Apple Rolls into 2008 with New Products

CNNMoney has an excellent article on Apple's prospects for 2008:

By Kenneth Musante, CNNMoney.com staff writer

January 11 2008: 12:37 PM EST

NEW YORK (CNNMoney.com) -- Apple had a banner year in 2007. The stock more than doubled thanks to strong sales of the new iPhone, revamped iPods, and updated Macs.

But that was last year. Now investors want to know if Apple can live up to Wall Street's lofty expectations for 2008.

Tech stocks have taken a big tumble so far this year and Apple (AAPL, Fortune 500) is no exception, with shares falling about 10 percent.

With that in mind, investors will be paying a lot of attention to what Apple chief executive officer Steve Jobs has to say during his keynote address at the company's Macworld show on January 15th.

Last year, Jobs unveiled the iPhone at Macworld. So Wall Street is hoping Jobs can once again deliver some exciting news to get the stock back on track.

A new 'Touch' for the iPod

Investors will definitely be looking for any announcements about updates to the company's popular iPod. Despite that product's runaway success, some analysts say that Apple has started to reach the saturation point with its portable media player. "Everyone who wants one has one," said Technology Business Research analyst Ezra Gottheil.

Morgan Keegan analyst Tavis McCourt also wrote in a recent report that he's concerned about slowing growth in iPod sales.

He cited the fact that the number of iPods sold in the company's fiscal fourth quarter, which ended in September, increased just 17 percent from a year ago, down from 50 percent growth in unit sales in the company's fiscal first quarter.

But just before the holiday season, Apple released the iPod Touch - basically an iPhone without the phone. The device's ability to access the Internet and its emphasis on video makes it more than just a standard iPod. So analysts said they are confident the iPod Touch could rejuvenate sales growth for the iPod product line in 2008.

Apple could also benefit from falling component prices. McCourt noted that NAND flash memory chips, which are used in the iPhone, iPod Nano, iPod Shuffle, and iPod Touch, have been getting steadily cheaper, which could boost the amount of profit Apple generates from the iPod and other consumer electronics devices.

And analysts said that other announcements from Macworld may also be viewed positively by investors. Trip Chowdhry of Global Equities Research, predicts Apple will unveil an update to Apple TV, a device that lets people view videos stored in their iTunes library on their television sets.

There has also been speculation that Apple will announce plans to allow movie rentals on iTunes through a partnership with News Corp.'s (NWS, Fortune 500) Fox studio. Gottheil said that even though revenue from iTunes is still relatively small, anything that can help increase movie and music downloads would be helpful since this should also boost demand for new iPods.

Thin is in

Of course, Apple still relies heavily on computer sales -- even though the company dropped the word "Computer" from its corporate name last year and now generates more than half of its total sales from non-Mac products.

At this year's Macworld, analysts suspect the company will round out its MacBook line with a new ultra light notebook.

A highly portable computer with long battery life and a flash drive instead of a delicate hard disk is something that Apple doesn't have right now, said Chowdhry.

He argues that if Apple unveils a new MacBook, that could open Apple's laptop line even further to new customers.

Gottheil disagreed with the idea that an ultra portable would bring in new customers. Still, he said that even if Apple simply got existing Apple fans to buy newer MacBook models, this would still benefit Apple because the new MacBooks would likely generate higher profit margins.

And that would be good news for Apple shareholders since Mac sales have been what's really driving growth for the overall company lately.

In the company's fiscal fourth quarter, Mac sales rose 40 percent from a year earlier to $3.41 billion. iPod sales, on the other hand, increased only 4 percent to $1.6 billion. So if the iPod Touch isn't as big a hit as analysts expect, the company will need to depend even more on the Mac to keep sales and profits growing.

No worms in this stock

With all this in mind, how will Apple's stock fare this year. David Bailey of Goldman Sachs wrote in a report earlier this month that he doesn't believe 2008 will be as "explosive" as last year, but that Apple's stock should head higher over the next twelve months.

