reflects on the company at large.

As mentioned before I would most certainly implement a clear policy on how to proceed with dispute or complains and how to document them. Having a process that is efficient and official will prevent from having to deal with potentially dangerous legal situations. Documenting grievances in the organization will also make it for good practice and will spur only constructive criticism.

Due to the fact that Bernadette’s performance evaluations were negative due to the recent gender change situation I would try to take care of some of the root problems described above and let this problem work itself out. However I would probably educate employees that performance evaluations must be done based on performance and not on personal feelings.

I think that after taking care of the preceding issues with regards to tolerance and educating upper management, the last issue I mention regarding VP expressing his intent on firing someone due to their sexual orientation will work itself out. I believe that when people learn to be tolerant of each other they will avoid unnecessary judging and will work together towards a better workplace.

1. Analysis and Goal Identification

Section A

Positive elements include:

• Relaxed work atmosphere, considering that this group has to work on the weekend we think it’s an important factor that is positive element.
• Free dinner and drinks is another aspect of working the weekend shift, especially if we take into consideration the fact that eighty eight (88) percent of workforce are students having a free meal is a plus.
• Friendly and tight nit group is a positive element because people are able to get along better with those they count friends.
• Clearly organized work procedure and assignments
• Flexible and frequent downtime during slow traffic times.
• Fairly typical (somewhat efficient) setup of the cafeteria.

Negative elements include:

• Frequent problem with neglecting customers
• Occasional unbalanced workload
• No specific authority figure during the weekend shift
• Casher does not have any independent verification for money receipted, and works all week as well as weekends.
• Large kitchen area is open during the weekends although there is never a need for it during the weekends.
• Upper management is absent on the weekends so there is no accountability for the employees.
• Job on the weekend is rather dull and workers are not motivated.
• Weekend shift is not as desirable as other shifts and is last resort for anyone.
• Employees do not adhere to the rules and regulations set forth.

Section B

Root causes and symptomatic issues:

• Poor management is the root cause of many symptomatic issues. It is the root cause for the fact that customers go neglected during those times when workers are horsing around in the back, as well as the uneven work load that some workers must carry while others are in the back playing around.
• Another root cause for the fact that motivation and employees behavior is decaying on the weekend shift is the fact that management is absent on the weekends; there is not even occasional schedule visit from the upper management to check on the workers.
• In addition, the basic operating rules and procedures are being ignored, that is a cause for symptomatic issues of food being thrown around in the back as well as other sanitary issues being neglected.

Section C

Problems (and symptoms) that must be treated now:

• Issue 1

Issue of poor management and all its symptoms must be treated immediately. The process must start with upper management and the change should take place in the middle management ranks as well.

• Issue 2

Re-instatement of already existing rules and regulations must take place immediately, to ensure that all work processes are deal with appropriately.

• Issue 3

Managers’ schedule needs to be adjusted so that there is some supervision for the weekend shift.

We can’t ignore the issues mentioned because they are all affecting customer service as well as effectiveness with which employees do their job. Dealing with these issues in a timely manner will help to insure that all good sanitary procedures are in place for the cafeteria to ensure customer safety.

Section D

Uneven workload is not addressed because this issue will work itself out in the process when the root issues are resolved. Similarly, issue with open kitchen area during the weekends is not addressed also due to its dependency on some other root problems that will be addressed.

Section E

We would like to accomplish maximum customer satisfaction; minimize waiting time; minimize kitchen horseplay; and ensure that all rules and regulations are followed. In addition, we would like to increase employee motivation.

2. Alternatives

Section A

Feasible alternatives for resolving:

• Issue 1
  Replace current management; hire an outside individual.

Re-train current management; instate a seminar for upper and middle management.

• Issue 2

Enforce the rules; instate a clearly defined protocol for workplace.

Periodic in-service training for student employees.

• Issue 3

Establish periodic monitoring schedule for the weekend.

Instate the casher to act as a weekend manager.

