) recently announced its decision to take over Israeli company
PrimeSense Ltd. for approximately $350.0 million. PrimeSense
developed the motion tracking chip technology, specifically used
) in its Kinect game console.
PrimeSense received funding from investors such as Canaan
Partners, Silver Lake, Gemini Israel Funds as well as Genesis
Partners. This helped the company to extend its technology beyond
gaming, and helped it to develop a new depth-sensing technology.
This technology helps mobile phone 3D cameras to enable apps like
indoor navigation tools or 3D shopping catalogs.
Apple pursues an innovative acquisition strategy, whereby it
buys small technology firms which help it to grow inorganically.
We believe that PrimeSense's technology that enables digital
devices to detect movements and objects, which are then
graphically represented in different colors, which will find a
place in Apple's future products.
Moreover, this acquisition will give Apple the opportunity to
utilize some of its cash reserve effectively.
We believe this is a win-win situation for both Apple and
PrimeSense, as Apple would be able to access a new technology,
while PrimeSense would get the support of a sector behemoth such
Apple is facing significant competition in most of the markets
) Android operating system. The company continues to lag Samsung
in worldwide smartphone shipment. As per data available from IDC,
Apple had 13.0% market share compared with Samsung's 31.0% at the
end of the third quarter of 2013.
We believe that acquisitions like these will help Apple to add
new features to its already popular iPhone series, which will
inturn help it to justify its pricing.
The significant decline in revenues in the U.S and Rest of
Asia suggests market share loss to low cost smartphones and
tablets produced by Samsung, HTC, LG, Huawei and
). Besides Samsung, we expect Apple to face stiff competition
from Microsoft in the U.S. smartphone market going forward.
Currently, Apple has a Zacks Rank #3 (Hold).
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