Analyst Hails Tim Cook’s Ever-Expanding ‘Applesphere’
Apple (NASDAQ:AAPL) CEO Tim Cook, who has officially been running the company since late 2011, has repeatedly been criticized by some industry watchers for supposedly allowing the Cupertino-based company to lose its innovative edge. These critics often contrast Cook’s reserved leadership style with the hands-on approach of legendary Apple co-founder Steve Jobs and point to Cook’s failure to introduce new product categories during his tenure. The last new product category introduced by Apple was the iPad in 2010, under Jobs’s leadership. This common criticism of Cook was expressed by Oracle Investment Research chief market strategist Laurence Balter in a recent profile of Cook published by The New York Times. “Where is the grand design?” asked Balter. “All we hear from Cook is there are some great products coming down the pike.”
UBS analyst Steven Milunovich may have outlined an answer to Cook’s critics in a recently issued research note. Milunovich, who maintains a “Buy” rating and a $115 price target on Apple shares, praised Cook’s long-term plan for the company that will see Apple’s ecosystem expand into every aspect of consumers’ lives. “Cook has called Apple a mega-ecosystem that has grown 10x stronger in the last few years,” wrote Milunovich in a note obtained by Barron’s. “We call it the Applesphere.”
Milunovich pointed to comments that Cook made during the company’s last earnings call in which the Apple CEO outlined the multiple ways that Apple is expanding its ecosystem. “From the pocket to the car, to the workplace, home and gym, we have a very large vision of what iOS can be and we’re incredibly excited about our plans,” said Cook according to an earnings call transcript provided by Seeking Alpha. Some of the new features highlighted by Cook included the Continuity feature in iOS 8 and OS X Yosemite, the Swift programming language, the CarPlay in-vehicle device integration system, the HealthKit health and fitness data platform, the HomeKit home automation feature, and various improvements aimed at the enterprise market, including a recently announced partnership with IBM (NYSE:IBM).
“The interaction among products and services is becoming more real, even as shown by the recent quarter’s poor iPad numbers that were compensated for by strong Mac sales,” wrote Milunovich in a note seen by Barron’s. “Appleites soon will be able work on the Mac in the office; surf the Net on the iPad in the living room; play games or watch TV on Apple TV in the den; use CarPlay for automotive services; interact with iBeacon in stores; transact with a payment capability; rely on iWatch for health and athletic monitoring on a run; and use the iPhone everywhere as the digital hub. The introduction of Continuity at WWDC, allowing handoffs between products, makes the experience more seamless.”
As noted by Milunovich, Apple’s focus on “product experience and customer satisfaction/loyalty” will help it retain customers and allow the company to maintain its “premium brand and margins,” reports Barron’s. For this reason, Apple may be regarded “less as a tech company and more as a luxury consumer franchise or lifestyle brand,” wrote Milunovich. This loyal user base will allow Apple to maintain its high margins despite the overall decline in the average selling prices of mobile devices that is threatening other companies such as Samsung (SSNLF.PK).
Besides hailing Cook’s leadership and vision for the company, Milunovich also advised investors to stick around for Apple’s expected new product releases this fall. Upcoming product releases include the debut of two new larger-screen iPhone models and an iPad product line refresh. Apple is also rumored to be entering a completely new product category this year with the so-called “iWatch” wrist-worn wearable tech product.
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