Apple Inc. (NASDAQ:AAPL) and Comcast Corporation (NASDAQ:CMCSA) were reported to have entered into a possible deal over the streaming video service, claimed a report from the Wall Street Journal on March 24. It was reported that Apple would come up with a set-top box (STB) supporting the over-the-top (OTT) services for Comcast customers. Though nothing has been made official yet, the deal could be positive for both Apple and Comcast, according to a report from William Blair on March 24, 2014 by analyst Anil Doradla.
No impact on Apple earnings in short term
So far, Apple Inc. (NASDAQ:AAPL) has struggled to get perfect deals for its online video. The struggle has been heightened since Steve Jobs changed the way in which music is priced and consumed, believe analysts. Over the past five years or since the landmark changes to the pricing, Hollywood and video content providers have turned more aggressive towards the deal making as they do not want to share the power with Apple.
However, a possible deal with Comcast could help Apple Inc. (NASDAQ:AAPL) to garner more users by utilizing Comcast’s relationships with the content providers.
A potential deal with Comcast would not have any significant impact on the earnings per share of Apple, in the short term. However, the deal would help the Cupertino based firm to “increase its stickiness with its ecosystem,” believe analyst. In the long term, the deal may boost the company’s top and bottom line provided the services are received well by the users, and Apple is able to maintain a Comcast-like relationship with other service providers.
Impact of deal on other players
The analyst believes that Apple’s STB, depending on the features present, will “result in varying degrees of competitive threats to incumbents,” and, therefore, would impact the component supply chain. The deal will not only be positive for Apple, but also for MaxLinear, considering its leadership position in higher broadband support. For Broadcom, the deal will be neutral as “any upside from Apple will be offset by share loss with incumbents where it is strong,” according to the analyst.
The expected deal also reflects the changing trend towards the service providers as Comcast “extracts pricing leverage” for offering quality bandwidth services.
William Blair has an Outperform rating on Apple Inc. (NASDAQ:AAPL).