Section B

Real and potential weaknesses and dangers associated with alternatives mentioned above:

• Main weakness in replacing current management is the fact that it’s always hard to retrain a complete outsider. In addition, hiring a new manager is always costly and will take some time for training. There is always the possibility of unknown when a new person comes in.
• Instating training for current management might cause some resentment from the manager. It also might be a costly solution.
• Enforcing the rules could be meet with a serious resentment from employees that are used to relaxed atmosphere in the workplace without rules.
• In-service training could potentially be costly as well as inconvenient for these minimum wages, student employees.
• Downside of the periodic monitoring is that with time it might not be so periodic. If it is not kept continuously random, employees will get used to the timing and it will loose it’s purpose.
• Casher is already the only person responsible for receipting and cash transactions throughout the week, adding weekend duties and managerial duties to her might be overwhelming and could prove to be a disaster.

Section C

Decision criteria discussed has been organized in the decision grid below.

1. 3. Recommendations and Implementations

Section A

Recommendations for:

• Issue 1

Retrain current management to avoid expense and possible legal action.

• Issue 2

Periodic training for the employees keeping the training to short periods so that it is easy to accommodate the schedules of all employees.

• Issue 3

Periodic monitoring will help to insure that employees are kept on their toes and it will allow for some flexibility for upper management.

Section B

Reasoning behind the chosen recommendation for solving:

• Issue 1

Retraining of the current upper management is the best options because we fill it will help meet the solution criteria chosen. In addition to the benefit of working with someone that has 5 years of experience in this kitchen we will be able to maximize the investment that has already been made in previous training over the years. Also training of current management will allow us to minimize expense that would most certainly be otherwise accrued in the hiring process. We decided that replacing management was not viable choice at this time. In addition to the above mentioned reasons, replacing manager might pose a legal threat to the company, as the manager might not be clear as to the reasons she is being let go.

• Issue 2

Chosen alternative in the second issues is to do periodic training of the workforce. Although the particular weekend shift is a low-pay, last resort job for most employees. Periodic training with some new and unique team management techniques might prove to be interesting and rewarding in the long run. Also throughout the training some of the rules and regulations might be refreshed. We did not think that simply enforcing the rules and regulations would be a viable option as it might cause resentment and will create disgruntles employees. We feel that since the weekend shift is not a very popular one and is not well paid, employees would be more prone to simply quit than adhere to rules and regulations.

• Issue 3

We chose periodic monitoring as a viable option for the third problem in the kitchen. We feel that by using this method of simply random checkups we can achieve more efficient environment during the weekend shifts while continuing with the flat management structure without the top manger present throughout the whole weekend.  We have decided to avoid changing casher’s responsibilities simply because they are already overwhelming. We feel that promoting the casher will create an internal power struggle within the current management and her weekend duties. Additionally, promoting casher to management only for weekend shifts might cause confusion during the normal hours of operation, throughout the week.

Section C

Possible obstacles to implementing recommendations:

• Who is going to retrain the manager and how upper management needs to be approached for the maximum cooperation. Also we need to find out which seminars are most helpful in this particular situation.
• A challenge to implementing the training process is that student employees have difficult schedules and it will be hard to accommodate all of the employees at the same time. Also due to relatively young age and somewhat unmotivated attitudes it might be difficult to keep everyone attention. Training will have to be kept to short times and will have to be repeated frequently.
• Keep periodic monitoring random enough so it is actually worth doing. In addition a challenge to this particular task would be the fact that manager that will be doing random monitoring will not have a complete weekend off. We think that the best way to deal with this type of situation is to delegate monitoring duties to upper managers from other departments throughout the school.

Section D

Steps to implement recommendations:

• Even though we have decided that the best option is to keep current manager we will send the manager to training seminar.

• Shortly after manager’s return we will hold a half hour training session for all of the weekend employees that will simply go over existing rules and regulations as well as mentions some basic sanitary information.
• In addition, after the manager has completed training and the in-service with all employees we will make up a schedule and have a commitment for random weekend monitoring. This task might be shared with other managers throughout the school.

