FW: AAPL US : Apple Inc. - iCar? iCan but iWon’t - BUY - United States
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Kuppam, Sudheer K
Feb 18, 2015, 11:22:35 PM2/18/15
to dhokebaz_gang, iithangover, ganavaram, Narendra K Gogula, Ashish Kothari, Anand Ramanathan, Karthik Krishnan, Venkat Krishnamurthy
Fyi
Sudheer
Managing Director, Asia Pacific
Vice President, Intel Corporation
m: +1 408 332 4036 / +91 990 145 5913
Admin.Asst.: Angel Mary
angel....@intel.com
m: +91 990 201 6849
________________________________
From: BofAML-Wamsi Mohan
Sent: Thursday, February 19, 2015 11:46:00 AM
To: Kuppam, Sudheer K
Subject: AAPL US : Apple Inc. - iCar? iCan but iWon’t - BUY - United States
BofA Merrill Lynch Global Research
A Company Update Report from Wamsi Mohan
Wednesday, 18 February 2015
Apple Inc. - BUY - PO US$140.00 (current price US$128.72)
iCar? iCan but iWon’t<http://research1.ml.com/C/?q=194Rw7LjcydCYNeD00HeWw__&e=sudheer.k.kuppam%40intel.com&h=jt!D3Q>
[Summary]
* Recent media reports suggest Apple has hired a team to look into building a car. However, we think this as highly unlikely
* In contrast to building a car, Apple could be building a broader platform as cars become more connected
* We point to several reasons for our view, and highlight our prior note on alternative end-markets where Apple could grow
Media speculation around Apple building a car
Recent media reports suggest that Apple has assembled a team to look into building a car. We view this as highly unlikely for several reasons (1) There is no clear technology adjacency to existing products, (2) the margins and returns are significantly lower than existing products, (3) Apple largely operates an outsourced manufacturing model that does not exist for automobiles, (4) there are many other end markets that Apple can tap for growth (See our note: Where is the next $100bn in revenue going to come from?<http://research1.ml.com/C?q=xSbxM37X!vD51Bk5N1FirQ>).
Why would Apple want a team to look at the auto market?
In contrast to building a car Apple could be interested in building a broader platform as cars become more connected. Apple could develop (1) an operating system for the car that connects all the electronics/infotainment subsystem and sensors, and provides tightly integrated software to existing auto OEMs, or (2) a system to support telematics that can be used for fleet management among other possibilities.
Where can returns be better? Almost anywhere else
Fig 1 shows the operating margins sorted by the top 50 S&P 500 companies and Fig 2 shows the bottom 50 by operating margins. It is noteworthy that both the auto manufacturers have margin structures close to the bottom of the S&P 500. Even if Apple manages to create a premium market with significantly higher margins, we view the returns as much lower than alternatives.
Not a question of resources but one of strategy
In our opinion, Apple has the resources to enter any new end market it chooses. The more pertinent question is can Apple create the best in class products that it consistently does, and create a new large market segment that is differentiated. We do not see that potential in building a car.
[pdf icon] <http://research1.ml.com/C/?q=194Rw7LjcydCYNeD00HeWw__&e=sudheer.k.kuppam%40intel.com&h=jt!D3Q> Intended for Sudheer Kuppam
Click for full report<http://research1.ml.com/C/?q=194Rw7LjcydCYNeD00HeWw__&e=sudheer.k.kuppam%40intel.com&h=jt!D3Q>
To reply to Wamsi Mohan directly, click here<mailto:wamsi...@baml.com> or call +1 646 855 3854
________________________________
* Read the research report for complete information including important disclosures and analyst certification(s).
The research report and the link to such report are for the use of Bank of America Merrill Lynch customers only or Merrill Lynch Global Wealth Management customers only and all copying, redistribution, retransmission, publication, and any other dissemination or use of the contents thereof are prohibited. Reports can be saved to your local drive in .PDF format. There may be more recent information available. Please visit one of the electronic venues that carry BofA Merrill Lynch Global Research reports or contact your Bank of America Merrill Lynch representative or Merrill Lynch Global Wealth Management representative for further information. "Bank of America Merrill Lynch" is the marketing name for the global banking and global markets businesses of Bank of America Corporation.
