In order to support their conviction that Apple Inc. (NASDAQ:AAPL) has loyal customers and the cost of switching from the iOS to Android operating system is high and difficult, analysts at Goldman Sachs Equity Research actually switched from an iPhone to the Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) Galaxy S4 smartphone.
In addition, the analysts explained that they initiated the move to provide a better understanding to their conviction that switching costs offer a baseline level of support for Apple Inc. (NASDAQ:AAPL)'s profits, cash flow, and valuation.
Based on their experiment, Goldman Sach’s analyst Billi Shoppe together with his fellow analysts found that the cost of switching from an iPhone to Samsung Galaxy S4 is substantial, and it is impossible for them to transfer all their content.
Shoppe said the switching cost from an iPhone to a Samsung Galaxy S4 is $79.85, which includes $24.99 for a subscription for iTunes Match, $4.99 for the paid version of a music management app, and $49.87 for paid replica apps. The worth of the contents they cannot transfer is not included in the switch.
iPhone Apps, Movies, TV Don't Transfer
He said, “While that is substantial in its own right, our inability to transfer 13 percent of our apps or any of our purchased iTunes movies and TV shows was not included in our calculations.” Shoppe suggested that the process of moving from iOS to Android is not only expensive, but also difficult, considering the significant amount of time they spent to complete the switch.
Android Loses iCloud Syncing
According to the analysts, a dual platform support is necessary for all switchers in order for them to be able to continue using their TV, movie, and music collections, which remained DRM protected on iTunes. In addition, they said that Apple Inc. (NASDAQAAPL)'s iCloud is not easily replicated even if a user uses two platforms. Shoppe said, “An Android smartphone cannot tie in to iCloud and the seamless syncing capability is lost.”
Shoppe emphasized, “We believe Apple Inc. (NASDAQ:AAPL)'s installed base loyalty clearly differentiates it from traditional IT hardware companies, though the company’s ability to attract new customers with new products remains the core of the long term story.”
Goldman Sachs Group Inc (NYSE:GS) analysts maintained their buy rating for shares of Apple Inc. (NASDAQ:AAPL) with a 12-month price target of $500 per share. According to the analysts, their target price is based on a P/E multiple of 13x on their CY2013 EPS estimate of $37.93.
Shares of Apple Inc. (NASDAQ:AAPL) are trading around $411.95 per share, down by more than 1 percent on Friday afternoon in New York.