Apple, Facebook and Samsung, will be the major beneficiaries in the phones or mobile segment while Google and Microsoft will be ‘challenged’ due to the growing dominance of Apple, says a report from Goldman, titled ‘Clash of the titans’.
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Commenting on Apple Inc. (NASDAQ:AAPL), report states, that the company has leveraged its success from iPod, iPhone and iPad, with an expanding list of complements that includes music, movies, TV shows, apps, and iCloud. The users are interested in paying for complements, which has made it a more attractive platform for complement providers and has continued to attract more users. As a result, the report expects, Apple Inc. (NASDAQ:AAPL) market share in the phone has still potential to rise further, and drive the stock higher.
Considering Facebook Inc (NASDAQ:FB) as one of the beneficiaries of the mobile era, report says that the shift to mobile brings better pricing and is margin accretive. The increasing demand for smartphones and tablets will help boost the company’s core ad business as mobile Sponsored Stories in the news feed monetize at 40X the CPM of typical right rail ads while carrying comparable costs in absolute dollar terms. Citing Facebook as an ‘ultimate complement’, report expect outperformance continuing into 2013 as the market starts to fully appreciate the company’s ability to monetize mobile.
The 75 page report from Goldman expect Samsung to maintain its position as the leading Android device maker and support other open platforms, such as Windows 8, given unmatched scale, vertical integration (especially in displays and semiconductors), hardware differentiation, and short design lead times. The Galaxy maker is expected to dominate about 20 percent market share in US and 35 percent in the rest of the world. The report believes that it may capture over 70 percent of smartphone and tablet BoM if it is able to integrate additional functionality such as baseband/connectivity.
The report views Amazon.com, Inc. (NASDAQ:AMZN) as ‘Straddling the Line’. Amazon’s strength lies in the fact that consumers can transact with Amazon on a continuous basis through their internet connected devices. However, company need to find an avenue to remain as dominant in digital media as it has been in physical. In order to accomplish this, company may launch an Amazon branded phone in early 2013. The launch may put pressure on the stock near-term given the potential for margin dilution. “While its ability to become a meaningful platform provider is still very much a question, Amazon is well positioned to benefit as a complement provider”, says report.
Google Inc (NASDAQ:GOOG) confronts a threat to pricing and margins in the shift to mobile. While Android operating system represented more than 70 percent of smartphone shipments in 3Q12, iOS still generates more than 60 percent of mobile internet traffic, and Google pays TAC rates on iOS devices that are north of 75 percent to be the default search provide, says report. The report says that the share of Android smartphones is declining from this year 55 percent to next year 53 percent. Operating margins would possibly decline in the next few years. According to Goldman report the company is striving to locate a way to keep its relevance in the changing compute paradigm.
Share of Microsoft Corporation (NASDAQ:MSFT) in total consumer compute declined from 93 percent in 2000 to 20 percent expected in 2012. Microsoft will have to sell on an average 5 windows phone or 2 windows RT to offset the loss of one traditional PC sale. The report estimates a flat PC market for 2103. The share will be stable and range bound in 2013 and could see high volatility after the result, that whether Microsoft can throw a competition to current computer leader Apple Inc. (NASDAQ:AAPL).
Expressing confidence in Apple, report says “ we see the potential for Apple Inc. (NASDAQ:AAPL) to capture additional growth as existing iOS users move to multiple device ownership and as the company penetrates emerging regions with new devices such as the iPad mini and lower priced iPhones. As a result, we believe Apple’s market share in phones has room to rise much further, and that its dominant tablet market share appears to be more resilient than most expect. We expect these factors to continue to drive the stock higher”.