Microsoft (MSFT) is about to launch its latest version of the Zune multimedia player. To date the company has sold two million units. In contrast, Apple (AAPL) has sold over 150 million iPods.
Microsoft has a chance to kill the Zune with a good excuse. By cutting prices on its Xbox 360 last week, it is putting pressure on the margins of its "devices" division.
Apple Inc. (NASDAQ:AAPL) reports earnings today after the close and Wall Street is expecting $0.86 EPS and $6.07 Billion in revenues. The company’s guidance usually comes at or under certain targets and is deemed overly conservative. The estimates for next quarter are $1.39 EPS and $8.6 Billion in revenues. If you have been inside an Apple store you’ll know why everyone expects a blowout quarter.
Apple shares were indicated higher by about 0.7% pre-market, despite the sell off seen in overseas markets and in U.S. futures this morning. After the open, shares are now up almost 1.5% at $172.90. Apple shares closed down $3.08 on Friday to $170.42, which was better than the overall market fared. Shares did hit new intraday highs of $174.63 on Friday.
Since shares were hitting new highs on Friday, you can imagine what the chart says. During the August market malaise Apple shares closed as low as $117.05, so shares are up over 40% from those levels. Options do not expire until November 16 after Friday’s expiration, but it appears that option traders are expecting a move of up to a $12.00 to $13.50 range in either direction today. Speculators are obviously using options as a "cheaper" way of trading the stock, because there are over 100,000 contracts listed in the open interest in the closest strike prices for November.
We just noted this morning how Strategy Analytics was predicting that Apple and AT&T would deliver 1.1 million iPhones in Q3, bringing sales to 1.325 million units. You have to wonder when Steve Jobs is going to split this stock. As a reminder, we are less than 5-days out from its new Mac OS X Leopard launch as well.
We recently covered how Apple was growing its worldwide computer shipments, and Gartner said that last quarter’s Mac shipments rise 37% to roughly 1.3 million units. If that is accurate, Apple’s computer market share is now 8.1%. Apple was also listed as one of our key window dressing stocks and Jim Cramer has it as one of his "New Four Horsemen of Tech," although recently he noted how some of these may see some expected profit taking.
Jon C. Ogg
October 22, 2007
Research-in-Motion (NASDAQ:RIMM) is set to report earnings today after the stock market closes, and First Call estimates are $0.50 EPS and $1.36 Billion in revenues. Keep in mind that the consensus estimate moved up from $0.49 over the last week and from $0.48 over the last month or two. Estimates of new subscribers are somewhere in the 1.35 to 1.45 million range (forecast was 1.32-1.37M) and shipments of more than 3 million units.
We just noted this one as one of the huge Window Dressing Stocks that was a large beneficiary of fund buying. Based upon a $98.00 mid-morning price, since the June 29 date shares are up 47%; but if you go merely one day before the end of the last calendar quarter shares are up a monster 77%.
It is never easy standing against the crowd and it is never easy saying hi-flyers have run too much. It is possible to stand against the crowd, but stocks have shown time after time how sometimes they will keep rising despite performance and despite valuations. But it is hard to imagine that there isn’t going to be some profit taking. RBC Capital Markets just downgraded this Monday saying R-I-M was hard to see higher prices for the time being. The average target is roughly $100 now, although there are higher targets. Jim Cramer said recently that he expects some profit taking in these names that are up big, mostly from his "New Four Horsemen of Tech" stocks.
The BlackBerry is still more business-focused, but what we are rally trying to look at is how large the global total is that the company can take. It has leaped over the Palm Treo from Palm Inc. (NASDAQ:PALM) and the iPhone, for now at least, has been less of a business focus and is still in the the very early stages of its 20 million unit target where R-I-M is trying to counter the advance.
We would expect some profit taking as the obvious move, but we aren’t going to try stand in front of a freight train. This one has just had way too many gap-ups on earnings before. With new versions of its PDA smartphones having hit the market, we aren’t going to try to outguess the guestimates for shipments and subscribers. We are still trying to factor in a longer-term estimate of the total global market opportunity for R-I-M and we aren’t alone.
The $55 Billion market cap sounds giant, but it depends upon how you view its global opportunity in the years ahead. Another wild card today will be the impact that the weak US Dollar had. Research in Motion is based in Canada, derives much of its sales in the U.S., and now has global sales with most major global wireless carriers.
Jon C. Ogg
October 4, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and does not own securities in the companies he covers.
Apple Inc. (NASDAQ:AAPL) is trading up marginally ahead of the technology analyst and press conference in San Francisco, but the stock is currently back within about $4.50 of its all-time highs. What is being pushed around all over Wall Street and Main Street alike is a new revamped and souped up iPod.
We’ve already gotten the iPhone, we’ve already seen new PC announcements, we’ve already been given the delayed launch date of the Leopard operating system, and we are still viewing the TV initiative as a hobby as Steve Jobs called it himself. Unless Apple is going to shock the you know what out of everyone with a new unknown and undiscovered product, this iPod revamp makes more than perfect sense. Consumers want it too.
