New iPhone 'Evolutionary', Not 'Revolutionary' - RBC

Apple Inc's (AAPL) upcoming launch of iPhone 3.0 OS and iPhone Pro will fill in the "gaps" and help keep the competition at bay, but the lack of an entry level iPhone, could cut into Apple's market share, says RBC Capital analyst Mike Abramsky.

Mr. Abramsky said in a note to clients:

"Positively, the new features addresses iPhone's major shortcomings vs. competitive platforms such as BlackBerry, Android and Windows Mobile, and may enable developers to create more innovative apps, however, in our view, the new features are evolutionary vs. revolutionary, sustaining momentum and developer interest vs. competitive platforms."

The analyst said Apple appears unlikely to launch an entry level iPhone, leaving the company vulnerable to share gains from lower-priced competitive alternatives.

Of course, having no entry level iPhone may go a long way to helping protect margins, which Mr. Abramsky sees coming under serious pressure from the growing competition in the premium Smartphone space.

Mr. Abramsky reiterated his "underperform" and $70 price target, noting that falling margins on greater competition could risk Apple's premium valuation to the NASDAQ, and PC/wireless peers.

He wrote:

"Our investment thesis would change if we saw an upturn in forward demand indicators, new products or innovations that would offer another growth cycle, resolution of near-term uncertainty over Apple's leadership."

Comments

[Murphy Mac:]

"Our investment thesis would change if we saw an upturn in forward demand indicators..."

Meaning, the stock will go up instead of down in the event that people buy more Apple products. Thanks Mike. Aren't you a useful tool?

How many quarters did the analysts predict that the iPod market was super-saturated - only to have yet another record breaking quarter? How many times did the analysts explain how they got that so wrong?

Doublespeak, smoke, mirrors - and you too can be an analyst.

Mar 30 02:23 PM

[FreeRange:]

This guy is absolutely clueless, and doesn't really understand Apple, its products or its markets. What a quack. Most laughable of all - his price target of $70 a share.

Mar 30 02:33 PM

[typopolice:]

they're like weathermen, no ever really holds them accountable for their calls, so they just write a bunch of BS day after day and then proclaim victory when they finally get one right..

speaking of margin pressure, how's his great call on RIMM going with all their BOGO blackberry promotions?

Mar 30 02:41 PM

[Timeline St...:]

Thanks, Mike. I DOOT that you will be wrong; you are just a-BOOT always right, eh.

Oh, and I can't wait to see what kind of rating you give to RIM, knowing that your parent company, Royal Bank of Canada, does all kinds of business for them.

Mar 30 02:54 PM

[jmmx:]

hahahahaha!!

Mar 30 03:01 PM

[uncleralph:]

Seeing that Mr. Abramsky has yet to be right yet concerning his analysis of AAPL I would take this yawner with a hefty grain of salt.

What he fails to see is that the iPhone is just gaining traction in the smartphone market and the computer business has nothing but room to grow... Combine that with one of the best run companies and a balance sheet most companies would kill for and I would think twice about shorting the stock back to $70.

Mar 30 03:05 PM

[pingdave:]

What are RBC’s known RIMM conflicts? >

www.rbc.com/vp/

BlackBerry Partners Fund (BBPF) is a $150 million fund focused on applications and services for the BlackBerry and other mobile platforms. The fund is anchored by capital commitments from RIM, RBC and Thomson Reuters along with participation from some of the country’s most successful mobile wireless and software entrepreneurs and corporations. BBPF will consider all stages of development and is co-managed by RBC Venture Partners and JLA Ventures.

RBC Venture Partners has $250 million under management and is investing out of a $150 million early-stage venture fund specializing in technology for the financial services industry and financial services enabled by technology. We consider investment opportunities throughout North America, often syndicating our investments with other high quality financial investors who will actively participate in the growth and development of the company. Typical initial investments range from $4 million to $6 million and we are active board participants.