1. A. Introduction

The subject of our group research was a company that has gone mostly unnoticed by the common eye and does not command the same notoriety that Google, Yahoo and the likes. However, Invitrogen is a global company in the forefront of medical and biotechnology research. With revenues of $1.15 billion Invitrogen provides products and services to pharmaceutical and biotechnology companies, as well as academic and government research institutions.

In this report we will examine this company, including its history and organizational profile as well as financial health. Also, we will highlight an interview with one of Invitrogen senior executives and some remarks from its current CFO.

1. B. Organizational Profile

• Company Background

Invitrogen, a medical research and commercial manufacturer was founded through the establishment of a partnership in 1987. After being a partnership for two years it became incorporated by two main leaders coming to the forefront: A graduate of the University of California Lyle Turner, and Bill McConnell. During the company’s earlier years, Turner kept the company going through the financial aid of CEFO and the World Trade Commission. By 1990, Invitrogen began distributing its genetically engineered products to eight different countries and had accumulated 42 employees in: Canada, U.K., Italy, Germany, Switzerland, Japan, The Netherlands, and Sweden. Their product expanded to both the life sciences research market and the commercial market.

Invitrogen states the following regarding their quest and corporate vision: “To discover how life works is the greatest scientific endeavor of our era, holding promise of fundamental improvement in the human condition. Our Quest is to accelerate this search through innovations in science and technologies that expand biological understanding. Success requires passion, intellectual curiosity, and a sense of urgency. We will strive for excellence and act with unyielding integrity in everything we do so that we can serve as responsible stewards in the global life science community.”[1]

In addition, Invitrogen believes that having high values is important for a company, specifically one that deals with human life. Invitrogen believes that “People Make the Difference”; Company strives to hire the most talented and determined individuals that are as interested in making a difference as the company itself. Company also prides itself on being responsible organization and lists its values in the following order:

• People Make the Difference
  We hire and develop the most talented people. All of our employees are determined to learn, support one another, and share in the commitment to our Quest.
• Responsibility to Do the Right Thing
  We meet our commitments and perform with unyielding integrity. We play a leading role in communities around the world.
• Innovation to Change the World
  We nurture environments where creative people initiate and champion bold ideas to succeed in record speed.
• Dedication to Customers
  Customers are our lifeblood; we are dedicated to their success.
• Excellence in Everything We Do
  Our work is fact-based, measurable, and of the highest quality. We are focused on continuous improvement for the benefit of our stakeholders.

In July 2000, the company began to expand when it attained a rival company, Life Technologies. Following this first acquisition, Invitrogen then merged with several companies like: Molecular Probes, Dynal, Panevera, Genicon Sciences, and BioSourse.

After the Life Technologies merger was completed, Invitrogen then controlled almost 40 percent of the market for its kits for gene cloning, gene analysis, and gene expression. During the first year of the merge Invitrogen’s sales increased significantly reaching $630 million. Through major expansions and innovation, Invitrogen successfully accomplished its strategic goals of making their product more available to its consumers. With its recent acquisition of Sentigen in 2006, one can only speculate what new ideas will be used to assist in the ever advancing medical research.

• Nature and Attractiveness of the Industry

Invitrogen appears to be a very organized and reliable service.  They describe themselves to be effective, and dependable, with leading-edge products.  Their motto: Providing outstanding products and services that advance discovery.  They’re very committed to the community and supportive of science education.

The biotech industry is based largely on a recombinant DNA technique.  Recombinant DNA is a method of making proteins such as human insulin and other therapies in cultured cells under controlled manufacturing conditions. Herbert Boyer, of University of California went on to co-found Genentech, which today is biotechnology’s largest company by market capitalization.  Biotechnology has created more than 200 new therapies and vaccines, including products to treat cancer, diabetes, HIV/AIDS and autoimmune disorders.  Biotechnology is responsible for hundreds of medical diagnostic tests that keep the blood supply safe from the AIDS virus and detect other conditions early enough to be successfully treated.  Home pregnancy tests are also biotechnology diagnostic products.  Clearly, Invitrogen is a company that is responsible for manufacturing our everyday health safety products.

