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."
Users of Google Apps will now be able to store up to 16TB of documents and images in Google's cloud.
For companies, educational institutions and even home users who want to increase the amount of space in their Google (GOOG) Apps accounts, Google today introduced new tiered pricing plans for buying huge swaths of additional storage.
Storage for Google Docs, Picasa Web Albums, and photos from Blogger can now scale up to MORESeth Weintraub - Mar 1, 2011 12:57 PM ET
Dubbed 'Google Storage for Developers,' the new service will compete with Amazon's S3 for app dollars.
As part of Google I/O today, the company unleashed its Google Cloud Storage product, which is squarely aimed at the same market as Amazon's (AMZN) S3 but has some significant advantages, including aggressive beta pricing (free) and integration with Google's App Engine platform.
The pricing for Google Storage is as follows:
Upload data to Google
Download data from Google
$0.15/gigabyte for MORE
Jon Fortt of Fortune interviews Kevin Brown, CEO of Coraid, about his startup's approach to storage for the cloud computing era.
(DELL) (HPQ) (CSCO) (NTAP) (EMC) (STX) (WDC) (VMW) (CTXS) (IBM)
Picture this: A brilliant engineer in a Georgia college town invents a cheaper way to do high-end storage. For nearly five years he and a small team quietly sell systems to demanding customers like the Nathional Institues of Health, which uses the technology for the Human Genome Project.
Eventually he realizes he can't run the company on a shoestring anymore and calls an old friend, who consults a legendary investor, who assembles MOREJon Fortt - Jan 25, 2010 7:00 AM ET
Cisco CEO John Chambers and Intel CEO Paul Otellini (center) are flanked by other Cisco executives as they explain how the two companies will work together on servers. Photo: Cisco
Cisco's new servers use more memory and faster I/O connections than mainstream competitors, and they come loaded with management software. Photo: Cisco
John Chambers is known for delivering Cisco's sales pitch like a revival preacher, complete with a country twang – and MOREJon Fortt - Mar 17, 2009 9:26 AM ET
Cisco CEO John Chambers needs to try new things to keep his company growing while corporate technology budgets shrink.
It is the buzz of the tech world: Cisco Systems may soon try selling servers, those heavy-duty computers that companies use to run critical back-office applications. The prospect of router giant Cisco's entering the already crowded $55-billion-a-year server market is intriguing (imagine if LeBron James decided to try his hand at football) MOREJon Fortt - Mar 5, 2009 10:00 AM ET
Bryan Cantrill and Mike Shapiro, Distinguished Engineers at Sun, dreamed up a new type of storage product and convinced executives to let them build it in relative isolation. Image: Sun
Maybe there's something about unconventional office space that gets Silicon Valley's creative juices flowing.
Bill Hewlett and Dave Packard worked their magic in a garage. Apple's (AAPL) Macintosh development team flew a pirate flag over the Bandley 3 building. Now Sun Microsystems MOREJon Fortt - Nov 12, 2008 8:11 AM ET
With a line of stylish new drives and a TV marketing campaign, Seagate hopes to make digital backup more popular than ... well, flossing. Image: Seagate
Aaron Levie runs his own online storage and collaboration company, so he sounds a little sheepish when he admits that, before he founded Box.net, he didn't back up the files on his computer. He's not alone. Recent studies show that at most, 17 percent of MOREJon Fortt - Sep 19, 2008 8:55 AM ET
SanDisk founder and CEO Eli Harari rebuffed Samsung's buyout offer, saying it undervalued the company. Photo: SanDisk
Politics, as humorist FP Dunne famously put it, ain't beanbag. If Dunne had spent his days observing Silicon Valley innovators instead of Chicago machine pols, he might have said the same about the flash memory business.
It's cutthroat stuff. Just look at the standoff between ailing flash innovator SanDisk (SNDK) and South Korean powerhouse Samsung.
On MOREJon Fortt - Sep 18, 2008 8:22 AM ET
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