FORTUNE -- "We think it's time to revisit what makes Apple unique," writes Lazard Capital Market's Edward Parker in a note to clients that initiates coverage with a Buy rating and a $540 price target.
Don't think of Apple (AAPL) only as the purveyor of jewel-like devices, he suggests. Or elegant, easy-to-use software. Or an "ecosystem" that keeps its customers coming back for more.
All of those factors are important, Parker writes, but none of them adequately explain how Apple manages to capture a disproportionate share of the profits in every business it's in. (In the global market for smartphones, for example, it takes home more that 70% of the profit with less than 20% market share.)
What Wall Street needs, Parker suggests, is a fresh perspective -- a new way of looking at the company.
And this is it: Think of Apple's core business as selling end users flash memory at steep markups.
"We propose," he writes, "that Apple is a 'storage' company, not only levered to data creation but instrumental in driving data creation in ways its competitors are not. Apple sells storage by delicately but deliberately incenting customers to purchase NAND flash memory at 80%-90% incremental margins. We believe this model is unique in the industry and will ensure Apple avoids the pitfalls of former handset innovators that are rapidly falling into the annals of history."
As Parker shows in the chart above, this makes Apple's business model very different from Google's (GOOG) or Samsung's. Google's mission is to drive traffic to its search engine and to data stored in its own cloud servers, not on users' devices. Samsung makes and sells its own memory chips, but is also perfectly happy to let customers walk out the door and buy additional memory from its competitors.
Only Apple gives its uniquely loyal customers ever stronger reasons to buy higher-capacity phones, tablets, music players and computers at margins far higher than the market for raw memory can bear.
"Challenges remain and the company needs to keep the magic alive," Parker writes in conclusion. "That said, we think the worst is behind Apple and believe it's time to long the stock. Our 12-month price target of $540 is based on 12x our calendar 2014 EPS estimate of $45, representing a potential return of 25% from current levels."
UPDATE: Asymco's Horace Dediu is unimpressed wtih Parker's framework.
"The NAND flash markup meme is being repurposed from the iPod era," he writes. "I heard it back then as the reason why the iPod was so profitable and that once that ability to mark up flash would disappear then the company would be finished.
"It was not insightful then and it's not insightful now."Apple is not a storage company. It is successful (and fails) on the basis of being able to innovate in ways that others can't. That means it approaches all open problems with an integrated solution. As long as that approach is in step with the evolution of the market and technology, they are successful. When it's not in step then it is not successful.Being able to charge a premium for storage is a result of having this model not a cause for it."
And re-sold it to consumers for billions more than it paid, according to Toni Sacconaghi
The only difference between a 16 GB iPhone 4S and the 32 GB model is 16 GB of NAND flash memory, for which Apple (AAPL) charges customers $100.
But according to Bernstein Research's Toni Sacconaghi, Apple buys that memory for a heavily discounted price of $0.67 per gigabyte, or a total $10.72.
That's a pretty sweet mark-up. And an MOREPhilip Elmer-DeWitt - Jan 6, 2012 11:39 AM ET
Cupertino's largest acquisition since it bought Steve Jobs' NeXT in 1997
According to Reuters, Apple (AAPL) has sealed the deal that was rumored last week to buy Anobit, the Israeli company that makes the flash memory technology used in Apple's iPhones, iPads and MacBook Airs.
For Apple, this is a big acquisition, both in dollar terms and in technology. The price -- a reported $500 million -- is larger than the $472 MOREPhilip Elmer-DeWitt - Dec 20, 2011 6:40 AM ET
Reuters adds detail -- and its authority -- to rumors of an 8GB "iCloud iPhone"
Stories have been floating around for months that Apple (AAPL) was building not one but two new iPhones -- the widely expected iPhone 5 and a lower-cost phone that's basically the current iPhone 4 with less on-board memory. According to an item posted two weeks ago by Apple'N'Apps' Trevor Sheridan, company insiders are calling the second device the MOREPhilip Elmer-DeWitt - Aug 23, 2011 8:07 AM ET
Using iPhone 4 parts and less memory, Apple might bring the subsidized cost to $0.00
There's been much speculation over the past year about the possibility of Apple (AAPL) shipping a lower-cost phone to compete in markets where the top-of-the-line iPhones have proved too expensive.
Writing in Apple'N'Apps Thursday, Trevor Sheridan -- a writer whose track record we can't vouch for -- offers what nonetheless seems like a plausible scenario.
Citing three unnamed MOREPhilip Elmer-DeWitt - Aug 11, 2011 9:54 AM ET
Flash memory might rule the roost when it comes to gadget storage – all the sleekest devices from smartphones to the upcoming iPad use it – but it can be tough to make a profit selling the stuff.
No one knows that better than Eli Harari. As founder and CEO of flash memory maker SanDisk (SNDK), he has been through a roller-coaster year.
Late 2008 was the worst of times. In a MOREJon Fortt - Feb 11, 2010 4:04 PM ET
Flash memory – the stuff that stores data in consumer gadgets like phones and digital cameras – is also finding its way into more corporate data centers. It turns out that while flash is still far more expensive than trusty old hard drives, it uses less power and serves up information quickly. That makes it well suited for tasks like data mining, business information and any other situation where time MOREJon Fortt - Dec 8, 2009 1:40 AM ET
Thanks in large part to Apple's (AAPL) iPhone and the growing ranks of iPhone imitators, worldwide sales of NAND-type flash memory are expected to rise nearly six-fold from 2008 to 2013, according to a report by iSuppli Corp. issued Wednesday.
Global revenue from sales of NAND flash for mobile phones could hit $932.5 million in 2013, according to iSuppli, up from $166.5 million in 2008 -- a compound annual growth rate MOREPhilip Elmer-DeWitt - Aug 5, 2009 4:53 PM ET
The Apple (AAPL) rumor sites have been buzzing for months about the new thin MacBook they expect Steve Jobs to unveil Jan. 15 at Macworld Expo 2008. Now, with the company's annual showcase for new products less than six weeks away, the talking heads of cable business news have started to pick up the scent.
Yesterday was CNBC's Jim Goldman's turn. In a breathless report that aired shortly after noon (video, MOREPhilip Elmer-DeWitt - Dec 7, 2007 8:55 AM ET
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