________________________________
Stop or modify<mailto:ML_Re...@ml.com?subject=PID#11485159> the delivery of Research via Emails. Alternatively, contact Research Operations:
The Americas: +1 888 734 1391 or +1 646 556 2910
Asia Pacific (ex-Japan) & Australasia: +800 7724 6510 (Press “3”)
Europe, Middle East, Africa: +44 20 7996 4444
Japan: +81 3 6225-8900
Publication: 1119739-11485159.pdf
Recipient: Sudheer Kuppam
http://research1.ml.com/C/?q=194Rw7LjcydCYNeD00HeWw__&e=sudheer.k.kuppam%40intel.com&h=jt!D3Q
Sudheer
Managing Director, Asia Pacific
Vice President, Intel Corporation
m: +1 408 332 4036 / +91 990 145 5913
Admin.Asst.: Angel Mary
angel....@intel.com
m: +91 990 201 6849
________________________________
From: BofAML-Wamsi Mohan
Sent: Thursday, February 19, 2015 11:46:00 AM
To: Kuppam, Sudheer K
Subject: AAPL US : Apple Inc. - iCar? iCan but iWon’t - BUY - United States
BofA Merrill Lynch Global Research
A Company Update Report from Wamsi Mohan
Wednesday, 18 February 2015
Apple Inc. - BUY - PO US$140.00 (current price US$128.72)
iCar? iCan but iWon’t<http://research1.ml.com/C/?q=194Rw7LjcydCYNeD00HeWw__&e=sudheer.k.kuppam%40intel.com&h=jt!D3Q>
[Summary]
* Recent media reports suggest Apple has hired a team to look into building a car. However, we think this as highly unlikely
* In contrast to building a car, Apple could be building a broader platform as cars become more connected
* We point to several reasons for our view, and highlight our prior note on alternative end-markets where Apple could grow
Media speculation around Apple building a car
Recent media reports suggest that Apple has assembled a team to look into building a car. We view this as highly unlikely for several reasons (1) There is no clear technology adjacency to existing products, (2) the margins and returns are significantly lower than existing products, (3) Apple largely operates an outsourced manufacturing model that does not exist for automobiles, (4) there are many other end markets that Apple can tap for growth (See our note: Where is the next $100bn in revenue going to come from?<http://research1.ml.com/C?q=xSbxM37X!vD51Bk5N1FirQ>).
Why would Apple want a team to look at the auto market?
In contrast to building a car Apple could be interested in building a broader platform as cars become more connected. Apple could develop (1) an operating system for the car that connects all the electronics/infotainment subsystem and sensors, and provides tightly integrated software to existing auto OEMs, or (2) a system to support telematics that can be used for fleet management among other possibilities.
Where can returns be better? Almost anywhere else
Fig 1 shows the operating margins sorted by the top 50 S&P 500 companies and Fig 2 shows the bottom 50 by operating margins. It is noteworthy that both the auto manufacturers have margin structures close to the bottom of the S&P 500. Even if Apple manages to create a premium market with significantly higher margins, we view the returns as much lower than alternatives.
Not a question of resources but one of strategy
In our opinion, Apple has the resources to enter any new end market it chooses. The more pertinent question is can Apple create the best in class products that it consistently does, and create a new large market segment that is differentiated. We do not see that potential in building a car.
[pdf icon] <http://research1.ml.com/C/?q=194Rw7LjcydCYNeD00HeWw__&e=sudheer.k.kuppam%40intel.com&h=jt!D3Q> Intended for Sudheer Kuppam
Click for full report<http://research1.ml.com/C/?q=194Rw7LjcydCYNeD00HeWw__&e=sudheer.k.kuppam%40intel.com&h=jt!D3Q>
To reply to Wamsi Mohan directly, click here<mailto:wamsi...@baml.com> or call +1 646 855 3854
________________________________
* Read the research report for complete information including important disclosures and analyst certification(s).
The research report and the link to such report are for the use of Bank of America Merrill Lynch customers only or Merrill Lynch Global Wealth Management customers only and all copying, redistribution, retransmission, publication, and any other dissemination or use of the contents thereof are prohibited. Reports can be saved to your local drive in .PDF format. There may be more recent information available. Please visit one of the electronic venues that carry BofA Merrill Lynch Global Research reports or contact your Bank of America Merrill Lynch representative or Merrill Lynch Global Wealth Management representative for further information. "Bank of America Merrill Lynch" is the marketing name for the global banking and global markets businesses of Bank of America Corporation.
________________________________
Stop or modify<mailto:ML_Re...@ml.com?subject=PID#11485159> the delivery of Research via Emails. Alternatively, contact Research Operations:
The Americas: +1 888 734 1391 or +1 646 556 2910
Asia Pacific (ex-Japan) & Australasia: +800 7724 6510 (Press “3”)
Europe, Middle East, Africa: +44 20 7996 4444
Japan: +81 3 6225-8900
Publication: 1119739-11485159.pdf
Recipient: Sudheer Kuppam
http://research1.ml.com/C/?q=194Rw7LjcydCYNeD00HeWw__&e=sudheer.k.kuppam%40intel.com&h=jt!D3Q
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