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Apple's mammoth size said to dictate tech investment strategies

post #1 of 20
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The sheer size and reach that Apple has come to enjoy over the past few years has forced some analysts to assess tech companies not only based on merits, but how they line up with the iPad maker's current and future plans.

In a note to investors on Tuesday, Barclays Equity Research outlined a new way of dissecting the global technology market by basing investment options on how a given company's operations jibe with Apple's.

The Cupertino-based company is now the largest in the world by market capitalization, and continues to innovate in the consumer technology space, especially with portable devices like the iPhone and iPad. With record-breaking revenues of $46 billion during the first fiscal quarter of 2012, analysts believe that the company could have an $80 billion revenue quarter within the next three years. This is contingent on innovation, demand and the market, however Apple's sheer size sways current trading and can theoretically make or break certain publicly traded tech entities.

To make a more tangible reference tool, Barclays Global Technology Outlook introduced "3 columns of tech investing," which directly examines how a given company's products and services line up with Apple's current offerings and annual refresh cycles.

The first two of the so-called "columns" use straightforward contrast and comparison techniques to decipher which companies are being helped or hurt by Apple's dominating presence in the mobility sector. Added to this equation is market-leader Samsung as the two companies combine to make up over half of worldwide smartphone shipments.

Barclays 3 column
First column companies profit by being aligned with Apple. | Source: Barclays Research


"The first two columns of tech investing are rather simple," explains Barclays analyst Ben Reitzes. "Companies aligned with the sizeable Apple and Samsung product cycles in mobility are set to thrive. Those cannibalized or obsolesced by the rise of smart mobility could see challenges. The sheer size of the upcoming iPhone 5 and iPad cycles, when combined with strong share from Samsung in smartphones, has only increased the importance of identifying these companies."

As noted above, the first column deals with companies that are inline or allied with the momentum created by Apple and Samsung. These corporations can be winning bets if they take advantage of the lumbering giants' progress and astonishing rate of innovation in the mobility sector.

For companies in the second column, Reitzes gives the example of Windows 8 and Intel's Romley server platform, major product launches represent short-term opportunities but have less impact versus past cycles due to the consumer shift toward Apple and Samsung. The second-column corporations will likely face considerable odds as consumer and enterprise spending is not expected to grow significantly outside of Apple's shadow in the next five years. Reitzes notes that the share of capital tied up in the mobility market is too high to let other categories grow significantly.

Barclays 3 column
Second column company profit may be reduced because of Apple's and Samsung's dominating presence in the mobile market.
Source: Barclays Research


The final investing column is reserved for what Reitzes calls "Apple-safe" companies, or those that can't be effectively disrupted by Apple's operations. Examples include cloud and "Big Data" companies and other enterprise-related tech which is currently not an Apple focus.

"Column three is dominated by storage, software and certain services," Reitzes writes. "Outside of those with cloud, Big Data or virtualization exposure, successful companies in this column often include those with strong maintenance streams and a shareholder-friendly cash return policy."

Barclays 3 column
Companies in the third column are unaffected or "Apple safe." | Source: Barclays Research


Overall, the report makes clear that Apple and Samsung are holding court in the mobility market, with the former pushing toward a nearly overwhelming share of the tablet business. The consumerization of IT, as Reitzes calls it, is well underway and Apple is looking to up the ante in the coming months with a rumored next-generation iPhone as well as a new, smaller iPad. Also said to be in the pipeline is an anticipated television which could further extend the company's reach by entering consumers' living rooms.

Barclays' overweight AAPL stock rating remains unchanged with a price target of $750.
post #2 of 20

My question is what does Samsung bring to the party? Other than slapping on free Google Android OS? In that regard Samsung doesn't "build" a phone really. If manufactures a phone type hardware. Ir's kind of like saying Goodyear builds cars because their tires come on a Ford.

 

Apple innovates and designs the whole phone - software and hardware and has Foxconn put it together. Maybe even with a Samsung screen. But Samsung does what again?

 

And why Apple stock rises. They have a vision for Apple. Samsung in cell phones?

post #3 of 20

Where is Google in these lists?

post #4 of 20

I remember when I had a so called smart phone years ago.  I thought it was the greatest device (SideKick 3) and was happy with it.  That's until the iPhone came out.  It changed how I saw my phone.  Heres my point.  Apple makes devices that please people who in the past thought they had a great device from another company.  Once you went to Apple and its portable devices you were hooked.  No wonder Apple has grown so large.  All the other companies found out that their customers were bailing on them.  Therefor an alternative had to be made but still that alternative (android) is still just trying to catch up.  No one out there has made what Apple makes and do it as well.  I say great Job Apple.

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post #5 of 20
Quote:
Originally Posted by TimmyDax View Post
Where is Google in these lists?

 

They don't actually make anything, so it'd be their partners that do all the buying. Like HP and Dell are to Microsoft, for example.

 

And yes, I know Google makes one phone. How's that working out for them? lol.gif

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post #6 of 20
$80 in three years? This analyst does not know what he is talking about

Try $65 billion this coming holiday quarter and a $110 billion quarter three years from now

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post #7 of 20
Quote:
Originally Posted by Tallest Skil View Post

 

They don't actually make anything, so it'd be their partners that do all the buying. Like HP and Dell are to Microsoft, for example.

