UBS declares Apple a 'special' kind of investment, says 'full ramifications' of iPhone are yet to co

Posted:
in AAPL Investors edited April 2015
Reading the new "Becoming Steve Jobs" biography inspired UBS analyst Steven Milunovich to share his thoughts on where Apple is headed, leading him to suggest to investors that the iPhone maker's best days may still be ahead of it.




Milunovich said the fact that "Becoming Steve Jobs" has been endorsed by Apple executives shows how the company's current top brass view their past, present and future. In particular, he noted that the late Apple co-founder emphasized product vertical integration, and current CEO Tim Cook continues to carry that vision.

"But current management has taken the understanding of multi-sided platforms, which require partnership, to a higher level," the analyst said. "Cook wants iOS to permeate consumers' lives. Consequently, the full ramifications of the iPhone have yet to be seen."

Though he said investors must avoid "drinking the Kool-Aid," Milunovich did admit that Apple is a "special" investment, calling it "the most creative industrial company."




"Becoming Steve Jobs," written by Brent Schlender and Rick Tetzeli, went on sale last week, and has received praise from Apple executives who believe Walter Isaacson's portrayal of Jobs in his own biography was inaccurate. To Milunovich, Schlender and Tetzeli's new book reinforces the fact that Jobs knew exactly what he was doing in picking Cook to be his successor and telling the Apple CEO to lead the company as he saw fit.

"Cook has maintained basic beliefs while tackling issues Jobs might have shied away from, such as capital return and worker conditions," Milunovich said. "Jobs's sweet spot -- clear in the failure of NeXT -- was selling to consumers. Apple is fortunate that consumer technologies and economics are now driving the industry, providing adjacent market opportunities."

UBS has maintained a price target of $150 for shares of AAPL. "Becoming Steve Jobs" is available at Amazon and also at Apple's iBookstore.
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Comments

  • Reply 1 of 22
    boredumbboredumb Posts: 1,410member

    poor guy...he'll never be asked to write for the WSJ...

  • Reply 2 of 22
    He's so going to be accused of drinking something. But he's right.
  • Reply 3 of 22
    lkrupplkrupp Posts: 6,681member

    I’ve become very cynical and suspicious of analysts, their methods and motives. To me they’ve become nothing more than carnival palm readers and fortune tellers. Financial sites typically post articles with 180° opposite opinions. The sky is either falling or unicorns rule the earth depending on who you chose to believe. So pardon me if I take this positive opinion with a grain of salt just like I do the doomed screeds. 

     

    I think Apple is in good hands and being run superbly well. Nothing lasts forever but Apple, with the exception of HP, is the oldest surviving PC manufacturer still building personal computers. IBM stopped building PCs years ago and most of the others are long gone.

  • Reply 4 of 22
    idaho43idaho43 Posts: 4member
    Apple and HP have learned you never yell whoa in a horse race!
  • Reply 5 of 22
    dickprinterdickprinter Posts: 1,060member

    IMO, by definition, the word ramifications is an improper word to use to describe an upside, which is what I believe he's trying to say. Am I wrong on this?

  • Reply 6 of 22
    anantksundaramanantksundaram Posts: 18,951member
    Quote:
    Originally Posted by Dickprinter View Post

     

    IMO, by definition, the word ramifications is an improper word to use to describe an upside, which is what I believe he's trying to say. Am I wrong on this?


    Although it can sometimes have a negative connotation, I interpret the word to generally mean 'implication' or 'consequence' without a positive or negative spin.

     

    I could be wrong...

  • Reply 7 of 22
    tjwolftjwolf Posts: 251member



    Apple makes 90+% of its money selling hardware.  Therefore, it's a hardware company.  The ecosystem exists to add value to the hardware and attract customers to the hardware and to keep them as customers.

     

    PC manufacturers of yore died because they didn't add any value to their increasingly commoditized hardware.  Eventually, they could not compete with cheaper PC manufacturers/labor from China.  The same thing is starting to happen to Samsung: like the old-time PC manufacturers, it does not really add any value beyond its hardware - that all comes from Google (today's equivalent of Microsoft) and its free OS and services - so it increasingly has to compete with other, cheaper hardware manufacturers from China (Xiaomi, Lenovo, etc.)  Samsung realizes this - thus its efforts with Tizen (OS), Milk (music service), etc.  The problem, so far, is that they haven't been able to convince customers that those value added things are better than Google's free alternatives.

