UBS: Apple’s a hit factory like Pixar, with annuities

“UBS’s Steve Milunovich this morning reiterates a Buy rating on Apple, and a $140 price target, as he relates the findings of a panel of experts he assembled during his firm’s technology conference last week, the question pondered being, ‘Is Apple a hits or annuity business?'” Tiernan Ray reports for Barron’s. “Milunovich’s conclusion is that it’s both.”

The Apple ecosystem results in an annuity-like business that is delivered as hit products. The top priority is customer loyalty — everything Apple does is for customer satisfaction and brand loyalty. Each Apple product generates about $1 per day in revenue. Panelists expect Apple to make a car, the ultimate mobile device — the question is how many? Company threats include dependence on the iPhone and internal turmoil. — UBS analyst Steve Milunovich

Ray reports, “Apple, according to the panelists — Mark Gurman, Senior Editor of 9to5Mac; Adam Lashinsky, Assistant Managing Editor of Fortune Magazine; and Horace Dediu, Fellow at the Clayton Christensen Institute — is that Apple is a hit factory sort of like Disney’s Pixar studio (which was sold to Disney by late Apple founder Steve Jobs).”

Read more in the full article here.

MacDailyNews Take: So true.

[Thanks to MacDailyNews Reader “Arline M.” for the heads up.]


  1. So Apple is supposed to be an entertainment company? A myopic view that feeds into the WallNut Street coke addict demands for killer-new-thrills-every-year. Not realistic or worthy of expectation.

    Meanwhile, back on Earth, after rehab…

  2. Basically this article is another article demonstrating how analysts don’t know what to make of Apple.

    Wall Street likes to put companies into neat categories. Apple used to the the struggling whacky computer people, then they were the one hit wonder that was the iPod people. After that, they became the even bigger one hit wonder, the iPhone people. What Wall Street consistently overlooks is that Apple’s non-iPhone revenue streams are greater than the entire revenue streams of any companies outside of the US top 5 and that means greater than Google or Intel.

    Analysts obsess over iPhone numbers and extrapolate their findings to suggest that Apple’s entire corporate profitability will go one way or the other, but the reality is that the non-iPhone element of Apple’s business is a reliable cash generator that smooths out many of the seasonal peaks and troughs associated with iPhones.

    Analysts can’t get their head around the concept which Dediu proposes, of Apple being a serial disruptor, even though there is plenty of evidence showing that Apple has been exactly that and furthermore there is every reason to expect further disruptions to other industries in the future.

    The comparison with Pixar is an excellent one because in the movie industry it’s difficult to make a hit movie and very rare indeed to make a string of hit movies. Pixar achieved that by putting tremendous resources into the design process of making a movie. They put a lot of effort into writing a compelling story and then working out how to manipulate the viewer’s emotions to make it into a roller coaster. After that they obsess over the story board and somewhere around a couple of years after they started writing, they begin actually shooting it.

    Everybody here will be familiar with Apple’s approach of putting incredible efforts into the design process. Pixar and Apple use very similar approaches and have both enjoyed far more hits than any comparable company could ever have dreamed of.

    UBS’s Steve Milunovich is right when he concludes that Apple is a serial hit factory accompanied with a massive ongoing revenue stream. There aren’t many examples of other companies that have achieved both and therefore most of Wall Street has no idea what to make of Apple. It’s hard to put a company into an existing neat category if no other company operates in a similar manner.

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