пятница, 2 марта 2012 г.

Gene Munster, Managing Director, Piper Jaffray

(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)

GENE MUNSTER, MANAGING DIRECTOR/SENIOR RESEARCH ANALYST, PIPER JAFFRAY, IS INTERVIEWED AT BLOOMBERG SURVEILLANCE

JUNE 28, 2011

SPEAKERS: TOM KEENE, BLOOMBERG SURVEILLANCE HOST

KEN PREWITT, BLOOMBERG SURVEILLANCE CO-HOST

GENE MUNSTER, MANAGING DIRECTOR/SENIOR RESEARCH ANALYST, PIPER JAFFRAY

8:03

TOM KEENE, BLOOMBERG SURVEILLANCE HOST: Gene Munster with us, Piper Jaffray, on Apple. Gene, good morning.

GENE MUNSTER, MANAGING DIRECTOR/SENIOR RESEARCH ANALYST, PIPER JAFFRAY: Good morning.

KEENE: Does Apple have a momentum here? Do they have a product cycle momentum? Are they coasting? What is the acceleration of Apple this summer of 2011?

MUNSTER: Well, they seem to be incremental. Like the iPhone 5 is going to be in the month of September, so we will finally get that and that is obviously just going to be continued innovation on the existing. And some new iPods, I would say in the back half of the year for back-to-school. And likely a new MacBook Air here in the next few weeks, so if you are thinking about getting a MacBook Air, I would hold off.

But the real innovation we think is going to come in 2012. We still believe that they are going to have an actual television. They have an Apple TV today which kind of hooks on the back of your TV. But kind of an all-in-one television, I think that is probably the next big market that they are going to be going after. But that is probably a good year away.

KEN PREWITT, BLOOMBERG SURVEILLANCE CO-HOST: Well, tell us - it hooks on the back of your - the TV you already have?

MUNSTER: That is the existing product that they have. It is $100.00. It basically just hooks into the back of your TV and allows you to basically get the internet over your TV and some content like Netflix.

But we believe, based on a several reasons, that we think they are actually working on an actual television. So think of it as kind of anywhere from a 25 to a 50 inch actual TV.

KEENE: Right. Okay, fine. But they have made their name first with the iPod recovery, and the iPhone is subsidized when you buy it off of phone companies - a $200.00 transaction. Is there any observation that the public is ready for a - I'm going to guess - $1,200.00 transaction?

MUNSTER: Well, if you look at the number of Macs, it would suggest that. The average price on a Mac is about that, about $1,200.00. And they sell about four to 4.5 million a quarter.

So I mean just based on that alone, there seems to be a relatively good market for it. Obviously, it is a small percent of the overall computers, but people do just spend up on unsubsidized products for Apple like a $1,200.00 product.

PREWITT: Didn't they try TV before, Gene?

MUNSTER: You know what? They have tried kind of around TV. They have tried some other products, like, for example, the Mac Mini. They have tried to encourage people to hook that up to your TV. It has basically been a failure.

The bottom line is people don't like hooking things up to the back of their TV. It's just - it is kind of this mess of a stack that they have got to call somebody to kind of work out. What Apple does really well is put everything into one box.

And it is funny that the Mac Mini, which was proclaimed when it came out several years ago as this massive market opportunity because it was $500.00, you could get a Mac. But you had to bring your own screen and your own keyboard. The products basically flopped because people are much willing - more willing to pay $1,200.00 for something that Apple puts together, that is all nice and neat, than go and try to tie it together themselves.

And so,. yes, they have tried around the TV before, but they really haven't put we think the kind of effort that they are going to put into it. This is the last big piece in consumer electronics that hasn't fit together. And so I think that they have an opportunity to really -

KEENE: Right.

MUNSTER: - open things.

KEENE: And now, folks, we go into the spy, the detective, the clandestine world of Eugene Munster of Piper Jaffray. You have gone into the patent records of the United States of America and gleaned the secrets of Steven Jobs. This is amazing. Patent Number 7,865,927 published in January 11. How do you find this stuff out, Gene Munster?

MUNSTER: Well, I mean thankfully for us, there are actually people who that is all they do is go and scrub patents. And so we are not in some patent library digging this stuff up. We just work with some other people who go and do this.

And so based on that - you know, Apple makes a lot of patents and over time some of the stuff never sees the light of day. But you can figure out generally where they are going, and this was the original indication that the iPhone was coming a couple years before the iPhone came out, and originally when the iPad was coming out a couple years before we started to see some patents around areas that they had not been involved in before.

And so around the TV, they have many patents around the TV. Some of it probably will never see again the light of day. But I think ultimately, you can get a direction of where they are going by looking at kind of the forensic work in patents.

PREWITT: Gene, one of our Inside Surveillance listeners, this was an interesting article in BusinessWeek earlier this year. Is Microsoft a value trap? That question is still open. How do you see it?

MUNSTER: Well, I think it is. I think if you look at - I mean with all due respect, Microsoft runs the world, but they have not done anything innovative for close to a decade. And so we take something like Xbox, that has been exciting, but I think that in order for a story really to work - a stock to work, it needs to have innovation and if they don't - if they are not innovating, I think these stories and these stocks end up becoming value traps. And I think Microsoft is in that position.

