7 Investing Ideas from Apple Shifting Suppliers

7 Investing Ideas from Apple Shifting Suppliers

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Rumors circulated in early-November that Apple (AAPL) would consider abandoning Intel (INTC) processors for powering its iOS hardware. In a move that would further improve profit margins for Apple, would use in-house processor designs that are based on ARM (ARMH) hardware.

Pros

ARM-based processors in all Mac hardware would have benefits for providing uniform experience between iOS and Mac OS. ARM-based processors are also very power-efficient, something that Intel is perceived to be lacking. Although power efficiency continues to improve with each Intel release, Intel is a very weak player in the mobile processor market.

Cons

A switch by Apple is fraught with operational risks. Backwards compatibility would also be required, so as to not to alienate customers with forced upgrades. If users are forced to upgrade, its customer-base may rebel, hurting sales.

Cons: for These Suppliers

A move to bring development in-house is not a new rumor. Apple has been squeezing margins for its external suppliers for some time, as discussed here. OmniVision (OVTI) did not explicitly say it was under pressure to sell at low margins, but it is clear from its most recent quarter that profits selling image sensors to Apple are small.

Analysis

A move by Apple to stop using Intel is similar to that of Microsoft’s (MSFT) strategy. Microsoft’s Surface RT tablet uses an ARM processor. The costs for RT are high: users get a 32GB device that only has 16GB of free space. RT also uses twice the memory as that of Apple’s iPad.

A recent test was done to compare the performance of 6 OMAP boards using A9-based ARM chips against that of an Intel Atom 330 and Z530 processor (released in 2008 and 2009, respectively). Intel’s system was three-times more efficient, and out-performed the former system by multiple times more than that. Based on this test, it would appear unlikely that Apple will be switching processor manufacturers any time soon.

Business Section: Investing Ideas

Companies mentioned in this article are a great start for investing ideas. In no particular order, they are:

1. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $527.64B, most recent closing price at $560.91.

 

2. Intel Corporation (INTC, Earnings, Analysts, Financials): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap at $97.08B, most recent closing price at $19.51.

 

3. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $224.8B, most recent closing price at $26.71.

 

4. ARM Holdings plc (ARMH, Earnings, Analysts, Financials): Designs microprocessors, physical IP, and related technology and software, as well as sells development tools to enhance the performance of high-volume embedded applications. Market cap at $15.85B, most recent closing price at $34.46.

 

Also mentioned was:

5. OmniVision Technologies Inc. (OVTI, Earnings, Analysts, Financials): Designs, develops, and markets semiconductor image-sensor devices. Market cap at $771.08M, most recent closing price at $14.41.

 

Related suppliers include:

6. Nuance Communications, Inc. (NUAN, Earnings, Analysts, Financials): Provides voice and language solutions for businesses and consumers worldwide. Market cap at $6.19B, most recent closing price at $20.10.

 

7. Synaptics Inc. (SYNA, Earnings, Analysts, Financials): Develops and supplies custom-designed human interface solutions that enable people to interact with various mobile computing, communications, entertainment, and other electronic devices. Market cap at $797.81M, most recent closing price at $24.22.

 

 

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One Response to “7 Investing Ideas from Apple Shifting Suppliers”

  1. mds says:

    Buy CRUS who makes all AAPL's Audio chips!!!!

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