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The purchase of Lala supports the idea that Apple is building a cloud-based system to allow access of content across all of its products, Maynard J. Um of UBS Investment Research said in a note issued to investors Monday morning. The purchase could tie in to Apple's $1 billion server farm project which found a home in North Carolina this past summer.
"We believe the Lala acquisition fits into our view that Apple is building a data center for a service to provide seamless access & mobility of digital content across all of its products, including media-focused content of iTunes and user-generated content of MobileMe," Um said. "Lala gives Apple browser/Web-based technology to access music anywhere."
Apple made its first integration between the browser and iTunes in November, when iTunes Preview was quietly released. Links generated via iTunes direct to a Web site that gives customers the option to view content without launching Apple's desktop media suite. Previously, users who did not have iTunes installed were prompted to do so in order to view content.
Apple's purchase of Lala was confirmed last week, though the terms of the agreement have not been revealed. The private, Palo Alto, Calif., company has a catalog of over 8 million songs, and allows users to match songs on their PCs to its licensed content, and then play them anywhere on the Web through a browser. DRM-free songs can be downloaded for about 89 cents, while Web-only streams are about 10 cents.
"Lala also allows users to browse friends' collections, create/listen to playlists, & get updates when new or recommended music is added to their sites," Um said. "The service is similar to Apple's Genius feature except driven by real people (vs. algorithms)."
He believes that the purchase of Lala will widen Apple's "halo" that draws consumers to purchase Apple products. By allowing iTunes content to be more easily accessed across a variety of Apple-branded devices, the purchase could further future hardware sales.
UBS Investment Research has maintained its $280 price target for AAPL stock, and reiterated its "buy" rating.
In October, Lala, along with iLike, entered a partnership with Google to allow users to quickly discover song previews, artist info, pictures, video and more. Currently, Google searches for artists or songs can return a full, streaming, embedded song at the top of results, courtesy of Lala.
Apple has the largest net-cash sum of any technology company. In September, it was reported that the Mac maker has $31.1 billion in cash and investments.