Apple’s WWDC 2012: The analysts weigh in (updated)
More than a dozen thumbs up. Two thumbs down. Egg on a couple of faces.
RBC’s Amit Daryanani: Increasing Ecosystem Stickiness. “We attended Apple’s World Wide Developers Conference in San Francisco and came away impressed with the new MacBook Pro Retina Display laptop, MacBook refresh, additional Siri capabilities, and Apple’s new maps application. With 200+ features and functionalities added through iOS 6 and Mountain Lion, the install base should continue to grow and remain loyal to the Apple ecosystem, increasing ‘stickiness’. We believe the refresh was expected and the next set of catalysts to watch for includes iPhone 5 launch in September/October and possible AppleTV launch in early 2013… In our view, the new maps application cuts Google out from iOS and likely increases competition between AAPL and Google as both companies attempt to monetize mobile ads. Finally, we believe the FaceTime over data addition hints at a new LTE enabled iPhone by year-end.”
Topeka’s Brian White: New iOS 6 Does Not Disappoint. “After a major iOS upgrade last year with iOS 5, we felt Apple was up against a tough comparison; however, we were pleasantly surprised by the iOS 6 upgrade that comes with over 200 new features. Expected to ship this fall and in time for the iPhone 5 launch that we expect, iOS 6 included updates such as enhancements around Siri, Siri on the iPad, FaceBook (FB-$27.00: Buy) integration, VIP mail, new Phone features, Passbook and more. The widely anticipated Maps apps was a big hit at the keynote, including new turn-by-turn navigation, real time traffic information and Flyover with 3D views… The next generation MacBook Pro is a work of art.”
Sterne Agee’s Shaw Wu: Getting More Social. “Rather than build its own social network, AAPL is choosing again to further partner, this time with Facebook, Yelp, OpenTable, Baidu, and others, building on its already strong integration with Twitter. We think this is smart, allows AAPL to remain neutral, and ironically give AAPL customers a richer set of choices. In addition, AAPL gets the benefit of leading social networks but not have to worry about the business model and monetization that most are still trying to figure out. At the same time, AAPL is not standing still, strengthening its own photosharing capability with a new Shared Photo Streams feature in iOS and iCloud.”
Goldman Sachs’ Bill Shope: Platform gets more deeply integrated. “Most notably, Apple announced that Siri will now be available on the new iPad, which we believe should add to the momentum we expect for the device as it continues to ramp this quarter. The company also announced that FaceTime will be able to run over a cellular connection and not just over Wi-Fi. We expect this to strengthen Apple’s platform for customers and to further separate Apple from its major competitors in the smartphone and tablet markets. Meanwhile, Apple also introduced a new Apple-developed Maps app, with turn-by-turn navigation. While we had been skeptical of Apple’s need to develop its own maps program, we believe the planned integration with Siri and the company’s increasingly competitive relationship with Google may have been key reasons for the move.”
Merrill Lynch’s Scott Craig: It’s all about the software, with new MacBooks to boot. “We believe that continued SW refinements are critical for Apple, as the company continues to build on differentiating features (e.g. improved Siri functionalities and support, feature upgrades for iCloud, etc.) and narrowing/closing the competitive gap in some functionalities (e.g. maps, turn-by-turn navigation). After recent years of aggressive expansion in China, Apple remains focused on China, which was evident in the new China-centric OS features like improved input method, partnerships (Baidu, Youku, Tudou, Sina Weibo, Siri support). The new MBP with retina display is certainly ahead of competing products, but given its price point ($2,199+), we expect the product to remain niche in the near term. Note that MacBooks with price tags of $2,000+ were only 14% of MacBooks in C2011 (per IDC).”
