William Blair Positive on Potential Apple/Comcast Deal (AAPL)
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Price: $169.89 +0.51%
Rating Summary:
39 Buy, 25 Hold, 7 Sell
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Today's Overall Ratings:
Up: 4 | Down: 8 | New: 1
Rating Summary:
39 Buy, 25 Hold, 7 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 4 | Down: 8 | New: 1
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While still speculative in nature, William Blair analyst Anil Doradla sees a deal between Apple (NASDAQ: AAPL) and Comcast (NASDAQ: CMCSA), as described in the Wall Street Journal, as a positive for both companies. While Apple has struggled to get the right content deal for online video, "With this deal with Comcast, we believe Apple will be able to reach out to customers by leveraging Comcast relationships with content providers," Doradla said.
The analyst said the most important aspect of a potential deal is the functionality of Apple's set-top-box (STB) - will it be a single STB that supports both existing Comcast broadcast video services and OTT, or will it only focus on OTT streaming?" Commenting on the question he said, "If it is the former, this means that Apple will not only become the one-stop STB provider, but it will also own the customer’s experience via a single user interface that consolidates content coming from the OTT and traditional broadcast. On the other hand, if it is the latter (only OTT), the Apple STB may be an attempt by Comcast to capture incremental revenues from a segment of the subscriber base that no longer subscribes to traditional broadcasts and only has a broadband connection at home."
While the analyst sees no meaningful impact to Apple's earnings near term, a deal increases "stickiness" to Apple's ecosystem.
The analyst sees a deal having varying degrees of competitive threats to incumbents like Arris (NASDAQ: ARRS) and Cisco (NASDAQ: CSCO) and thereby affecting the component supply chain. Within their coverage, they not only view this announcement as positive for Apple, but also for MaxLinear (NYSE: MXL) (given the leadership position in higher broadband support), and we see it as neutral to Broadcom (NASDAq: BRCM) (given that any upside from Apple will be offset by share loss with incumbents where it is strong).
The analyst said the most important aspect of a potential deal is the functionality of Apple's set-top-box (STB) - will it be a single STB that supports both existing Comcast broadcast video services and OTT, or will it only focus on OTT streaming?" Commenting on the question he said, "If it is the former, this means that Apple will not only become the one-stop STB provider, but it will also own the customer’s experience via a single user interface that consolidates content coming from the OTT and traditional broadcast. On the other hand, if it is the latter (only OTT), the Apple STB may be an attempt by Comcast to capture incremental revenues from a segment of the subscriber base that no longer subscribes to traditional broadcasts and only has a broadband connection at home."
While the analyst sees no meaningful impact to Apple's earnings near term, a deal increases "stickiness" to Apple's ecosystem.
The analyst sees a deal having varying degrees of competitive threats to incumbents like Arris (NASDAQ: ARRS) and Cisco (NASDAQ: CSCO) and thereby affecting the component supply chain. Within their coverage, they not only view this announcement as positive for Apple, but also for MaxLinear (NYSE: MXL) (given the leadership position in higher broadband support), and we see it as neutral to Broadcom (NASDAq: BRCM) (given that any upside from Apple will be offset by share loss with incumbents where it is strong).
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