Is Apple's Secret OLED Hire a Game Changer?


Shareholders of OLED specialist Universal Display were left shaking their heads Tuesday as their stock suddenly dropped more than 6% in an otherwise uneventful session. Though Universal Display recovered to close up for the day, many were left wondering what spooked the market to cause such a plunge.

So what happened? Speaking at an investment conference held by Goldman Sachs on Tuesday, Apple CEO Tim Cook made some disparaging statements about the OLED displays made possible by Universal's technology and championed by competitors including Samsung and LG Display . Instead, he pointed consumers to Apple's own Retina Display as the best available option, noting it is twice as bright and "create[s] an amazing experience."

Going even further, Cook called OLED displays' color saturation "awful" and stated "If you ever buy anything online and really want to know what he color is, as many people do, you should really think twice before you depend on the color from an OLED display."

About that new hire...
Curiously enough, that's also what makes a recent report from the OLED Association so interesting. While Cook's comments unsurprisingly oppose competitors' claims of OLED superiority, they also seem to contradict his own company's recent hiring decisions.

According to the report, Apple may have just hired Dr. Jeung-jil (James) Lee, a former research fellow from LG and "a senior person in LG Display's R&D effort to create a printed AMOLED TV." In addition, the organization noted that, prior to joining LG, "Dr. Lee was responsible for development at Cambridge Display Technology (CDT, now Sumitomo), the leading developer of solution-based polymer based OLED material."

Of course, while the rumor mill has stirred up plenty of speculation regarding Apple's OLED development over the past few years, the notoriously secretive tech giant has yet to provide any concrete information confirming its interest. As competitors like Samsung and LG use OLED to differentiate their own products, however, Apple has faced scathing criticism for its failure to embrace the technology in its own devices.

Even so, that hasn't stopped hawk-eyed industry watchers from regularly managing to dig up OLED-related patent applications from Cupertino. Fellow Fool contributor Evan Niu even wrote nearly a year ago that he fully expects Apple to incorporate OLED tech into its displays, albeit nowhere in the near future. After all, given Apple's unabated love for pleasing aesthetic design, it's a safe bet the company would love to take advantage of the seemingly endless possibilities offered by OLED displays, which can be made flexible, transparent, and nearly unbreakable. If Apple could offer those kinds of groundbreaking features in its devices going forward, something tells me color saturation would amount to a mere afterthought.

If this recent hire is confirmed, then, an Apple-OLED union could arrive a whole lot sooner than we expect. Given Apple's unparalleled ability to sell huge numbers of its popular products, if and when that day comes, it would help usher in a new era of widely adopted futuristic displays.

What now?
So what's the best way to play the trend?

On one hand, you could buy shares of Apple as they currently trade more than 30% off their 52-week highs. Though the debate continues to rage over whether the stock has further to fall, introducing a series of revolutionary products with bendy, see-through, indestructible screens could be just what the doctor ordered to re-energize its shares. In addition, even if Apple's OLED adoption isn't yet on the horizon, the fact remains it consistently generates boatloads of cash and looks undeniably cheap at less than 11 times trailing earnings. After everything is said and done, you could also get paid for your patience as you wait for Apple's shares to rebound by collecting its 2.3% dividend.

On the other hand, if you're searching for a derivative play, look no further than Universal Display, whose OLED patents practically ensure it will profit no matter who uses the technology. Even if Apple doesn't join the OLED race anytime soon, Universal Display investors are eagerly anticipating a new wave of profits from the coming introduction of large-screen OLED televisions from Samsung, LG, Sony, and Panasonic. Given the increasingly likely event that Apple does jump on board, however, Universal Display will be first in line to benefit.

Universal Display's placement at the center of OLEDs makes the company an underappreciated way to play the enormous sales growth in tablets and smartphones. However, like any new technology, there are plenty of risks to Universal Display. Motley Fool analyst Evan Niu, CFA, has authored a new premium report that dives into reasons to buy the company as well as the challenges facing it. For access to this comprehensive report, simply click here now.

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Fool contributor Steve Symington owns shares of Universal Display. The Motley Fool recommends Apple, Goldman Sachs, and Universal Display. The Motley Fool owns shares of Apple and Universal Display. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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