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

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Why and how - Apple shares will hit $450 in 2011 - a SMITH-TRG perspective and prediction.

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

  1. 1. 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
  2. 2. Copyright 2011 SMITH-TRG, All rights reserved. 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
  3. 3. Copyright 2011 SMITH-TRG, All rights reserved. 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. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  4. 4. Copyright 2011 SMITH-TRG, All rights reserved. And . . . Apple can leverage its Apps library into the TV market then Apps will ultimately proliferate the TV world Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  5. 5. Copyright 2011 SMITH-TRG, All rights reserved. Why $450 begins in 2010 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  6. 6. Copyright 2011 SMITH-TRG, All rights reserved. 2010, was a GOOD YEAR Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  7. 7. Copyright 2011 SMITH-TRG, All rights reserved. iPad introduced - created new product Category. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  8. 8. Google HelpedCopyright 2011 SMITH-TRG, All rights reserved. Sell iPhones Apples 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. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  9. 9. Copyright 2011 SMITH-TRG, All rights reserved. Apple Centric age arrived a.k.a. the paradigm shift in June 2010 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  10. 10. Copyright 2011 SMITH-TRG, All rights reserved. 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 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  11. 11. Computer MarketCopyright 2011 SMITH-TRG, All rights reserved. Share to 10.4% in 3rd quarter up from 9.3% year ago Average Apple computer price about $1,360 Source: Gartner & NPD Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  12. 12. Copyright 2011 SMITH-TRG, All rights reserved. October 2010 $51 Billion in Cash Apple Shares @ $325+/- Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  13. 13. Apple Takes Market Cap LeadCopyright 2011 SMITH-TRG, All rights reserved. reaches $288.3 billion Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  14. 14. Copyright 2011 SMITH-TRG, All rights reserved. Jobs Announces iAd Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  15. 15. Copyright 2011 SMITH-TRG, All rights reserved. iAd Producer first web development tool for Apple’s mobile iAd unit Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  16. 16. Copyright 2011 SMITH-TRG, All rights reserved. Apple’s strategy to pump ad money to app developers that are increasingly eyeing Googles Android platform. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  17. 17. Copyright 2011 SMITH-TRG, All rights reserved. 12 - 25 - 10 Apple Qtr. Ended Results . . . Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  18. 18. Copyright 2011 SMITH-TRG, All rights reserved. Record Quarter Revenues $26.74 billion Net Profit $6 billion Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  19. 19. Copyright 2011 SMITH-TRG, All rights reserved. International Sales 62% of Qtrly. Revenues Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  20. 20. Copyright 2011 SMITH-TRG, All rights reserved. Mac Sales Qtr. Sold 4.13 million Up 23% over Qtr. Year ago Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  21. 21. Copyright 2011 SMITH-TRG, All rights reserved. iPhones Qtr. Sold 16.24 million Up 86% over Qtr. Year ago Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  22. 22. Copyright 2011 SMITH-TRG, All rights reserved. iPads Qtr. Sold 7.33 million Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  23. 23. SMITH- TRGCopyright 2011 SMITH-TRG, All rights reserved. 15 Million iPads Sold in 2010 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  24. 24. Copyright 2011 SMITH-TRG, All rights reserved. Corporate Sales $7.5 billion Mac sales 5.2% of the market up from 3.3% in 2009 $11.3 billion forecasted for 2011 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  25. 25. Copyright 2011 SMITH-TRG, All rights reserved. iPods Qtr. Sold 19.45 million Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  26. 26. Copyright 2011 SMITH-TRG, All rights reserved. iTV’s Qtr. Sold 725 thousand Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  27. 27. Jobs "hobby― GainsCopyright 2011 SMITH-TRG, All rights reserved. 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.) Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  28. 28. Copyright 2011 SMITH-TRG, All rights reserved. 317 Retail Stores World-wide, 233 in U.S. 44 New in 2010 28 were International Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  29. 29. Copyright 2011 SMITH-TRG, All rights reserved. Per Store Revenue - $34.1 million Up from $26.2 million 2009 average Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  30. 30. Copyright 2011 SMITH-TRG, All rights reserved. Apple Stock ROI $100 invested in 2005 $529 market value in 2010 SMITH-TRG Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  31. 31. Copyright 2011 SMITH-TRG, All rights reserved. Why . . . $450 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  32. 32. Copyright 2011 SMITH-TRG, All rights reserved. What - others say . . . Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  33. 33. Copyright 2011 SMITH-TRG, All rights reserved. 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. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  34. 34. Copyright 2011 SMITH-TRG, All rights reserved. Piper Jaffray Co.’s Apple target price of $483 is 14 percent less than Ticonderoga’s $550 the highest projection. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  35. 35. Copyright 2011 SMITH-TRG, All rights reserved. Trefis, a forecaster . . . The value of a company is the sum of the values of it’s divisions, plus cash, minus debt. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  36. 36. Copyright 2011 SMITH-TRG, All rights reserved. Trefis Target Price $420 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  37. 