Merrill Lynch: headless iMac hints at migration to 'digital living room'
In a research note to clients this week, Merrill Lynch analyst Steve Milunovich offered his endorsement of the recently rumored sub-$500 iMac sans monitor.
Citing the cost of a 17" LCD now near $400 and the basic eMac at $799, he says Apple could sell a headless iMac for under $500 without hurting its profit margins.
"Why require a PC owner to buy a new monitor to get a Mac?," says Milunovich. "Selling just the system unit would cut significantly the cost to switch."
Noting that Windows users must upgrade to Windows XP to connect to an iPod, Milunovich said he believes the target audience to be iPod purchasers wanting a second PC to easily connect with their iPod.
And while the analyst agrees that the proposed iMac could cannibalize the eMac, he says the impact should be modest at best, as eMacs are primarily targeted at the education market.
Milunovich said he also believes that a headless iMac could mark the second step in Apple's migration towards the digital living room, citing the company's AirPort Express product as the first.
"Apple needs to build a strong digital consumer franchise based on more than iPod but using iPod as the lever," he says.
Merrill Lynch maintained its 'Buy' rating on Apple Computer with a price objective of $78 per share based on a 2.2X EV/Sales ratio, which is an 18% premium over Dell and Lexmark.
"Apple's earnings growth should be faster than Dell's," the firm says.
Citing the cost of a 17" LCD now near $400 and the basic eMac at $799, he says Apple could sell a headless iMac for under $500 without hurting its profit margins.
"Why require a PC owner to buy a new monitor to get a Mac?," says Milunovich. "Selling just the system unit would cut significantly the cost to switch."
Noting that Windows users must upgrade to Windows XP to connect to an iPod, Milunovich said he believes the target audience to be iPod purchasers wanting a second PC to easily connect with their iPod.
And while the analyst agrees that the proposed iMac could cannibalize the eMac, he says the impact should be modest at best, as eMacs are primarily targeted at the education market.
Milunovich said he also believes that a headless iMac could mark the second step in Apple's migration towards the digital living room, citing the company's AirPort Express product as the first.
"Apple needs to build a strong digital consumer franchise based on more than iPod but using iPod as the lever," he says.
Merrill Lynch maintained its 'Buy' rating on Apple Computer with a price objective of $78 per share based on a 2.2X EV/Sales ratio, which is an 18% premium over Dell and Lexmark.
"Apple's earnings growth should be faster than Dell's," the firm says.
Comments
"Apple's earnings growth should be faster than Dell's," the firm says.
Screed
A low cost headless box is probably just what they need right now. It surely won't hurt eMac sales enough as AIO are preferred by many in edu environments.
This is just the beginning. I could see this device evolving quite nicely over the next few years.
Sure, TiVo exists, but so did many MP3 players before the iPod.
Setting up an iPod division has a lot more to do with just an MP3 player...
That leaves open the potential of a headless Mac plus the potential for a "package deal" that includes a wide screen display - probably 17".
The digital living room, for me, is software based and I believe that Apple will move more in this direction across the board. The less expensive Mac (as well as a less expensive flash iPod) opens the Apple lines to a very large group of people who cannot afford the current offerings. I think that is the factor - opening up lower price points for those that need them to join the Apple world.
Has this guy ever seen an eMac? - How can you discuss this topic with LCD prices when the eMac features a CRT which is what? - 50 bucks?
On the other hand Apple isn't know for "giving" away anything or doing things on the cheap. They have never been interested in keeping pace with PC manufacturers on price. The iPod is no different - you'd be hard pressed to find a more expensive portable HD player out there.
Based on this I'd be shocked if this new computer comes in under $500 - it just wouldn't fit Apple's profile. I'm guessing Apple would consider $599 highly agressive and I can definitely see Steve Jobs trying to push $699 as a major breakthrough price, even though it's not.
Well, I take that back. We all would do a better job with the whole "LCD" and "eMac" business.
Originally posted by Louzer
I have a question. What does it take to work at Merrill Lynch? I mean, it seems like the guys basically saying pretty much what everyone on these boards have been saying. Does that mean he just reads and recaps? Or could any one of us do his job?
Well, I take that back. We all would do a better job with the whole "LCD" and "eMac" business.
That was exactly my thought when I saw that report!!!
TS, AI or macrumors are obviously more reliable regarding what to expect than any of those analysts...
Originally posted by AppleInsider
In a ...
The entire article is a bit repetitive.
Otherwise - a white box in the living room which streams almost every media content to your TV/Stereo is compelling. I'll buy in a split...
Originally posted by Boukman
If financial analysts are picking on this rumour, then Apple will either have to deny it or to release the thing. They won't be able to stay quiet as it might affect their share price...
"Buy on rumor, sell on news" is nearly an axiom on Wall Street, so let it affect their stock price. As of today, it's had hardly an impact at all, so who cares? We'll all know better in a few days.
Steve has fielded "why haven't you released X" questions many times before. All the swirl of rumors guarantees is that he'll have an explanation ready for the keynote or the conference call, and that'll be that.
Consider the number of Windows users that want to switch but want to keep their monitors, or who are put off by the high price tag of either an iMac or eMac, as well as being forced to pay for an additional flat pannel or CRT monitor, respectively.
Personally, if I could run OS X on commodity hardware, I would have done so as soon as last summer.
I think this will mark the beginning of a sea change in the PC industry. All potential "switchers" such as myself will no longer sit in the sidelines, and the floodgates will open.
Mark my words, by this time next year, Apple will have well over 5% of the PC market, and maybe even closer to 10%. Microsoft, gambling their company on locking in users into Windows DRM, will be in big, big trouble.
Originally posted by BuonRotto
I'd just like to say that Merrill Lynch, Piper Jaffray and all these other so-called financial experts are clueless, as clueless as anyone on this board. I don't mean to poo-poo the good projections for Apple completely, just that it bothers me a lot because people expect them to really know something and make informed reports, and honestly they know as much as you do.
Actually, ...
In the not so distant past (about January 2001?) there was a heated discussion about a new power line of Apple products. Well, the introduction of a fabulous new Processor was on the horizon and in everybody's mouth ... the all new G5.
Every Joe and Lynch suggested new superfantastic specs. Well we do know how it winded up. A dull bump of the yesterday processor "G4". The bumming was huge. Teardrops flow.
Well, i have always been a master of stating the obvious.
The obvious, however, is quite often undervalued.
Just about everyone has daydreams about being a Mac specialist.
Easy as Apple pie.
Originally posted by JavaCowboy
The headless Mac has basically clinched the decision for me. Unless the hardware specs are incredibly dissapointing, I WILL be buying it.
What would it take for you to purchase one? Me, it would have to be at least a G5 1.6 GHz+ with memory that is expandable to 2gb. Anything less then this and Apple can forget the business market. Knowing Apple though, they?ll probably throw in the cheapest crap they have lying around, albeit a G4 1.33 MHz or something else anemic.
Originally posted by Relic
What would it take for you to purchase one? Me, it would have to be at least a G5 1.6 GHz+ with memory that is expandable to 2gb. Anything less then this and Apple can forget the business market. Knowing Apple though, they?ll probably throw in the cheapest crap they have lying around, albeit a G4 1.33 MHz or something else anemic.
[grumble mode on/] A G4 1.33 MHz is good enough. Check for yourself. [grumble mode off/]