He expects Apple's upcoming fiscal first-quarter earnings announcement, which includes sales during the key holiday shopping season, to prove that Apple is still a great growth stock.

Apple will report its results on January 22. Analysts predict revenue will grow 32 percent to about $9.4 billion and that profits will soar 40 percent to $1.60 a share.

Apple's string of healthy results come at a steep price, however. The stock trades at nearly 35 times fiscal 2008 earnings estimates.

That's much higher than the valuations for rivals Microsoft (MSFT, Fortune 500) and personal computer maker Dell (DELL, Fortune 500), which trade at 19 times and 13 times earnings forecasts for this fiscal year respectively.

Still, Apple has consistently smashed Wall Street's earnings per share estimates over the past year. And the company's projected earnings growth rates of 30 percent this fiscal year and 22 percent a year, on average, for the next few years, is much higher than most other large tech companies.

Chowdhry said investors should probably not try and make short-term trades on the stock though. He warns that investors who buy now just because they think Jobs will make an announcement at Macworld that will send the stock higher could be setting themselves up for disappointment.

But analysts said Apple is a good buy for long-term investors who can avoid being influenced by day-to-day volatility. Investors who want to make a bet on the company's ability to keep coming out with the hottest new gadgets and delivering strong earnings will eventually be rewarded.

History of the iPod by the Discovery Channel

This is a good overview of the development and impact the iPod has had by The Discovery Channel.

TiVo Digital Downloads Could Transform TV

An announcement by the makers of TiVo to make TV shows downloadable to digital devices has the potential to revolutionize TV as we know it. Apple with the video-capable iPod and other manufacturers are making possible TV-to-go for the masses, the big question now is easy-to-obtain and free content. TiVo's plan will make this a reality. I wonder now how TiVo is going to get around content-provider concerns that users will pirate material. Time will tell. Read the article in MacWorld.

Is iPod's Popularity Waning?

According to The Financial Express, Apple Computer’s continued dominance of the MP3 market is prompting more people to examine exactly what it is that makes the iPod so successful.

Many attribute the iPod’s dominance to Apple’s coolness, but according to the report, "Understanding iPod’s Dominance: A Consumer Perspective," Apple’s coolness appears to be waning. The reasons most often cited for purchasing an iPod have more to do with brand familiarity than Apple’s cachet.

Today’s iPod buyer is driven by practical considerations more than social status, according to Dale Gilliam III, director of primary research at the Diffusion Group, a media research and consulting company. Coolness ranked third among people aged 15 to 24, behind quality of interface and familiarity with the brand. Design aesthetics and quality of interface were the top two reasons cited by the 25- 34-year-old age group for purchasing an iPod. Among those between 35 and 50, familiarity with Apple and the iPod brand were the primary reasons they chose the iPod.

Video iPod May Change TV

Apple may have stumbled onto something very great, and it's called iTV.

The new iPod that supports video could very well change TV and video the way the original iPod changed eletronic music. Only time will tell.

Admitedly, there's still a lot of shaking out yet to be done. It may be months or years before we see clearly the impact the video-enabled iPod makes. Some, like Business Week have seen the future and it's huge.

Apple to be Intel's "Show Pony?"

Rhonda Ascierto of the Computer Business Review reports about the newfound lovefest between Apple and Intel in the article, "Apple may be Intel show pony." Ascierto quotes IDC analyst Roger Kay: "Apple could be become the showcase for Intel's technology." I think Kay is on to something.

Apple already has practically cornered the digital music market by "getting it right." But another frontier is on the horizon: digital video...and no one has gotten it right yet either. If Apple - powered by Intel technology - were do for digital video what it has done for digital music, a new giant in the entertainment business could be born.

