Apple Inc (AAPL)

[fmikehugo]

08:39 AAPL Apple Computer: Amtech comments on MSFT speculation; believe concerns are overblown (57.20 )

Amtech notes there has been renewed speculation that MSFT could design and market its own portable hardware device similar to an iPod. They believe the biggest issue with MSFT entering the portable hardware business is that it puts it in direct competition with its partners. While the focus is on AAPL, they believe this move will likely have a much larger competitive impact on CREAF, Sony, Samsung, MTV Networks, and others.

They believe concerns that AAPL would be in grave danger should MSFT pursue a vertically integrated model are overblown for a couple reasons: 1) they believe AAPL's vertical model is tough to execute with not many companies (if any) succeeding; 2) AAPL has a large installed base of about 50 mln iPods and 300 mln iTunes users; 3) AAPL's competitive advantages are largely defendable; and 4) AAPL is pursuing a longer term broader strategy beyond iPods. With AAPL shares trading at 22x their CY07 EPS of $2.59 (18x excluding net cash), they find the risk-reward favorable and believe lower expectations are priced in at these levels.