37. Copyright 2011 SMITH-TRG, All rights reserved. Trefis estimates . . . Apple’s iPhone business constitutes around 53% of the $420 Trefis price for Apple’s stock, or 27% above current market. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  38. 38. Copyright 2011 SMITH-TRG, All rights reserved. Others - Summary Ticonderoga Securities @ $550 Piper Jaffrey & Co. @ $483 Trefis Trends @ $420 Note: None say their target will be achieved in 2011 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  39. 39. Copyright 2011 SMITH-TRG, All rights reserved. What – we say . . . Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  40. 40. Copyright 2011 SMITH-TRG, All rights reserved. $450 Enabled by three strategic growth areas . . . Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  41. 41. Copyright 2011 SMITH-TRG, All rights reserved. #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 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  42. 42. Copyright 2011 SMITH-TRG, All rights reserved. Why & How . . . Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  43. 43. Business Model Success IndicatorsCopyright 2011 SMITH-TRG, All rights reserved. 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.) Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  44. 44. Primary Growth Opportunity IndicatorsCopyright 2011 SMITH-TRG, All rights reserved. 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 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  45. 45. Copyright 2011 SMITH-TRG, All rights reserved. Apple’s iPhone Business Value today exceeds the combined market caps of mobile competitors RIM, Nokia and Motorola Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  46. 46. Copyright 2011 SMITH-TRG, All rights reserved. International. . . Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  47. 47. 2010 - 5 billionCopyright 2011 SMITH-TRG, All rights reserved. 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 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  48. 48. Copyright 2011 SMITH-TRG, All rights reserved. 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 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  49. 49. Copyright 2011 SMITH-TRG, All rights reserved. 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. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  50. 50. Copyright 2011 SMITH-TRG, All rights reserved. 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. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  51. 51. Copyright 2011 SMITH-TRG, All rights reserved. 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. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  52. 52. Copyright 2011 SMITH-TRG, All rights reserved. domestic U.S. . . Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  53. 53. Copyright 2011 SMITH-TRG, All rights reserved. Verizon iPhone (CDMA) available February 2011 and expected to drive strong U.S. demand. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  54. 54. Copyright 2011 SMITH-TRG, All rights reserved. Corporate Business $11.3 billion forecasted for 2011 $7.5 billion actual Sales in 2010 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  55. 55. Copyright 2011 SMITH-TRG, All rights reserved. FORTUNE 50 Co’s 38% have mobile-optimized websites & 58% offer a mobile application. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  56. 56. Copyright 2011 SMITH-TRG, All rights reserved. Global 1000 Co’s Most likely to develop -- Apps for iPhone (58%) Android (32%) and Blackberry (26%) Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  57. 57. Copyright 2011 SMITH-TRG, All rights reserved. iTV & iAds. . . Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  58. 58. Copyright 2011 SMITH-TRG, All rights reserved. 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.
  59. 59. Full-screen "Tron" iAdCopyright 2011 SMITH-TRG, All rights reserved. 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. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  60. 60. Copyright 2011 SMITH-TRG, All rights reserved. A preview of iAd’s coming in 2011. The format, designed to maximize the ad potential of Apples tablet computer, will be launched widely in early 2011 when other ads start flowing onto the platform. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  61. 61. Copyright 2011 SMITH-TRG, All rights reserved. iProducer . . . lets agencies and developers build iAds themselves meaning faster development cycles, more ads and dollars follow onto the platform faster
  62. 62. Copyright 2011 SMITH-TRG, All rights reserved. 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 Apples help. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  63. 63. Copyright 2011 SMITH-TRG, All rights reserved. Motive & Opportunity Global LCD TV market estimated at nearly $100 billion in 2010 revenue, U.S. TV advertising market estimated at $70 billion
  64. 64. Copyright 2011 SMITH-TRG, All rights reserved. Where we stand . . . Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  65. 65. Copyright 2011 SMITH-TRG, All rights reserved. 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 Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  66. 66. Copyright 2011 SMITH-TRG, All rights reserved. February 1st Apple $345.02 a Share Market Cap $317.8 billion Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  67. 67. Copyright 2011 SMITH-TRG, All rights reserved. SMITH-TRG business value creators Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  68. 68. Copyright 2011 SMITH-TRG, All rights reserved. iPopped TM Digital-Media The global digital-media consulting and venture development arm of SMITH-TRG Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  69. 69. Copyright 2011 SMITH-TRG, All rights reserved. More Value. Same Source. Across media. Across technologies. Across continents. Business performance improvement & value creation consulting. Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG
  70. 70. Copyright 2011 SMITH-TRG, All rights reserved. questions or comments. . . RDSmith@SMITH-TRG.com Vision. Insight. Innovation. Strategy. Solution. Value Creation. SMITH-TRG

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