There are two specific focus areas of Invitrogen as far as the nature of the company is concerned.  The first focus is DNA & RNA Purification.  Purification in that the company makes sure all of its products is clean and perfect for the user/consumer.  The second focus is the quantification factor.  The company makes sure that every ingredient included in the product is added in with the right proportions.  The fact that this information is provided on the site, gives users a sense of security that the company prides itself in these particular areas.

Industrial biotechnology functions have been able to provide for cleaner processes that produce less waste and use less energy and water in industrial zones such as chemicals, pulp and paper, textiles, food, energy, and metals and minerals.  Most laundry detergents produced in the United States contain biotechnology-based enzymes.  DNA fingerprinting, which is also a biotech process, has dramatically improved criminal investigation and forensic medicine, as well as meet the expenses of significant advances in anthropology and wildlife management?  The biotech industry is regulated by the U.S. Food and Drug Administration (FDA), the Environmental Protection Agency (EPA) and the Department of Agriculture (USDA).

• Company’s Current Position and Prospect

Today Invitrogen is one of the Premier suppliers of products that support disease research, drug discovery, and commercial bio-production. With more than 4,300 employees in 70 different countries, such as New Zealand, Argentina, and the United States of America, Invitrogen has become an industry leader. Through offering products, technologies, licensing arrangements, and services for all researchers to complete their experiments more efficiently and effectively, they have obtained more than 900 patents and 500 license deals to complement their own in-house research. Invitrogen today is producing approximately 25,000 products with a mindset that because of their better and faster understanding they are set apart from the rest. Invitrogen’s success is widely contributed to its strengths in additional to recognizing its opportunities and improving their weakness as well as eliminating potential organizational threats.

The strengths of Invitogen come with an understanding of the importance of time and quality for its clients. One of the most important strengths of this company is its wide variety of products that they manufacture. By producing items with quality and variety that extends across a wide spectrum of areas in the science life industry, Invitrogen sets itself apart from other companies. This year, Invitrogen displayed one of its other strengths with the buying of Bio Reliance and Bio Source Europe.  After the buying of these companies, Invitrogen then improves and sells the products that came along with the purchase of that company. By doing this there is not only expansion in product ideas and improvements, but there is also the elimination of any more potential competitors. This then allows Invitrogen to take more control of the life science industry. Strength of this company is that they recognize the importance of producing products that will contribute to making their clients research efficient. They do this by producing new products, such as multi-vendor e-procurement technologies, which is the first of its kind in the life science industry. These technologies allow clients to use software where they can purchase products from Invitrogen as well as other vendors instead of having them purchase different orders with each vendor. Invitrogen has shown that it creates products with the customer in mind.  All of Invitogen’s strengths lie in their understanding that positive change makes room for growth and expansion which will help them obtain competitive advantage.

With the strengths, however, also come weaknesses. These weaknesses become deficits in the skills or capabilities that prevent an organization from choosing and implementing strategies that support its mission. In reference to Invitrogen, their weaknesses revolve around products, operating expenses, and research and development technical sales. In the past Invitrogen has encountered problems regarding its products. However, this is something that they are continuingly trying to eliminate by focusing more on the area of quality at a good cost. However, because Invitrogen focuses on producing a good product and then selling it at a decent price they have increased operating expenses for both their Biodiscovery and Cell Culture segments regarding, sales and marketing, general and administrated, and research and development; all increasing from 2-12% from the same time in 2006.

