Special Report: Apple’s Shadow Across the Tech Industry (AAPL, AVGO, CRUS, QCOM, ARMH, NUAN, TQNT)
Apple (AAPL) casts a huge shadow across the tech industry, and the company’s suppliers have an opportunity to ride Apple’s considerable coat tails. At the same time, an Apple supplier today is not assured of being an Apple supplier tomorrow, and some companies positions in the Apple food chain are especially threatened.
In NextInning.com’s recent report on Apple and its suppliers, available free to trial subscribers, looks at how investors can leverage Apple’s success beyond just owning shares of Apple directly and provides his opinion as to which Apple suppliers have the strongest and the weakest (riskiest) positions in Apple’s sector-leading designs. Next Inning’s model portfolio has returned 302% since 2002, over six times the return of the S&P 500.
In this report, Next Inning looks at several popular stocks, including Avago Technologies (AVGO), Cirrus Logic (CRUS), Qualcomm (QCOM), ARM Holdings (ARMH), Nuance Communications (NUAN) and Triquint Semiconductor (TQNT).
Here is just a tiny sample of what Editor Paul McWilliams wrote about Apple:
“There are essentially two economies for mobile products (smartphones, tablets, and MP3 players) – Apple and everyone else. I’ve read research reports suggesting that while Apple has “only” about 19% market share in smartphones, it generated roughly 80% of the profits during Q4. That is simply due to the fact that Apple sells the experience of its ecosystem versus just a product.
“In the Q4 reports we saw semiconductor companies that have designs in the iPhone report strong results albeit with slightly pinched gross margins. That is part and parcel of dealing with Apple. However, it’s not necessarily a downside. Companies benefit from being Apple suppliers in that the volume is predictably high and Apple products don’t come and go as quickly as products from Apple’s competitors (longer design cycles and longer production cycles). These benefits can deliver favorable economic scaling as well as higher efficiencies for operating costs like R&D and SG&A. Therefore, I wouldn’t bucket all Apple suppliers in one group and assume it as a negative…”
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