  • Reply 8 of 22
    geekmeegeekmee Posts: 299member
    lkrupp wrote: »
    I’ve become very cynical and suspicious of analysts, their methods and motives. To me they’ve become nothing more than carnival palm readers and fortune tellers. Financial sites typically post articles with 180° opposite opinions. The sky is either falling or unicorns rule the earth depending on who you chose to believe. So pardon me if I take this positive opinion with a grain of salt just like I do the doomed screeds. 

    Agreed. I think it's just their attempt to get-in front-of-the-parade. I have noticed that Wall Street analysts are either "amazed" or "disappointed" with Apple's earnings... Which really means they were simply wrong!!
  • Reply 9 of 22
    MacProMacPro Posts: 17,972member
    sog35 wrote: »
    But Apple is not primarily a hardware company.

    It the ecosystem.

    Even Microsoft who has been terriblily managed for a decade has been able to thrive and make tons of profits because they are based on an ecosystem (Windows/Office).  Its 100x harder to dethrone a company that has a strong eco system (Apple/Microsoft) than a pure hardware company (HP, Dell, ect)

    I agree in general but in the case of Microsoft they have a big problem ... that they have nothing out there (as in any measurable market share of hardware) to run their 21st Century mobile eco system on!
  • Reply 10 of 22
    MacProMacPro Posts: 17,972member
    sog35 wrote: »
    Your lack of understanding on this matter.  Apple is not a hardware company.  Tim Cook has said this already.  They deliver an experience.  A lifestyle.  What they are selling is a combination of hardware, software, and services.

    Yes Apple sells hardware.  But without the software, services, ect (Ecosystem) that hardware could easily become commodized.

    To compare Apple to hardware companies of the past like HP, Dell, ect is foolish.


    http://www.businessinsider.com/tim-cook-apple-is-not-a-hardware-company-2013-2

    "Apple is not a hardware company," CEO Tim Cook just said at the Goldman Sachs Technology and Internet Conference in San Francisco.


     

    It does't hurt that Apple sell the Rolls Royce of consumer computing technology hardware too though.
  • Reply 11 of 22
    tjwolftjwolf Posts: 251member



    There's no lack of understanding on my part.  I was trying to point out that, from a financial perspective at least, Apple is a hardware company since it makes 90+% of its profits from hardware sales.  I didn't compare Apple to hardware companies of the past - I explicitly distinguished it by stating that, UNLIKE hardware companies of the past, Apple added an ecosystem which adds value to their hardware and, thus, shields them from commoditization.

  • Reply 12 of 22
    sog35 wrote: »
    Finally one of the analysis get it.

    Its not about hardware.  Anyone can copy a phone (see Samdung) 

    Its about the ecosystem.  Something none of the Apple competitiors can duplicate no matter how hard they try.  Once Wall street realizes this they we see that Apple's moat is MASSIVE and cheaper phones won't be able to threaten their growth or margins.

    The tech press and techies in general don't get it. They're still valuing cheap "commodity" hardware running Android or "L33T" cyanogenmod
  • Reply 13 of 22
    mj webmj web Posts: 918member
    The only book I've seen hyped and hawked more than "Becoming Steve Jobs" is the bible. And I'm no believer in the bible! I do believe in SJ but I get the vibe this is a total waste of a read. The reviews remind me of the proprietor's friends' reviews on Yelp.
  • Reply 14 of 22
    tjwolftjwolf Posts: 251member
    Quote:

    Originally Posted by sog35 View Post

     

     

    Calling Apple a hardware company is showing a lack of understanding.

     

    Apple is a platform and lifestyle company.


     

    Not sure what your issue is.  Apple is in the consumer electronics business (and electronics is hardware).  Pointing this out is not a misunderstanding.  It's a fact.

     

    Yes, when you buy an Apple hardware product, you make a lifestyle *choice*.  Yes, when you buy an Apple hardware product, you get a platform.  Yes, when you buy an Apple hardware product, you get an extensive ecosystem.  But what you pay actual dollars for, and the industry sector Apple is in is hardware - specifically, consumer electronics.  There is no "lifestyle" industry sector.

  • Reply 15 of 22
    gtrgtr Posts: 3,231member
    Happy Birthday Apple.
  • Reply 16 of 22
    lkrupp wrote: »
    Nothing lasts forever but Apple, with the exception of HP, is the oldest surviving PC manufacturer still building personal computers. IBM stopped building PCs years ago and most of the others are long gone.

    HP refused to sell the Apple I because they though there was no market for personal computers back in 76. Apple was free to sell to it.
  • Reply 17 of 22
    tjwolftjwolf Posts: 251member
    Quote:

    Originally Posted by sog35 View Post

     

     

    you just don't get it.  Which is fine.  Most analysis and writer hacks don't either.

