As Apple gets pressured to make deal, an analyst reminds them of Steve Jobs' words

Key Points
  • UBS reminds Apple and Wall Street of Steve Jobs' words: "Companies forget what it means to make great products."
  • Analyst Steven Milunovich thinks Apple should keep its focus on the customer and not on making a big acquisition like Netflix or Disney to please shareholders.
  • The firm reiterates its buy rating and $165 price target for Apple, representing 8 percent upside from Monday's close.
This analyst says Apple should focus on the customer, not the shareholder

Wall Street is buzzing over which companies Apple may buy with its massive cash holdings. But UBS analyst Steven Milunovich used the words of its founder Steve Jobs to remind the company (and his peers on the Street) that the innovative tech company should only make a deal that betters its customers and not just greedy shareholders.

Wrote Milunovich in a note Tuesday: "Steve Jobs warned: 'Companies forget what it means to make great products … they really have no feeling in their heart about wanting to really help the customers.'"

"We think Apple is likely to only make an acquisition that results in a better product and customer experience, not to protect financial results," the analyst added.

Just last week Citigroup put out a report speculating that Apple may buy Netflix, Disney and even Telsa with its $256.8 billion cash hoard.

But Milunovich isn't buying it.

"Our view is that the probability of mega-mergers is low as it should be. ... 'Think Different' means Apple [is] likely to do the unexpected," he wrote.

Instead, Milunovich predicted Apple will acquire firms which will allow the company to "leapfrog" its technology capability in areas such as transportation, augmented reality, health, home automation and content.

But some on Wall Street were sticking to the notion that innovation alone will not allow a company of Apple's size to keep the pace of growth that investors have grown accustomed to.

"In this market, you're going to have to pay up for an asset worth having. Streaming video is Apple's glaring product weakness," BGC Partners' Colin Gillis said in a phone interview.

UBS reiterated his buy rating and $165 price target for Apple, representing 8 percent upside from Monday's close.

The tech giant's shares rose about 1 percent in trading Tuesday and now sport a market value above $800 billion, the largest in the world.