Now Steve Jobs has said more than once that watching video on the tiny screen of an iPod is not the experience people want. But what if Apple produced a device that's as small as an iPod with the capability of a consumer "digital hub?" Want to listen to music? Use the device as a stand alone player or feed it through your home stereo system. Want to watch the latest release of a new movie? Just hook the device up to your home TV system. If you're on the go, just watch the movie on the built-in screen or project it on the wall. A true portable digital device for all occasions!

Intel technology is closer to making this happen than IBM or Motorola and Apple saw the writing on the wall. If you think about it, it's amazing it took Apple this long to make the switch. In 1998 I talked about the promising future of the PowerPC chip in the article, "The Second Coming the of Macintosh." There's some great technology in the PowerPC chipset, but when it comes to portability and power consumption, Intel has leaped ahead big time.

The bottom line is Apple had little choice to do what it did. It will be exciting to see what the most innovative computer and software maker in the world will do with this opportunity in years to come. There will be bumps along this conversion, but with Apple encouraging developers to produce both PowerPC and Intel versions of their apps for the foreseeable future, there should be little compatibility concerns for current and future Mac users.

Tim Yarbrough
MacDoor Editor

So What's the 'Next Big Thing' for Apple?

By Tim Yarbrough
MacDoor Editor
zxmac8384@yahoo.com

With the runaway success of the iPod we can only wonder what the "next big thing" will be from our friends in Cupertino.

The 2004 Christmas shopping season will be known as the "Year of the iPod" just as in past years were known for the Cabbage Patch doll and Tickle Me Elmo.

What's different is the iPod is a utility device that will bring millions of users years of music enjoyment and a reason to access Apple's iTunes store to buy new music.

In the months to come we'll know if the iPod phenomenon is for real. Apple may see increased computer sales as millions of people experience Apple and its innovative products. The company continues to get good press on the quality and stability of its OS X operating system and how Macintosh is immune to many viruses that bombard Windows every day. But selling a few more computers is only part of the iPod story.

Steve Jobs isn't sitting on his laurels. Rumor sites are sizzling with speculation that a new iPod flash and an increased capacity iPod Mini will be introduced in January. But what else does Jobs have under his hat?

Whatever "it" is won't be introduced in January, I'm sure of that. I think Apple could very well be working on new products that further integrate home or personal media. What that is, I can only speculate.

However, Jobs knows all too well that computers won't keep Apple afloat. Rather, it will be the creation of innovative products that make peoples' lives better and more enjoyable.

Only time will tell what products Apple will debut on the world stage. One thing is for certain, on the heels of a monster hit like the iPod, there will be a lot of folks taking notice.

Could Apple be Microsoft's Worst Nightmare?

By Tim Yarbrough
MacDoor Editor
zxmac8384@yahoo.com

"Today, in a time when people are looking for easy access to technology, Apple can lead out with devices that provide this accessibility to the masses. By doing so it can accomplish something in computers that companies like Sony have been able to do with electronics such as the Walkman. While this opportunity certainly is within reach of Apple, I am not convinced it is ready to take on this role. While Apple is without a doubt one of the most innovative computers companies ever, Apple is not the risk taker it once was. I recognize that Apple has had to become more like other PC companies in order to survive."

Above is from the my column, "It’s Time for Apple to Innovate Again" written for The Macintosh User in January 2001. It appears Apple has decided it will innovate rather than fade into computer obscurity. What’s interesting is how it may "innovate" in the future.

Apple is getting serious. By all appearances, Apple’s "iApp" strategy will move way beyond the home and education user into, dare I say, the enterprise market? Consider these recent events:

• Apple introduces 17-inch "iMac for education" in the form of the affordable eMac. Apple is once again "attacking" the education market.
• Apple announces "Jaguar" OS X. Among other things, Jaguar features iChat, which accesses AOL's instant messaging servers: see "Apple’s New Gig: Smooth Interoperator" http://www.business2.com/articles/web/0,1653,40592,00.html; and Rendezvous, a technology that allows users to search out IP Networks and to share network "aware" devices; as well as other cool network stuff.
• Apple’s integration of Microsoft technologies with the apparent strategy to "embrace and extend" (see "Could Apple be Stealing a Page from Microsoft’s Playbook?") http://www.mymac.com/mccormick/5.15.02.shtml.