RBC Venture Partners Advisory Board … and guess who sits on their board? James (Jim) Balsillie co-CEO at Research In Motion (RIM) maker of BlackBerry

Who sits on RIM’s Board? 2007-Present - Barbara Stymiest RBC Group Head, Strategy, Treasury & Corporate Services

********
from this source:
idannyb.wordpress.com/.../

Mar 30 03:09 PM

[.crazylegs..:]

$70 price target? If you subtract out their $30/share in cash, that means you are paying $40 for a business that put up $10/share in free cash flow last year. 4X real earnings? That makes sense I guess in canada.

Mar 30 03:14 PM

[cccp2121:]

If iPhone Pro replaces iPhone 3g would it makes iphone 3g entry level iPhone p. s. entry level iPhone or this guy wants voce only phone. and at 70 it will be trading at 3.6X cash flow with out cash of 28b

Mar 30 03:20 PM

[crozet:]

Why doesn't Abramsky, or people like Savitz who cite Abramsky, disclose the close relationship and conflict of interest with RIM?

Mar 30 03:21 PM

[waf76:]

obvious conflict of interest when RBC is a major stakeholder in RIMM. comical analysis. 70 price target, lol.

Mar 30 03:51 PM

[marv08:]

So, Apple is not building the pointless entry-level/small phone that analysts made up, the equally unannounced "iPhone Pro" is, well, unannounced, too expensive despite its unknown price and, despite unknown features, only evolutionary?

iPhone OS 3.0 brings full external hardware support through BT and dock connector and generic free push support for each and every application developer (means they can implement features that were previously only possible for the likes of MS and RIMM)... Yeah, nothing revolutionary here. The sheer existence of full CoreData support will skyrocket the amount of integrated business applications, while reducing development time by at least one third... Of course, noobs like Abramsky don't know nothing and concentrate on nonsense like MMS and "copy and paste"... (I am on my 11th smartphone, all except the iPhone had c'n'p, and I have not used it even once on any of them, I have not sent a single MMS in my life either).

The capability to marry the iPhone with any hardware (from cars, handheld scanners, medical devices, to home automation systems) is huge. In 12 months from now we will see the iPhone and the iPod touch in places where no mobile or MP3-player has been before.

Mar 30 04:08 PM

[Julian Ivan...:]

"Hey where's Abramsky? Anyone seen him? The WSJ are on the phone and want a quote from him on whether Steve Jobs has cancer.. oh sh*t that was last year's story, errr hang on.. yeah, I mean they want to know his dead-for-certain-I-Kno... take on the new iPhone. Where is he? Oh there, he is, crawling out of Jim Balsillie's colon after giving him a RIMM job. Hey, Mike...."

Mar 30 04:17 PM

[Anthony B:]

$70/share would leave GAAP forward p/e ratio discounted for the $30 cash/share at 8. Non-GAAP forward discounted p/e ratio at 6.

At that price I'd take out a 4% home equity loan and go all in!

Mar 30 05:26 PM

[want to bel...:]

How these guys call themselves analysts is unbelievable. What do they know anything about the economy and running a successful business. They are pure spin-artist. Trying their best to put + / - spin . Fortunetellers are more accurate than these high paid spinners.

Mar 30 05:42 PM

[User 249971:]

RE: "... New iPhone 'Evolutionary', Not 'Revolutionary'... "

And THAT is what makes Apple the most successful company of all. Years ago, analysts said that American companies developed a product to 90% of it potential, and then the Japanese took the product to 100% from 90% whereby the Japanese took the market from the Americans.

Apple is doing it right. It keeps on improving the product through enhancement in design, software, hardware, and the user experience.

A "revolutionary" phone already exists. It's called the iPhone! Apple will just keep improving all of its dimensions.

An "entry-level:" iPhone is almost an oxymoron. What should Apple do? Leave out wi-fi? install a slower chip? Sell it with a dumbed down operating system?

Just as everybody cannot afford a car, everybody cannot afford an iPhone. Sorry, but that's life.

Mar 30 09:16 PM

[Mike M:]

How is it that anybody pays this idiot for his advice. Nice work if you can get it I guess.

Mar 31 01:20 PM