logo
  Join        Login             Stock Quote

What Apple Will And Won't Do?

 November 12, 2012 10:29 AM
 


(By Mani) Apple, Inc. (NASDAQ: AAPL) is surely the talk of the Wall Street for the past two weeks with an earnings miss, executive departure and concerns of losing market share to Samsung whose Galaxy S3 recently said to have outpaced iPhone as the world's bestselling smartphone.

Let' see what the Cupertino, California-based tech giant is expected to do or not to do.

First, Apple is selective about what it does in providing platforms and services to consumers. The company does see new categories to create and appears interested in services.

However, Apple seems to have less interest in owning content or its own network. Surprisingly, it played down the mobile wallet opportunity.

[Related -Sobering Quarter and Guidance for Long-Time Apple Bull]

"CEO Tim Cook has said it is fair to think of Apple as a leading mobile device company. Alternatively, executives suggested that Apple provides platforms and services to consumers. It applies its skills in hardware/software/services in a focused way with a preference for large markets," UBS analyst Steven Milunovich wrote in a note to clients after speaking to Apple management.

Apple, which recently launched iPhone 5 and iPad mini, suggested it does believe there are more frontiers to conquer, more new categories to create while underscoring continued opportunity in smartphones and tablets. There are rumors that Apple may be targeting areas such as wearable computing or entertainment management.

"The remote control is very crude. If they can solve the problem and move to either a touch or gesture recognition, then they can create an app universe on the TV," Apple observer Horace Dediu said on UBS conference call.

[Related -What does Istanbul have to do with AAPL?]

The company does seem interested in layering services over its hardware offerings. iCloud is free and has 190 million users while iTunes runs at a slight profit. There is talk of a Pandora-like service. As Siri evolves it could become a digital assistant, but will these services just enhance the attractiveness of the platform or become a significant source of profit remains to be seen.

Meanwhile, despite Steve Jobs' lack of interest in selling to corporations, Apple recognizes the bring your own device trend. The company has over 200 enterprise sales people in the US, is expanding its value-added reseller channel, and supports companies out of the retail stores.

On the other hand, the company suggested less interest in owning the content and appears happy to sell devices and provide services.

Some investors think Apple should consider building or buying its own network, perhaps as a proof point of what can be done in entertainment or to reduce the risk of phone subsidies declining.

"Management seems to think owning a network wouldn't make sense," Milunovich said.

In addition, Apple does not seem interested in vertically integrating into components despite its size, leaving that to partners and also not very keen on the mobile wallet opportunity.

"Passbook offers useful features, such as holding gift cards and airline tickets. But at least in our discussion, Apple said that NFC is "a solution looking for a problem," that banks and credit card companies don't want to fork out for new terminals and that paying with a phone isn't a step-function better than using a credit card," the analyst said.

This shows that Apple wants to stay focused despite its growing cash pile as it has said "We have never made acquisitions for revenue." The statement indicates that the cash isn't burning a hole in Apple's pockets though it is nice to have if a larger opportunity is presented.

Apple's view of its cash trove is that preservation is more important than return. The majority of cash is overseas, and Apple is lobbying for lower repatriation tax rates. However, much of it is invested in US Treasuries and corporates with an average 16-month duration.

"There was no comment regarding future buyback or dividend plans, but if staying focused reduces the likelihood of huge deals then we would expect increases in both over time," Milunovich added.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageChipotle Mexican Grill, Inc. (CMG) Q2 Earnings Preview: Will Higher Traffic Offset Higher Costs the Key

Chipotle Mexican Grill, Inc. (NYSE:CMG) will host a conference call to discuss second quarter 2014 read on...

article imageNetflix, Inc. (NFLX) Q2 Earnings Preview: The Ruby Month for a Reason

Netflix, Inc. (NASDAQ:NFLX) will post its second-quarter 2014 financial results and business outlook on its read on...

article imageLadenburg Thalmann Financial Services (NYSEMKT:LTS): Heavy, Durable Insider Buying

Ahh, but any worries over price levels didn’t stop multiple insiders at Ladenburg Thalmann Financial read on...

article imageInternational Business Machines Corp. (IBM) Q2 Earnings Preview: Small Beat and Pop

International Business Machines Corp. (NYSE:IBM) will host a conference call Wednesday, Jul. 16, 2014 at read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.