All noteworthy stuff indeed, especially that about Microsoft. Actually, it would be a funny turn of events if Apple really did pursue the "embrace and extend" strategy. It would be hard for Microsoft to stop Apple from "cherry picking" its technologies … but I’m sure it would try. It would be harder for MS to pursue such a policy considering the Federal antitrust lawsuit that continues to dog it … in addition to the fact that Apple hardware is based more and more on industry standards and the UNIX operating system.

Apple is certainly capable of delivering all types of devices based on its technology and the technology of others. The key is the strategy it decides to pursue. As Jason Brooks of eWeek points to in the article, "Bluetooth will Provide Strong Spokes for Apple’s Digital Wheel" http://www.eweek.com/article/0,3658,s=1870&a=26999,00.asp.

It appears Apple is planning to embrace a wireless and integrated device strategy that once again could move it ahead of the computer pack. Bluetooth, as you probably already know, is a wireless technology that links mobile computers, mobile phones, portable handheld devices, and theInternet. For more about Bluetooth, check out the web site www.bluetooth.com.

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Alsop Gets Real

The more I read Stewart Alsop’s columns on technology in Fortune, the more I like him. Not only is he giving the new iMac an extended test drive (and liking it), his latest On Infotech column "XP Means Extra Pain" in the April 29 print edition hits at the core of what has become Microsoft’s legacy:

"I agree with the reviewers. There’s nothing in Windows XP to cause anyone to go out of his way to get it. In fact, I wonder why such an amazing giant of technology as Microsoft — which argues vociferously for its right to integrate new technology into its operating system — can’t do better than this."

Alsop continues to break down why XP doesn’t deliver on its promises: XP isn’t all that new or stable; MS is the same old company; and XP is not easier to use.

It will be noted that in the same column he also states, "As many readers know, I’ve been using the Macintosh more and more at home. Apple recently upgraded its operating system to what’s known as OS X. That is based on Unix. You don’t have to restart your computer all the time. Managing programs and data is even easier than before. Of course, Apple is still the same old company too. But I’m beginning to think that Apple might actually be able to use such advantages to compete effectively."

Great column, Stewart. We’ll continue to walk with you as you seek enlightenment.

The iPod is More Than an MP3 Player!

The transformation of Apple from a computer manufacturer to electronic device manufacturer has begun. Mark it down as the iPod.

The iPod is one nifty MP3 player/recorder, but I believe Apple may have an underlying strategy with the device. Has everyone noted there been no Apple-branded PDA device announced? Could iPod possibly be the handheld device that will deliver this technology to Mac (and possibly Windows) users? Think about it.

Now I am not familiar with the underlying technology in iPod. However, what I do know is that it can serve as a hard drive for Firewire-equipped Macs and has its own operating system used to select and play songs. If you take this one step further it would be noted that programs theoretically could be installed and run on the device. Now , you tell me, how hard would it be for Apple to write PDA software to run on iPod? They already know how to do it (Newton) and they would have had to been blind not to see the tremendous potential out there (Palm, Microsoft CE devices).

You may say, well Newton was a bomb, so why would they want to go after this market again? Well, the answer is simple: iPod wouldn't just be an MP3 player/recorder, PDA or whatever. Depending on software installed, it's a cool and extremely portable extension of your computer desktop. Steve Jobs said it himself during the introduction of iPod: it will go places only PowerBooks dream of.

Well, there's my theory. Hey, I may be wrong, but it's interesting speculation nevertheless, huh?

No matter what happens with iPod, it appears Apple will be introducing more non-computer based gadgets in the future and attempting to migrate to more of a computer electronics company.

Click here for an example from Mac Directory that shows the iPod can be more than an MP3 player!