Most of Invitrogen’s opportunities lie within strategic partnerships that will enable them to expand their area of research and also products.  With resources provided, through partnerships, Invitrogen can broaden their scientific research in addition to product supply. Agreements such as the Biological Defense System, enables Invitrogen to expand its company’s bio-security applications while leveraging products and knowledge gained through the company’s pathogen research. Also Invitrogen’s recent partnership with Biosynth enables them to launch rapid detection products for MRSA contamination in hospitals. With this launch MRSA colonies can be found in 8-12 hours rather than the 48 hours need for current culture methods. With these two partnerships alone Invitrogen has opened its doors to more opportunities concerning scientific research, development, products, and sells. With partnerships come opportunities for growth that will enable Invitrogen to continue to set itself apart from the rest. However, with these opportunities also come threats.

The overall threat that Invitrogen faces with its strengths and opportunities is the ability to keep up with the industry. With most manufacturing companies there will always be the issue of supply and demand in the ability to meet a need with enough supply. Because the life science industry is constantly changing, due to new discoveries, Invitrogen must keep up with those changes by providing products that were developed rapidly, but at low cost, and are furthermore reliable. With its many partnerships, buying etc., Invitrogen has to focus on making sure that their financial stability and overall image is not tempered while they are taking advantage of its opportunities and strengths.

• Financial Position and Projections

After reviewing five different financial analysis companies—Reuters Company Research, Rochdale Research, BNY Jaywalk Consensus, Sabrient Systems, and Standard & Poor’s (S&P) – Invitrogen Corporation’s current financial position is described as “moderate,” boasting a medium investment risk status, due largely to its intense competition and because it is heavily regulated.  It also has made many acquisitions and is dealing with minor integration issues, which will adversely affect net earnings, even if sales boost.  Invitrogen’s share price is valued at $97.01(Dec.2), and its projected 12-month target price is $102, representing a steady growth; it pays no dividends to stockholders.

Sales are expected to increase by 7% to 1.23 billion in 2007, although sales are projected to slow down in the last two quarters of this year, on account of estimated slowdown in pharmaceutical and biomedical spending.  Another forte of Invitrogen is that it has low price volatility, meaning its stock price doesn’t fluctuate whimsically, and it is highly liquid and can easily pay its bills – Its current assets total $798 million and its current liabilities total 248 million – roughly a 3 to 1 ratio on the balance sheet.  However 75% of analysts label Invitrogen’s stock as a “hold” stock, meaning that it should be held on to, not bought nor sold, although it leans more toward the “buy” side; analysts are cautious because of an actual minor dip witnessed in the last two quarters of 2006, even though information from the first two quarters of operations of 2007 show steady improvements and profitable business operations.

1. C. Executive Requirements and Challenges

For purposes of in-depth analysis of the executive requirements and challenges we interviewed several executives from Invitrogen Corporation. The main subject of the interview and this report is Jerry Garcia, Director of Internal Audit in the Invitrogen Corporation. Additional remarks regarding requirements and challenges for company executives are provided by the Chief Financial Officer and the Senior Vice President, David Hoffmeister as well as the former CEO and Founder of the company, Lyle Turner.

When interviewed, Gerry Garcia (Director of Internal Audit) described that one of the most important qualities someone in his position must poses is the integrity and high ethics. Mr. Garcia mentioned that specifically in the auditing department these qualities are the foundation to successful resolution and managing of day to day challenges that occur throughout the company’s many world-wide offices. Mr. Garcia shared with us that although academic training and degree qualifications are important aspects of success for someone in his position, flexible management style and personal communication skills are other very important aspects of his job that he has been able to grow and improve as he worked at the director capacity.