 

And yes, I know Google makes one phone. How's that working out for them? lol.gif

So true! lol.gif Bought or Stolen!

 

I don't get it though. They're all in the second list. I s'pose Motorola => Google.

 

They must be making some licensing fees off of Maps, YouTube apps though, right? Yahoo similarly doesn't get a mention for Stocks or Weather.

 

Many hardware contributors do though.

post #8 of 20

This reminds me of what used to be said about Microsoft in the roaring 90s - stay out of their way or get run over.  Who could have seen this coming 5 years ago?  Simply amazing. 

post #9 of 20
Quote:
Originally Posted by TimmyDax View Post

They must be making some licensing fees off of Maps, YouTube apps though, right?

 

But hopefully not after October.

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post #10 of 20
Apple has done a good job of getting people to buy smartphones but many people I know who have used Apple and Samsung's versions gladly stick with the non-iPhone.
Much of Apple's appeal is because of the cult of personality and making phones that are easy-to-learn.
post #11 of 20
Quote:
Originally Posted by meofcourse View Post

My question is what does Samsung bring to the party? Other than slapping on free Google Android OS? In that regard Samsung doesn't "build" a phone really. If manufactures a phone type hardware. Ir's kind of like saying Goodyear builds cars because their tires come on a Ford.

 

Apple innovates and designs the whole phone - software and hardware and has Foxconn put it together. Maybe even with a Samsung screen. But Samsung does what again?

 

And why Apple stock rises. They have a vision for Apple. Samsung in cell phones?

 

They have the honour of being the only other company making money.

post #12 of 20
Quote:
Originally Posted by AppleInsider View Post

The sheer size and reach that Apple has come to enjoy over the past few years has forced some analysts to assess tech companies not only based on merits, but how they line up with the iPad maker's current and future plans.
 

click link above to see why analysts have to assess tech companies not only on merits...

/

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post #13 of 20
Quote:
Originally Posted by LizSandford View Post

Apple has done a good job of getting people to buy smartphones but many people I know who have used Apple and Samsung's versions gladly stick with the non-iPhone.
Much of Apple's appeal is because of the cult of personality and making phones that are easy-to-learn.

 

 

I'm not sure what you mean here. 

 

Add iPads, iPods, Macs, everything. 

 

Apple's appeal arises from doing consumer tech right - making it attractive, usable and desirable, like no one else. That is, Apple actually achieves significant, palpable differentiation in the industry. 

 

That "cult of personality" comes from the integrity of the brand; all the stuff that's behind the logo, every level of the User Experience. It isn't some sort of accident.

post #14 of 20
Quote:
Originally Posted by LizSandford View Post

Apple has done a good job of getting people to buy smartphones but many people I know who have used Apple and Samsung's versions gladly stick with the non-iPhone.
Much of Apple's appeal is because of the cult of personality and making phones that are easy-to-learn.

Just as there are people who are tone deaf, there are people who are blind to visual aesthetics and numb to touch. I usually fall back onto my standard explanation for this: too much "living" in the left brain, nothing going on much in the right.

 

Many people you know stick with Samsung? You probably don't hang with people who see and touch with attention. Rather, they like solving geeky problems, which is a left-brain talent.

 

If you don't get what I'm talking about when you have an iPhone in your hand, then I rest my case.  

 

Anyway, it has nothing to do with ease of use and a "cult of personality," whatever that means.

post #15 of 20
Quote:
Originally Posted by Red Oak View Post

$80 in three years? This analyst does not know what he is talking about
Try $65 billion this coming holiday quarter and a $110 billion quarter three years from now


So explain the reason for this:  http://tech.fortune.cnn.com/2012/05/07/the-market-values-apples-earnings-growth-at-0-00/

 

Apple making that much money in a few years seems to be a no-brainer to you, so why does Wall Street see it so differently?

post #16 of 20
I'm sure my friends here in the 95014 (which includes current and former employees at Infinite Loop) don't "get" form, they just want a phone that works. Meanwhile, the fanboys drool over mockups of a new design which they will no longer see once they are ensconced in Otter Box or Speck protective cases!
Of course, Apple has done things right but it's not universally beloved, as sites like this would have you believe.
Apple is good at a lot of things, including avoiding taxes and consumer/sheep manipulation.
post #17 of 20
Quote:
Originally Posted by LizSandford View Post

Of course, Apple has done things right but it's not universally beloved, as sites like this would have you believe.
 

 

You ought to get out a bit more.

post #18 of 20

By "line up" I guess they mean, look at Apple, and then laugh at everyone else trying to catch up. Tragic, but true.

post #19 of 20
Quote:
Originally Posted by Tallest Skil View Post

They don't actually make anything, so it'd be their partners that do all the buying. Like HP and Dell are to Microsoft, for example.

And yes, I know Google makes one phone. How's that working out for them? lol.gif

They certainly do make things, and will make more soon now that the Motorola Mobility purchase is complete.
post #20 of 20
Quote:
Originally Posted by jouster View Post
They certainly do make things, and will make more soon now that the Motorola Mobility purchase is complete.

 

Ah, but that's left to be seen.

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