KEENE: You look at Apple, Gene Munster, and the price - I'm bringing it up here. Where is it? Three? I'm having trouble with my computer today. Ken, my - there it is - $331.00. Should they split?

MUNSTER: I don't think that they will. I think that Apple kind of takes a perspective that this is - there has been a whole change in thinking around this with companies in the last five years. It used to be your stock would get above $100.00 you would split.

And now, I think that the thinking is just let it do what it is going to do and the company just run their business, and don't meddle with the stock price. And so I think Google kind of set that tone, and I think Apple generally follows that.

KEENE: Right. Should they do that so they become a Dow component? If they were, would they be a Dow quality component?

MUNSTER: If they were to split?

KEENE: Yes.

MUNSTER: I don't know what - if - I don't know the mechanics behind it.

KEENE: That's a fair answer.

We're going to come back with Gene Munster and talk to him about a number of the ideas out here. Amazon being something to talk to him about, and, of course, as he mentions, Google as well. Maybe we can get him to talk a little about BlackBerry as well.

8:10

(BREAK)

8:19

KEENE: Gene Munster with us, Piper Jaffray, as we look at technology, as we go to Case-Shiller here. Gene, where is the value out there now? Where is the opportunity?

MUNSTER: I think you have got to look at multi year growth stories, which is ecommerce. And if you look at - stories that would fall within that would be if you look at - the gold standard is Amazon, and then I think some emerging stories like, for example, [ Markyle Leeberry] in Latin America and Dangdang in China.

I think all of these are big opportunities and the reason why is that if you look at the percentage of the people that buy online, it is still very small. It is one percent in China and it ranges up to eight percent in the U.K., somewhere in that. And over time, we think that it is going to be 25 percent of what people buy is online. So when I think about investing, I think ecommerce is still a great area to invest in.

PREWITT: Well, you know, this is an AP story out of the Boston Globe this morning. Twelve percent of U.S. households now have a reading device like a Kindle. Ownership of tablet computers like the iPad has doubled to eight percent of households. That's only eight percent. I mean there is a long way to go here, right, Gene?

MUNSTER: Yes, there is. I mean if you just kind of think about macro growth opportunities, ecommerce is one. The mobile market, like you are saying, is still going through a massive transformation, especially because of the tablets. The space is dominated by the iPad today. Eventually, the Android tablets are going to be there.

But I think just how these tablets fit into our every day lives is still really unseen. I think that we are in the last generation of kids with backpacks right now and ultimately this is going to be something that is going to be in pockets of our life we don't even know right now. And so I think that is going to be a multi year growth story.

PREWITT: I wanted to ask what is the next new thing that you see out there, the thing that we haven't really thought about, that we find out we cannot do without?

KEENE: Stop, stop. Gene, let me give you the back story here. Ken Prewitt has a cellphone that looks like the one Michael Douglas used with Kathleen Turner and that movie where he slides down the slope. Okay, continue. What is new?

PREWITT: Yes, go ahead.

MUNSTER: Okay. Well, I mean the stuff that is done in the next five years is NFC bills your phone as your wallet. So I think that is kind of - that is out there. Obviously the living room and the television, like we talked about earlier, is going to be transformed.

As far as even beyond that, stuff that people aren't talking about, 3D printing is one. And this sounds pretty crazy, but I'll go there for the sake of being a futurist here, is that the ability to, for example, print some of the things that you might go through, like a toothbrush or some other thing that in your home if you want to do some design, for example. So I think 3D printing - you can do it today, but that is an area that I think you are going to see some innovation in.

KEENE: Well, two quick ideas. Kevin Smithen from MacQuarie was on yesterday on BlackBerry. Your thoughts on RIM?

MUNSTER: I think it is a troubled company. I think that if you look at their growth rate, it went from 40 percent three quarters ago and last quarter to 18 percent units.

They haven't done really anything innovative. On the TouchScreen, they have a couple products - the Storm and the Torch. But, for the most part, this is a company that has seen significant pressure from Android and from iPhone, and I think it is only going to get worse.

KEENE: And also Ken mentioned earlier Ancestry.com. You've got an overweight on it. It is up 125 percent - wow - off the Bloomberg screen. How do they make money? What is the profit stream there for any potential investors?

MUNSTER: Well, this is a - it is really a sleeper story that has done great because they own the genealogy market. And it doesn't sound like that exciting of a market, but the reality is is since they own it, it is one of the few internet businesses that don't - it is almost impossible to have competition because they go and digitize all this content from all these different countries, for example, old newspapers and photos and things like that.

But the reason they make money is they charge a subscription and it tends to be about $15.00 a month. And you can put in your name and some of your relatives and based on that it can produce documents. Like, for example, I found my grandparents' marriage certificate, and I found that my grandma lied about her age on her wedding day. And so there are some fun facts you can find by using Ancestry.

KEENE: Great. I was on and found out that one of the 32 grandfathers drank a lot of Pabst Blue Ribbon. That's what I figured - for $15.00 bucks a month I figured that out.

PREWITT: Really?

KEENE: Gene, thanks for that.

PREWITT: Thank you, Gene.

KEENE: Gene Munster, Piper Jaffray, really always interesting. I wonder what the construction is over at the Apple store?

***END OF TRANSCRIPT***

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