Apple Inc. In Transition; Wells Fargo Rates As Market Perform

Apple Inc. In Transition; Wells Fargo Rates As Market Perform
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Earlier today, April 11th, Wells Fargo published an investors note on Apple Inc. (NASDAQ:AAPL). In the note, Wells Fargo analyst Maynard Um suggested that Apple Inc. (NASDAQ:AAPL) is in a transitional phase right now, and that the tech giant may not offer much appreciation over the short term. He goes to great pains to explain he is not casting a pall over Apple’s prospects; rather, he is making a case for long-term growth at the expense of short term profits.

Apple picking up steam in “third phase”

Um argues that the technology sector has already passed through two developmental phases and is just beginning a third phase. He calls the initial phase the ecosystem creation phase (2007-2010). The second just finishing up phase is the focus on establishing market share phase (2010-2013).

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The third phase is not formally named yet, but involves companies in the process of developing the “Internet of things.” In this nascent third phase, companies are focusing on extending their ecosystem to include physical devices, from smartphones to smarthouses to smartwatches.

Um forecasts that Apple will enter the wearable and connected device markets over the next year or two. He says a device such as an “iWatch” would let Apple learn more about its users so as to keep them interested in the company’s complete ecosystem of devices. Current platforms like Android Wear and other wearables are already designed to connect users into an ecosystem of devices by developing new and meaningful ways to improve users’ lives.

Phase four on the horizon

Phase four will be when tech firms start to enhance their ecosystems by leveraging the reams of “Big Data” they have collected from users. Um argues that machine learning or artificial intelligence is going to play an increasingly important role as phase four plays out. “By combining data points such as age, gender, location, calendar information, behavioral history, or even data mined from e-mails, like travel itineraries (and much more), Apple could effectively become a more proactive personal assistant,” Um said. “Hence, the ultimate goal of this phase will be likely to offer a value-add service to not only simplify, but also become a more proactive personal assistant.”

Um says that most companies won’t truly focus on monetization until phase four is completed. Phase five — monetization — won’t really become the focus until technology products are truly mature and offer a wide range of highly individualized services.

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