Trefis Top 5 – June 6 Insights (AAPL, RIG, HAL, RIMM, IBM)

In today’s recap we highlight two oil services heavyweights in Halliburton Company (NYSE: HAL) and Transocean Ltd. (NYSE:RIG), both of which we initiated coverage on recently. We see opportunity for both companies as more oil & gas exploration and production efforts move offshore and to difficult to reach locations that require high technological expertise. Today we also look at IBM’s (NYSE:IBM) efforts to attract businesses to its cloud computing platform, and we question whether Research in Motion’s (NASDAQ:RIMM) dramatic decline is overdone — which we think it is. Finally, we consider the potential for Apple’s (NASDAQ:AAPL) iCloud platform that was announced today and what it could mean for increasing the halo effect (and hence value) of the Apple suite of offerings.

iCloud Should Strengthen Halo Effect of Apple Platform

Apple (NASDAQ:AAPL) will unveil its iCloud services today, which will allow users to store digital files such as photos, music and videos in the cloud (remote computers), and access them through smartphones, PCs or tablets. ^[1] We believe that this is a good move from Apple as users will benefit from being able to listen to music from any device. Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) have tried to bring similar services in the past, and we believe Apple’s large iTunes user base, MobileMe platform and the popularity of the iPhone will help drive adoption. Although iTunes accounts for only about 2% to our $430 price estimate for Apple stock, this service will help Apple strengthen its halo effect on other more valuable products like the iPhone, Mac and iPad. Our price estimate stands about 30% above market price. We will incorporate our analysis of iCloud in our Apple model after we have more details on this service.

New Coverage: $86 Trefis Price Estimate for Transocean Ltd.

Transocean Ltd. (NYSE:RIG) is the world’s largest provider of offshore drilling services for oil and gas wells by fleet size as well as by market capitalization. The company operates one of the most modern and versatile mobile offshore drilling fleets in the world and has consistently set industry records in deepwater drilling that have reinforced its position as a niche player in the segment. In addition to drilling services, Transocean also provides provides well and logistics services through its integrated services division and also turnkey drilling solutions, planning, engineering and management services and competes with companies like Noble Corp (NYSE:NE) and Diamond Offshore Drilling (NYSE:DO).

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New Coverage: $60 Trefis Price Estimate for Halliburton Co.

Halliburton Company (NYSE: HAL) provides products and services to oil and gas firms in upstream exploration and production activities. The company has operations in 80 countries that are classified into 4 main geographic divisions and competes with Schlumberger (NYSE: SLB) and Baker Hughes (NYSE: BHI) as well as with Transocean (NYSE: RIG) in the offshore and deepwater sector.

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Is Market Over Reacting to RIM’s Short-Term Headwinds?

Research in Motion (NASDAQ:RIMM) has consistently lost market share in the U.S. smartphone market for the last few months. According to a recent report from Comscore, RIM’s U.S. market share declined from around 30% in January 2011 to 26% in April 2011. ^[2] The main beneficiaries have been smartphones based on Google’s (NASDAQ:GOOG) Android operating system and Apple’s (NASDAQ:AAPL) iPhone. RIM’s stock has sunk this year from around $58 at the beginning of 2011 to $38 as of today. Is market overreacting to RIM’s market share decline by punishing its stock? Our $68 price estimate for RIM stock is about 80% above market price.

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IBM Targets Cloud Services for Businesses

IBM (NYSE:IBM) sees a big opportunity in rolling out cloud services to companies, and it recently announced a new cloud hosting services platform offering multi-tenant solutions to businesses at reduced prices. One of its new initiatives, the SmartCloud Enterprise platform, will help provide infrastructure-as-a-service (Iaas) services to companies based in India, which will be hosted in its Asia-Pacific cloud computing data centers. We will see additional moves like this as Big Blue looks to get secure market share vs. competitors like HP (NYSE:HPQ), Dell (NASDAQ:DELL) and Oracle (NASDAQ:ORCL) that are all vying for a larger piece of this the promising “public” cloud market.

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1. Apple to Unveil Next Generation Software at Keynote Address on Monday June 6, press release dated May 31 2011 [↩]
2. comScore Reports April 2011 U.S. Mobile Subscriber Market Share, June 3rd 2011 [↩]