J.P. Morgan’s Mark Moskowitz: Passbook and Maps Highlight Apple’s Increasing Role in the Digital Life. “We think that Apple’s new offerings to kick-off WWDC 2012 are a net positive for the model and stock. In our view, the hardware and software advancements stand to sustain Apple’s increasing role in the end user’s digital life. While the MacBook refresh was in line with the blogosphere’s expectations, we believe that the new specs do not cede ground to the Ultrabook crowd. Overall, we think the biggest incremental highlights from WWDC were Passbook, Maps, and FaceTime over cellular. These software-driven services are a strong set up for the iPhone 5 launch… In our view, the two major iOS 6 advancements are Passbook and Maps. We think that these software-driven services stand to augment the end user’s experience and underscore Apple’s increasing impact on the digital life. In our view, Passbook is the precursor to what we have referred to previously as “iPay” for mobile payments. Plus, we think that FaceTime over cellular and its integration across the iPhone, iPad, and Mac is a positive.
Piper Jaffray’s Gene Munster: Strengthened Device And Web Integration Widens Gap Between iOS And Android. “We believe the biggest takeaway is that Apple is strengthening not only the interaction within its own ecosystem, but also creating a consortium of powerful web partners to offer an experience that largely falls outside of Google’s walls. We believe this focus on integrating important web partners continues to meaningfully differentiate iOS from Android. We believe Google is unlikely to ever engage in the same type of partnership as Apple and Facebook, making the iPhone the de-facto ‘Facebook phone’… Apple’s expansion of Siri is a more direct shot to Google that we had expected last week as detailed in our discussion of Google Maps. Siri content has expanded to include sports results, OpenTable reservations, and movie times. We believe Apple will continue to add content partners for Siri to marginalize Google’s presence on the iPhone.
ISI’s Brian Marshall: Notebook refreshes should maintain momentum. “While Steve Jobs’ past performances are impossible to duplicate, we believe presentations by Tim Cook along with senior executives (e.g., SVP of Worldwide Marketing Phil Schiller, SVP of iOS Software Scott Forstall, etc.) did a solid job keeping the AAPL faithful satisfied. While some may have been mildly disappointed that a new Apple TV OS was not introduced, we believe AAPL wanted to focus attention on the Mac platform which is positioned to continue taking share, in our view… AAPL announced refreshes to both the MacBook Air (MBA) and MacBook Pro (MBP) with faster processors, better graphics, USB 3.0 ports, etc. and a new OS (Mountain Lion) available in July. The highlight however was the next-generation, flagship MacBook Pro (new MBP) which features a 15.4″, high-res 2,880×1,800 Retina display and the power of a MBP (e.g, up to 2.7Ghz processor, 16GB RAM, discrete graphics, etc.) with the utility of a MBA (e.g., 0.71″ thin, up to 768GB SSD, etc.) priced at $2,199 in the base configuration (e.g., 2.3Ghz processor, 8GB RAM, GT 650M 1GB graphics, 256GB SSD).”
Morgan Stanley’s Katy Huberty: Apple now has 400M App Store accounts with credit cards, which is up 78% Y/Y. This is the store with the most accounts on the Internet today and it is an underappreciated asset in our view. For comparison, Amazon had 173M+ accounts as of C1Q12…. A focus on China is key to long-term growth. We currently model China contributing 33% of incremental revenue in CY13 driven by expanded distribution of the iPhone. Apple announced new integration with Baidu, Sina, Youku and Tudou as well as improved Chinese text input, a new dictionary, eight new fonts, and both Mandarin and Cantonese language integration with Siri, which all reflect the significant investments Apple is making to target this large and growing market.
Deutsche Bank’s Chris Whitmore: Many enhancements but no big surprises at WWDC. “The announcements were in-line with expectation and our model is unchanged. We expect the software / Siri enhancements and new hardware to attract users and developers to the iOS platform- extending AAPL’s lead in mobile OS (365M iOS install base) while driving greater cross-platform fertilization… It appears Apple is driving increased convergence between its mobile and computing OS’s through cross-platform applications (Game Center), iCloud (contacts, document, etc sharing) and messaging (iOS6 unifies phone number & Apple ID so users can send/receive messages across their Macs, iPad and iPhones). This cross platform convergence should increase the stickiness of the iOS (iPhone, iPad and Apple TV) and Mac platforms while making the entire Apple ecosystem increasingly attractive to App developers and users alike.”
