iCloud preannouncement leads Wall Street to expect big things from Apple at WWDC

After Apple tipped its hand on Tuesday and revealed it will unveil its new iCloud service next week, Wall Street analysts believe the company has set the stage for a strong software-focused Worldwide Developers Conference keynote.

RBC: iCloud and iOS 5 will expand iPhone, iPad markets

Mike Abramsky with RBC Capital Markets sees Apple's upcoming iCloud service as more than just a digital "locker" service that will store users' file. To that effect, he sees iCloud allowing Apple to target iPhones at 5.1 billion handset users worldwide, compared to 1.3 billion PC users.

iCloud could be an important step for Apple, making it so users are not required to have a Mac or PC to sync their device, or store music and movies. He imagines a new version of iOS where users no longer need to tether to a machine to upgrade their software, making the addressable market much larger.

Abramsky also said that iCloud could allow Apple to exploit what he sees are three competitive advantages: licensing and digital rights management, consumer friendliness, and a massive existing install base of more than 200 million iOS devices, plus iTunes users.

"Apple's licensing relationships and 'controlled' platform may appeal to studios/publishers seeking to minimize piracy, while protecting their economics in a hosted model," Abramsky wrote in a note to investors on Wednesday. "iCloud may also be differentiated via Apple's trademark user experience for convenience, simplicity, and discoverability. iCloud APIs may in time extend to developers."

As for the iOS 5 update, Abramsky said he believes Apple may offer hosted online services like content streaming, voice recognition and translation, photo sharing, community and multiplayer capabilities. This could lead to new iOS devices built around iCloud services.

But a key for Apple will be how strong the debut is for iCloud. Abramsky recalled that the 2008 debut of Apple's current cloud-based service, MobileMe, didn't go so well, with performance and reliability issues.

Jobs was said to be furious following the launch of MobileMe. The Chief Executive reportedly assembled the team that created the service and scolded them in a meeting at the auditorium on Apple's corporate campus, saying that they had "tarnished Apple's reputation."

Because of that learning experience, Abramsky expects that Apple will have a more measured, possibly staggered rollout of the new iCloud service. "Apple may initially limit iCloud's scope," he said, "before expanding to a broader audience."