Apple’s Juice - What's Driving Their Strategic Value by Richard D. Smith, CEO, SMITH-TRG

Copyright 2011 SMITH-TRG, All rights reserved.

Apple’s Juice
Why – Apple will hit $450 a share in 2011
A SMITH-TRG Perspective & Prediction: February 1, 2011

SMITH-TRG


Our View
Apple’s Mac, iPhone, iPad, and Apps success
in the global consumer space will continue to
drive growth in the often overlooked/under
reported Corporate marketplace.

Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG


Plus . . .
Apple is one of the few companies in the
world that will be able to offer consumers
a broad digital media ecosystem with
iTunes, iBooks, and the App Store.



And . . .
Apple can leverage its Apps library into
the TV market then Apps will ultimately
proliferate the TV world



Why $450
begins in 2010



2010, was a

GOOD
YEAR


iPad introduced - created
new product Category.


Google Helped

Sell iPhones
Apple's average iPhone prices
have gone up since Android
There has been some price erosion among the
other top vendors (orange line in chart), it is
surprisingly small.



Apple Centric age
arrived a.k.a. the paradigm shift
in June 2010



the Paradigm Shift – led/driven by Apple’s Steve
Jobs as change agent with iPhone (Smartphones)
and iPad (tablets) as catalysts for digital-media
& iPopped enterprise transformation.
TM


Computer Market

Share to 10.4%
in 3rd quarter up
from 9.3% year ago
Average Apple computer
price about $1,360
Source: Gartner & NPD



October
2010
$51 Billion in Cash
Apple Shares @ $325+/-


Apple Takes Market Cap Lead

reaches $288.3 billion



Jobs
Announces
iAd



iAd
Producer
first web development tool
for Apple’s mobile iAd unit



Apple’s strategy to pump
ad money to app developers that are
increasingly eyeing Google's Android
platform.



12 - 25 - 10
Apple Qtr. Ended Results . . .



Record Quarter
Revenues $26.74 billion
Net Profit $6 billion



International Sales
62% of Qtrly. Revenues



Mac Sales Qtr.
Sold 4.13 million
Up 23% over Qtr. Year ago



iPhones Qtr.
Sold 16.24 million
Up 86% over Qtr. Year ago



iPads Qtr.
Sold 7.33 million


SMITH-
TRG

15 Million
iPads Sold in 2010



Corporate Sales $7.5 billion
Mac sales 5.2% of the market
up from 3.3% in 2009
$11.3 billion forecasted for 2011



iPods Qtr.
Sold 19.45 million



iTV’s Qtr.
Sold 725 thousand


Jobs' "hobby― Gains

Traction, Apple sells 1 million TV
set-top units 2010
 400,000 TV episodes rented
or purchased daily
 150,000 movies rented
or purchased daily
(only 250,000 set top boxes sold as of Oct. 18.)



317
Retail Stores
World-wide,
233 in U.S.
44 New in 2010
28 were International



Per Store Revenue - $34.1 million
Up from $26.2 million 2009 average



Apple Stock ROI
$100 invested in 2005
$529 market value in 2010

SMITH-TRG



Why . . . $450



What - others say . . .



Ticonderoga Securities
Apple share price target is $550 (making
Apple’s value @ $506.6 billion) the highest
among analysts surveyed by Bloomberg and
61% more than yesterday’s closing price.
– January 18th, the day Apple reported quarterly financials.



Piper Jaffray Co.’s
Apple target price of $483 is 14 percent
less than Ticonderoga’s $550 the
highest projection.



Trefis, a forecaster . . .
The value of a company is the sum of
the values of it’s divisions, plus cash,
minus debt.



Trefis
Target Price
$420



Trefis estimates . . .
Apple’s iPhone business constitutes around
53% of the $420 Trefis price for Apple’s stock,
or 27% above current market.



Others - Summary
Ticonderoga Securities @ $550
Piper Jaffrey & Co. @ $483
Trefis Trends @ $420
Note: None say their target will be achieved in 2011



What – we say . . .



$450 Enabled by
three strategic growth areas . . .