Credit Suisse’s Kulbinder Garcha: Innovating in Compute: “We believe that at yesterday’s WWDC, Apple again demonstrated that its durable competitive advantage lies in software and services, giving it a material lead in the compute market. Within this, Apple’s strong developer ecosystem allows the company to sustain momentum. We believe this will allow for simultaneous share gains across key product lines (iPhone, iPad and Mac) while maintaining premium pricing… We believe this further evolves its competitive advantage in mobile operating systems when compared with Android or Windows. The increasing levels of functionality available to developers should continue to make iOS the platform of choice for the critical developer community.”
Wedbush’s Scott Sutherland: We Remain Positive Following WWDC Keynote. “The pièce de résistance was the next-generation MacBook Pro retailing at $2,199 (256GB flash storage, 8GB RAM). The notebook has a 15.4-inch Retina display, 0.17 inch thick, 4.46 lbs, 2880 x 1880 (220 ppi) making it the highest resolution notebook display. The device has a backlit keyboard and a multi-touch trackpad. Several applications are being updated to take advantage of the display including Adobe Photoshop, Autodesk AutoCAD, and Final Cut Pro… Mountain Lion has >200 new features. These include (1) tighter integration with iCloud (new Documents in the Cloud feature), (2) Notification center, (3) Dictation, (4) Sharing (from within apps), (5) New Safari (faster page loading), (6) Power Nap (sync while it sleeps), (7) AirPlay Mirroring (mirror content upto 1080P), and (8) Game Center (supports iOS to Mac gaming). Also, the company announced new features specifically tailored for China. We view AirPlay as a precursor to a more full-fledged iTV offering.”
Jefferies Peter Misek: Hardware and Software Refresh; Lots to Get Excited About. “Tim Cook delivered a solid performance aided by a strong cast, in our view. We believe there are plenty of new products and updates for both developers and consumers to get excited about… We believe there was too much content for a TV to be announced. We now see a TV being unveiled at its own event likely within the next 3 to 6 months. We believe the launch of the device is still a 2H 2012 event.”
Needham’s Charlie Wolf: It’s an Apple World; and we’re all just living in it. “The dominant theme of Apple’s 2012 Worldwide Developers Conference was a continuation of the seamless build out of Apple’s ecosystem managed through the company’s iCloud service… The one “disappointment” in the keynote is that, contrary to the predictions of many pundits, Apple did not specifically focus on the company’s rumored Apple TV service. However, many of the components of such a service were highlighted through the company’s Airplay technology.”
Barclay’s Ben Reitzes: Software the Focus of WWDC, Hardware Launches not quite as Broad as Expected. “We believe many of the software innovations were ahead of expectations, but we were surprised not to see Apple introduce the ability to write apps for Apple TV. The hardware announcements were impressive but excluded a lower priced MacBook Air Price Performance for education. Also, no new iMacs were released and only the new Macbook Pro received a retina display. As a result, investors likely expected more. Nevertheless, we expect another major event in early September to release the next iPhone and several other key hardware products.”
JMP’s Alex Gauna: No Surprises as Apple Updates Macs, OS X, iOS, Siri, and Maps; No New Apple TV. “Harmonized messaging, tighter support of Facebook, and the move to its own Mapping application came through as widely forecast… The moves should allow Apple to continue making steady gains to its user ranks which number over 66 million for Macs, over 125 million for iCloud users, and over 140 million for iMessage, but we will have to wait until the next iPhone arrives in the fall to see if Apple can staunch the faster growth rate of Android. The stock reversed the modest gains it had seen for most of the day as the event concluded, closing down -1.6% (S&P 500 – 1.3%) due to the lack of any noteworthy surprises and likely on a modest amount of disappointment that there were no Apple TV advances. The stock is currently trading at ~10x our CY13 non-GAAP EPS estimate of $55.50, which equates to a significant discount to its current growth rate but a substantial premium to most mobile- and computing-centric hardware peers.”
Global Equities’ Trip Chowdhry: Nice refresh, but no breakthroughs. “Common sensical integration of Facebook and Twitter. Is this the best we can get from Apple, post Steve Jobs??”