From a note to clients by UBS analyst Steven Milunovich that slammed into my inbox Tuesday morning:
Our work suggests that AR [augmented reality] could be the next major innovation from Apple and that its competencies could make the company a winner. Industry sources are upbeat and anxious to see what Apple does. Investors could be surprised at how AR could reinvigorate the iPhone/iPad and possibly result in new products…
Apple tends not to be first to market but often wins first to mind. Its advantages could include: (1) hardware expertise and superior hardware/software integration; (2) consistent updated releases with most customers on the latest version of iOS compared with the fragmented Android OS base; (3) an installed base of iPhone and iPad customers that can use AR rather than starting from scratch; and (4) a cloud infrastructure that facilitates data gathering.
Milunovich rattles off the usual laundry list of potential AR applications and lands on SLAM (Simultaneous Localization and Mapping) as the big one:
SLAM solves the chicken and egg problem of mapping a space without prior knowledge. The device starts from one angle and collects points of data. As the device moves, it observes how objects shift and begins to fuse data to create an environment. As the 3D map is forming, the device begins to understand its own positon in the context of the environment it is trying to map. SLAM underlies most of the advanced AR technologies available today and will likely be critical in the future. In 2015, Apple bought software company Metaio, which had one of the most advanced SLAM-based AR engines available at the time. The company has been silent since being acquired, but according to our industry checks it’s likely the core team has remained and the IP could play a key role in Apple’s strategy.
Reiterate Buy, raise price target to $151 from $138.