Mr. Garcia mentions that working in the auditing department he has an enormous responsibility to the board as well as the shareholders of the company to perform his job to the best of his abilities. One of the challenges to doing that is the fact that his job requires mobility and consistent travel to company’s world-wide locations thus, using up his time on travel and talking him away from his family, which at times can be burdensome for a young dad. The CFO, Mr. Hoffmeister mentions that although traveling around the globe is a large part of his job also he feels that one of the challenges he faces on daily basis is the fact that he must divide his valuable time amongst numerous projects throughout the day and it is very easy to lose track of priorities at hand. Both executives agree however, that presenting information to the board and the audit committee (as it is the case with Mr. Garcia) is a challenging task. Partly due to the fact that board and the auditing committee have a very short time to grasp many complicated concepts presented, and it is the executives job to ensure that the information presented via visual aids as well as in forms of other data is interpreted in a way that best represents the operational reality for the corporation.

When asked about the typical day in the workplace it’s no surprise that the response from the executives was quite clear on the fact that there is no typical day for an executive of a multinational corporation such as Invitrogen. Although some days are more relaxed than others, a job of an executive in a company the size of Invitrogen is around the clock communication with various counterparts and requires extensive multitasking. Often times Mr. Garcia finds himself sitting on a company plane heading to office in UK or China while communicating with his team in California. He says that due to the fact that his job is of such nature that does not require consistent presence in an office building, sometimes he works from home or other locations where he is able to focus on a particularly pressing matter without being interrupted. According to Mr. Garcia he appreciates the fact that his job at Invitrogen allows him to telecommute and work remotely.

When asked about likes and dislikes about the job Mr. Garcia mentions that part he looks forward to everyday is the fact that he has a unique place in the organizational structure and has a direct channel of communication to the auditing committee and the board of directors. There is no other director of department in Invitrogen that is able to communicate and report directly to the highest levels of organization. Mr. Garcia appreciates the flexibility and personal initiative that this opportunity provides for him as an executive. In addition, Mr. Garcia believes that no one also within the Invitrogen Corporation plays such an objective role as he does. Mr. Garcia goes on to say that he takes joy in seeing when an area of the company that he saw needed improvement took his advice and improved. He also appreciates when individuals involved in the improvement process give him direct feedback and are appreciative of the work done by the auditing department.

Overall both Mr. Garcia and Mr. Hoffmeister value and appreciate the work-life balance that Invitrogen offers to its executives. Although work is often times grueling and difficult the company values its employees and is concerned about their well being.

D. Conclusion

Invitrogen is a major player in global in pharmaceutical and biotechnology research. As described by the executives interviewed company’s vibrant and multinational environment offers an array of challenges as well as tremendous amount of personal fulfillment. Throughout the project we are able to note the effect a company’s overall citizenship has on individual employees. While the research that went into this project was rather difficult, we as a group appreciate the opportunity to explore a new and largely unknown aspect of this particular industry. By being able to speak on the phone to the executives of this company we now have a better understanding of what it takes to run a multibillion dollar business as well as what it takes to be able to balance work with family life. Invitrogen research project and preparation of the report allowed our group to experience multi-tasking and teamwork that was talked about in the interview first hand and that is quite possibly the most important lesson to be learned today.

According to the video, one of the most important components of the SWA day-to-day operations is the technology that runs in the background and allows for smooth ticketing, baggage processing and other transactions. For me personally, a surprising component of the first line manager’s job was the fact that one of the many duties she held was attempting to deal with technological issues as well.

As displayed in this video SWA is centered around efficiency and customer service, with these two aspects being the center of business model SWA is able to achieve the two components expected from airline travel: on time flights, and no hassle experience.

As the video goes on, SWA first line managers brings up an interesting point that is often forgotten in business hierarchies, customer service agents are an important and vital link in the chain that connects outside customers with business. SWA does a great job in educating its employees to be capable in dealing with customers on the front lines with outmost efficiency and competency. First line manager documented in the video mentions that employees must continue regular training by means of memorandums and other reading material that allows for them to be in sync with the latest company procedures and regulations. Also the state of the art communication system between all levels of SWA operations allows taking care of issues and share concerns with people swiftly and transparently.

In short, Southwest Airlines empowers its employees to master at hand with outmost efficiency. By having such process Southwest ensures that customers leave the gate satisfied and come back often.