#1 International
focus on market ‘Foot-Print’ penetration/expansion
#2 Domestic U.S.
consumer & corporate growth – across product lines
#3 iTV & iAds
emerging market development/expansion



Why & How . . .


Business Model Success Indicators

Total Sales Net Income
Up $45.9 B Up $12.32 B
$65.2 billion in 2010 $14.3 billion in 2010
$19.3 billion in 2006 $1.98 billion in 2006
(Fiscal 4th Qtr. ends Sept.)


Primary Growth Opportunity Indicators

iPhone Prod/Svc iPad Prod/Svc
Sales Sales
$25.2 billion in 2010 $4.96 billion 2010
Post launch
Up 93% over 2009 first nine months
Selling in 26 Countries



Apple’s iPhone Business Value
today exceeds the combined market caps of
mobile competitors RIM, Nokia and Motorola



International. . .


2010 - 5 billion

mobile phones in use
global population 6.8 billion
implying 70+% worldwide
mobile penetration.
Penetration among unique individuals is
lower due to individuals with multiple
phones.
Source: Wireless Intelligence



2011, expect 1.6 billion mobile phones to be
sold world-wide - 4 phones sold for every PC

Apple benefits from existing international
presence and pent-up demand for high-value
brand image of Mac’s, iPhone & iPad



Case for Apple –
Apple introduced the iPhone 4 in China during
the fall of 2010, just three months after the
iPhone 4’s U.S. release in June 2010.
By contrast, Chinese consumers waited nearly two years for iPhone 3G.



Having ceded much of the high end of the
smartphone market to Apple Inc., slower-
footed rivals such as Research In Motion Ltd.,
Nokia Corp. and Motorola Inc. are jostling for
relevancy and what remains up for grabs:
cheaper cellphones providing Internet access.



Plus, the 2010 holiday season price wars in
midrange smartphones forced wireless carriers
and global handset makers to focus more on
affordable lower margin smartphones — which
skimp on high-value features such as screen
resolution and camera quality.



domestic U.S. . .



Verizon iPhone
(CDMA)
available February 2011 and
expected to drive strong U.S.
demand.



Corporate Business
$11.3 billion forecasted for 2011
$7.5 billion actual Sales in 2010



FORTUNE 50 Co’s
38% have mobile-optimized websites
& 58% offer a mobile application.



Global 1000 Co’s
Most likely to develop --
Apps for iPhone (58%)
Android (32%) and
Blackberry (26%)



iTV & iAds. . .



Longer Term . . .
Apple has larger ambitions in
the TV market, the new $99
version of Apple TV is just the
beginning of something much larger.

Full-screen "Tron" iAd

will run in iPad apps
such as TV Guide
Includes 10 minutes of video, images
from the movie, theater locator with
show times with preview of movie
soundtrack with option to purchase on
iTunes without leaving the ad.



A preview of iAd’s coming in 2011.
The format, designed to maximize
the ad potential of Apple's tablet
computer, will be launched widely
in early 2011 when other ads start
flowing onto the platform.



iProducer . . .
lets agencies and developers build
iAds themselves meaning faster
development cycles, more ads and
dollars follow onto the platform faster


digital agency types take in a sigh
of relief now that they can develop
mobile ads for iPhones -- soon
for iPads -- on their own without
Apple's help.



Motive & Opportunity
Global LCD TV market estimated at
nearly $100 billion in 2010 revenue,
U.S. TV advertising market estimated at
$70 billion


Where we stand . . .



Baseline January 7th
$341.78 a Share +5.66 (1.68%)
Range $337.17 - $342.07
52 week $190.25 - $342.07
Market cap - $313.52B



February 1st
Apple $345.02 a Share
Market Cap $317.8 billion



SMITH-TRG
business value creators



iPopped
TM

Digital-Media

The global digital-media consulting and
venture development arm of SMITH-TRG



More Value.
Same Source.
Across media. Across technologies. Across continents.
Business performance improvement & value creation consulting.



questions or comments. . .
RDSmith@SMITH-TRG.com


Apple’s Juice - What's Driving Their Strategic Value by Richard D. Smith, CEO, SMITH-TRG

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