Analyst Sees Apple's Competitive Advantage as 'More Than Just Software'

by , 1:40 PM EST, January 3rd, 2006

American Technology Research analyst Shaw Wu on Tuesday issued a new research report in which he wrote: "We believe AAPL's competitive advantage is more than just software. It is the company's focus, vision, industrial design, and integrated approach with hardware, software, and service that help create its easy-to-use and best-selling products." He added that CEO Steve Jobs is instrumental in helping the company "maintain its position as an innovator and trend setter, not a follower."

Mr. Wu composed the report in response to Sony senior vice-president Tim Schaaff's desire to create a unified look and feel in the company's software. Mr. Schaaff used to be a vice-president at Apple, where he was in charge of QuickTime development. "While we view this as a potential positive for Sony and potential negative for AAPL," Mr. Wu wrote, "we believe unifying different software code from different hardware platforms from different regions, not to mention different ideas and conflicting agendas, may prove time-consuming and difficult to execute."

In comparison, QuickTime benefits from "its position as one of many industry standards (avi, mpg, mpeg, wmv, divx, etc.) for playing back and recording video," Mr. Wu explained. "We believe AAPL has been quietly de-emphasizing it as a proprietary technology with QuickTime 7 as it leads the industry to new emerging standards MPEG4 and H.264 for HD video."

In addition, Mr. Wu said, "it may be difficult for competitors to replicate AAPL's easy-to-use user interfaces without infringing on its patents. AAPL is known for its strong legal team and its patents not only cover technology but the "look and feel", interfaces, and methods as well."

Mr. Wu reiterated his "Buy" rating on Apple's stock, with a US$77 price target. He also maintained his December quarter forecast of $4.9 billion in revenue, $0.54 in EPS, and 9.7 million iPods sold.

At 1:41 PM EST on Tuesday afternoon, Apple shares were selling for $72.91, up 1.42% for the day.

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