Recommendation: Buy AMZN, AAPL, EMC, ORCL Sell
VZ

VZ – Verizon
 Bought as a cash alternative
 Up ~$10/share
 Sell following iPhone announcement
Current secular shifts in IT
Federal Chief Information Officer sees cloud computing as an IT solution to the cost
inefficiencies of the nation’s IT infrastructure.

Mandated that agencies of the federal government institute a "cloud first" IT
procurement policy
 Looking to reduce the number of federal data centers by 40% by 2015.
 The goal is to shift $20B of the $80B/year federal IT budget to cloud solutions.
From Business Week

Right now, the cloud is small: It represented about 5 percent of the $1.5 trillion in
corporate information technology spending last year, ….
 Cloud is real and is profoundly changing how companies buy computer technology
 There's a saying in the technology industry: People tend to overestimate what will
happen two years from now and underestimate what will happen in 10. Well, the next
10 years have arrived.
How Do We Play "IT"?
Virtualization
/ Storage
 EMC/VMware
Cloud
computing / SaaS-
 Amazon & Oracle
Mobility
 Apple
AAPL: Enter Enterprise
•
AAPL: Enter Enterprise
• CIO’s are adopting tablets – This is Apple’s inroad to enterprise
• Next generation of corporate IT professionals in America use Apple
•
Amazon: Disruptive Technology & Web Services
•
•
EMC : More data will be created in the next two years than in history to date – IDC
•
Oracle
Apple Company Profile
•Business profile: Apple designs, manufactures, and markets personal computers,
computing and mobile communication devices, related software, and networking
solutions.
•International vs. domestic: With $24.5billion in revenue for 2010, the Americas is
the largest geographic section. Europe comes in second with $18.7billion for the
same time period. The Europe and Asia/Pacific markets have 43% and 89% avg 2year growth respectively as Apple enters new markets.
•Management quality: Excellent. Jobs, the COO and CFO have been
managing the company since the late 1990s. Part of executive compensation is
aligned with shareholder interests.
Investment Information
Prev Close: 339.25
1y Target
Est:
52wk
199.25Range:
364.9
Avg Vol
19,790,730
(3m):
Market Cap: 311billion
P/E (ttm): 18.87
EPS (ttm): 5.3
Div & Yield: none
Forward
12.9
P/E:
Investment Thesis
•Catalysts:
1. Tablet- Deltoitte expects companies to purchase 10million tablet devices in
2011 (APPL has 75% market share of tablets).
•Tablet has been tested or deplowed at 80% of Fortune 100 companies. Medtronic
has given 5,000 iPads to sales reps and SAP has bought 3,500 for company use.
•Industry tracker iSuppli predicts Apple will ship 43.7 million iPads this year and 63.3
million in 2012.
2. Next generation of IT professionals- as more young people become
familiar with apple computers, they will request these computers in the workforce.
Macs have less viruses, spam, crashes and need for upgrade compared to PC
SWOT Analysis
Strengths
Brand Image
iPhone and iPad run on same operating
system
Desktop/notebooks steadily increase
revenue
iTunes is largest music distributor in world
Product release cycle
Product Design and Utility
Opportunities
Mac App Store
Loyal customer base
Apple TV
Weaknesses
Computer-Software Chief steps down
A projected 50% of revenue will come
from iPhone line by 2012
Not shareholder-friendly, sits on cash
instead of giving a dividend.
Very controlling over products.
Threats
Steve Jobs’ Health
Competition introducing similar products
Over-priced products
Google

Profile: Amazon is an online retailer that offers a wide range of products. They
also offer web services for start-up companies.

International vs. domestic: Revenue for North America hit
$18.7billion in 2010. All other geographic areas reached $15.5billion. Average
2-yr growth was 35.62% and 31.68% respectively.

AWS contributed to $500million in revenue in 2010

Expected to bring in $2.5billion in revenue by 2014.

With companies who have their own hardware assets, servers might
reach a max utilization of 25%. Since AWS only charges for what a
company uses, utilization is close to 100%

Using AWS, a company will save security, upgrade, and personnel costs.
Prev Close:165.53
1y Target
Est:
52wk
191.6Range:
105.8
Avg Vol
19,790,73
(3m):
0
Market
74.69billi
Cap:
on
P/E (ttm): 65.46
EPS (ttm): 5.3
Div &
none
Yield:
Forward 12.9
P/E:
Amazon SWOT Analysis
Strengths
Brand Image
Low-costs since company does not own
retail stores.
Superior customer service/ loyal
customers
Allowing 3rd-parties sellers on
amazon.com
Last quarter saw record sales of $13billion
130 million active users (amazon.com)
Opportunities
Android App Store
Bought LOVEFiLM (Europe’s Netflix)
Weaknesses
Computer-Software Chief steps down
Outsources delivery
Most of revenue from AWS has to be
reinvested into hardware.
Threats
Evolution of media to digital formats
Online sales tax
Increase in gas prices
Valuations


Valuation is relative
AAPL vs HP - Are you willing to pay for growth?
Name
ORACLE CORP
EMC CORP/MASS
ADOBE SYSTEMS INC
APPLE INC
GOOGLE INC-CL A
AMAZON.COM INC
Market Cap (M)
165,669
55,356
17,731
324,723
190,690
76,242
BEst Est
PEG Ratio FWD
0.990
1.056
1.210
0.667
0.772
1.069
BEst
P/E FWD ROE % FCF Yld %
13.9
22.0
7.5
15.4
11.5
8.1
13.7
15.4
6.2
13.2
35.3
6.2
14.7
20.7
3.7
29.5
19.0
3.1
Net Debt
Per Share LF
$
(1.55)
$
(0.93)
$
(1.88)
$
(29.29)
$
(98.07)
$
(17.92)
Portfolio Placement / Recommendation






Sector : Technology
Industry Group: Software
Current Holdings: GOOG, ADBE
Target Sector Allocation: 15
Current Sector Allocation:
Remaining Allocation: