iOS Is New Windows, Influential UBS Analyst Claims

Apple is poised for even bigger success in the emerging tablet sector, because its iOS is the new Windows, UBS analyst Steven Milunovich said Wednesday.

The influential analyst said Apple, of Cupertino, Calif., is not only going to dominate the tablet sector with models of the iPad but could gain share in the PC sector if more consumers shift from PCs running on Windows from Microsoft Corp. (Nasdaq: MSFT) to Macs.

“Not only could iPad maintain half the tablet market,” Milunovich said, “but MacBooks might steal a significant number of Windows PC users.”

The UBS analyst may be correct: Reports over the past week from Hewlett-Packard Co. (NYSE: HPQ) and Dell Inc. (Nasdaq: DELL), the No. 2 and No. 3 PC makers, respectively, showed weak demand for PCs in their most recent quarters, although consumers were believed to have delayed purchases pending Microsoft's release of Windows 8. Intel Corp. (Nasdaq: INTC), the top provider of PC chips, previously reported lower third-quarter earnings.

The latest version of Windows was shipped only three weeks ago.

Milunovich maintained a “buy” recommendation on Apple shares, with a 12-month price target of $780, unchanged from his earlier target. Apple shares set an all time high of $705.07 on Sept. 21 but have fallen as much as 21 percent in November, double the percentage of an ordinary share correction.

In Wednesday trading, shares of Apple rose 79 cents to $561.70, valuing the company at $528.4 billion, more than any other public company. Exxon Mobil Corp. (NYSE: XOM), the No. 2 company, is valued at $401.3 billion.

Milunovich also expressed skepticism that newcomers to the tablet sector, such as Microsoft with the Surface, Google (Nasdaq: GOOG) with the Nexus and others, may not get far, with earlier entrants, such as Samsung Electronics (Seoul: 005930), with a nearly 20 percent share, doing well.

Amazon.com, with its Kindle Fire brand, is also likely to succeed, he said, because consumers obtain a lot of content. Its current share is about 9 percent of the market compared with the iPad's 50 percent share.

A new UBS survey of chief information officers about their plans to buy tablets for employees showed 60 percent expected tablets to replace PCs over time. “Windows tablets are well positioned to grab a corporate niche,” Milunovich said, but not more than that.

By 2016, Apple forecasts overall tablet shipments to exceed PC shipments, the analyst said. “We aren't far away” from that estimate, he said.

Milunovich estimates nearly 290 million tablets will be shipped in 2016, with only about 216 million notebooks.