     

    ...cost of iPhone includes software, blah, blah, blah.


     

    Ok, I'll try it one last time: obviously "hardware", the way I used it is not solely the pieces of electronics and the plastic and screens - show me a single electronic widget that doesn't have *some* software in it!  Every single company that is in the consumer electronics business has some level of software in their products.  So every company selling an electronic widget includes the cost of the software in the price they charge.

     

    So, according to your definition, they should all be "lifestyle" companies - because you're not just buying the "hardware"; you're buying the software and the ecosystem, etc.

     

    You singled out Samsung.  Why isn't Samsung a "lifestyle" company?  Its phones have a software, ecosystem, and services - in addition to the Google Android system of services, Samsung integrates its phones with its TVs and other entertainment widgets.  They've started a Mobile payments system (in addition to already having Google Wallet).  Heck, unlike Apple (which is only building the HomeKit API), Samsung's even building intelligent home appliances (refrigerators, wash machines, lights, switches, etc.) that will work with their phones!

     

    But Apple is the "lifestyle" company in your world and Samsung is a "hardware" company?  Ok!

     

    They're both hardware companies in my book.  The only difference is the quality of their components and software and ecosystems.

     

    As an aside: your statement that "anyone who has a clue knows that half the cost of an iPhone is software/services/etc." is just plain bullsh1t.  You just pulled that percentage out of your arse.  Apple doesn't break down the costs of its cloud services, App store, software development in its quarterly statements, so how can "anyone with any clue" know such things?  The only costs that are shown on those statements is "R&D" and capital expenses.  You simply can't ascertain from those few numbers that 50% of the iPhones' cost is due to software & services.

     

    You're a poser.  Which is fine.  Most analysts and writer hacks are too.

  • Reply 18 of 22
    boredumbboredumb Posts: 1,410member
    Quote:

    Originally Posted by sog35 View Post

    But Apple is not primarily a hardware company.

     

    It the ecosystem.

     

    Even Microsoft who has been terriblily managed for a decade has been able to thrive and make tons of profits because they are based on an ecosystem (Windows/Office).  Its 100x harder to dethrone a company that has a strong eco system (Apple/Microsoft) than a pure hardware company (HP, Dell, ect)


    I had an old friend - the one who introduced me to Apple products in about 1991 or so (he brought over a Newton) -

    who tried to make this same point...the way he put it, describing problems Apple was having, was something like,

    "Apple needs to get hit on the head a few more times before they realize they aren't a hardware company..."

     

    Then they brought out the iMac...then the iPod...then the iPhone...then the iPAD...(soon the ?Watch)...

    Then my old friend died, but, he lived long enough to realize he'd been wrong, or, that Apple, with Jobs' return,

    had made him wrong.

    So, while I don't entirely disagree with you, I kinda do disagree with you.  If they didn't make the hardware

    to perfectly complement the software, and vice versa, they wouldn't have the elegant ecosystem they have, it wouldn't run the way it does, it wouldn't put everything else (pretty much) to shame.  

     

    I know that's partly your point - the ecosystem requires both elements -

    but then, although the software wouldn't quite be what it is on other hardware,

    the hardware is still pretty fine even when it's running Windows.  

  • Reply 19 of 22
    tjwolftjwolf Posts: 251member



    @buredumb,

    Good point.  A good way to decide whether a company is a "hardware" company or a "software" company is to see which supports the other.  In that light, clearly Apple is a hardware company: it sells hardware that is made "better" by the software/services that come along with/support it.  They don't sell software/services that are made "better" by the hardware that comes along with the software.

  • Reply 20 of 22
    boredumbboredumb Posts: 1,410member
    Quote:

    Originally Posted by sog35 View Post



    Apple is both a hardware company, software company, and a services company.



    They are not simply a hardware company. Why are you so stubborn as not to take Tim Cooks word for it? Do you seriously think you know Apple better than Cook? I mean WTF guy!

    I know you enjoy raving away without really trying too hard to see other people's viewpoints...but at least

    the first sentence above seems a lot like what I and others have said...perhaps what we have here is

    "a distinction without a difference"?

     

    But, WTF guy!  

    Try combining both elements of my comment before going off.

     

    Besides, it's not much fun having a personal, sentimental comment blithely derided,

    but I guess I've come to the right place for that...;)

     

    Meanwhile, Tim Cook is a salesman, at least part of the day, and I'm required neither to 

    believe nor agree with everything he says in protecting and promoting Apple.  

    I think he's a fine leader of the company, but, like anyone, he has a viewpoint and an opinion, and they are his,

    but I don't necessarily agree with them out of hand, each and every time.

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