Back in April, Apple said it had sold its 100-millionth iPod. This goal is probably to hit 200 million units if it wants to keep driving the stock. We think this may be more of an iPhone-esque iPod, but without the phone. So we’d be looking for more touch screen and hopefully some more Wi-Fi features. We’ll know in a few hours. Here is what some of our tech friends are saying around the web today:
Business 2.0: wide-screen, touch-sensitive iPod, iPod nano with a larger screen, iPod Shuffle with more memory for the same price….
Engadget: Rick Rubin proclaims "the iPod will be obsolete"
Apple to unleash "The Circle" concept tomorrow?
Newsday.com: What’s coming next from Apple?
CNET: "The iPod is growing up: If Apple really is putting a version of Mac OS X in a new iPod, presumably it has more in mind than showing high-quality reruns of The Hills."
Think Secret: Touch-screen iPod to take center stage
San Francisco Chronicle: What news awaits the Apple faithful?
Speculation centers on redesigned iPods, expanded content offerings on iTunes
After the recent Zune price cuts, you have to wonder if Microsoft (NASDAQ:MSFT) is holding on to this space with looser hands and maybe just as a hobby. And as far as Creative Tech (NASDAQ:CREAF), everyone now only asks "Who?".
Jon C. Ogg
September 5, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and he does not own securities in the companies he covers.
Earlier this morning, Wal-Mart (NYSE:WMT) announced the launch of its own "DRM-free" MP3 music downloads. Those wanting the service can download from Walmart.com at $0.94/song and $9.22/album. The new MP3 digital format allows the ability for customers to play music on nearly any device, including iPod®, iPhone® and Zune(TM).
Wal-Mart is one of the first major retailers to offer MP3 digital tracks with music content from major record labels such as Universal and EMI Music, and the launch is aimed to get into the space of Apple (NASDAQ:AAPL) and Amazon.com (NASSDAQ:AMZN). Wal-Mart’s new MP3 music catalog includes hundreds of thousands of songs and albums, and will be continually expanded with additional mainstream and independent music content. Also, Wal-Mart is currently offering special MP3 album pricing on hundreds of album classics.
It used to be that once Wal-Mart went after your space that things became instantly worse for you and your other competitors. But after the Wal-Mart woes of late, they just don’t seem able to wrangle away customers at the same rate. In fact, many may now chuckle at new initiatives because its online presence is still too small to be a major factor.
Steve Jobs and Jeff Bezos probably didn’t call each other up in a panic this morning, and probably won’t be tomorrow either. These stocks are even higher on the heels of RealNetworks (NASDAQ:RNWK) launch of a new digital music company with MTV. We addressed this earlier today. If these were as threatening as they sound then Amazon.com (AMZN) shares might not be up 3.8% and Apple (AAPL) shares might not be up 4% today. Getting the huge established tech predators unseated from a dinner table at their favorite restaurants usually takes more than getting a two-top table in the corner.
Jon C. Ogg
August 21, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
Dell (NASDAQ:DELL) is apparently boosting PC offerings with Linux and is going after more virtualization. The company released some data that it will have PC’s that run multiple versions of Microsoft’s (NASDAQ:MSFT) Windows and Linux simultaneously. It is already selling PC’s with the Ubuntu Linux system on it. This came out of the LinuxWorld conference.
Dell is working with the VMware (NYSE:VMW; t.b.a.) unit of EMC Corp. (NYSE:EMC) for virtualization, along with other partners. Everyone is getting into the virtualization game it seems. Imagine when Apple (NASDAQ:AAPL) offers out its operating systems to PC-makers, rather than just Macs allowing virtualization with other PC’s.
PC companies in the past had not been too crazy about virtualization. But now they either really want to offer virtualization or they just will have to offer it. With the new dual-core and quad-core processors (and the even greater multi-core offerings down the road) and perpetually lower DRAM costs, this is going to become easier and easier and cheaper and cheaper to offer. Virtualization is coming on strong, like it or not.
Jon C. Ogg
August 8, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
VMware, the soon-to-be partial IPO and partial spin-off out of EMC Corp (NYSE:EMC), has announced the general availability of VMware Fusion. This will now allow Mac users to run Mac OS X, Windows, and other PC-based apps on a single Mac. The suggested box retail price is $79.99.
Interestingly enough, it isn’t on sale throughout the entire distribution chain yet. VMware Fusion is now available online at vmware.com/mac, the Apple Store (apple.com), Amazon.com, Buy.com, Fry’s (frys.com), Microcenter (microcenter.com) and CompUSA (compusa.com). The software will soon be available at Apple’s retail stores and other authorized retailers worldwide.
The software allows Mac users to run both 32- and 64-bit operating systems, leveraging two processor cores at the same time and using a wide variety of USB 2.0 devices. VMware Fusion is also the only Mac virtualization software available today to provide full support for more than 60 operating systems and complete power management capabilities to safeguard virtual machines when laptops are running out of battery. There have been more than 250,000 downloads of VMware Fusion since the beta became available in December 2006.
Apple (NASDAQ:AAPL) has to be happy about this being available ahead of the new OS launch later this year. The company has unbelievable upside to market share gains in computer sales, and the more and more that can ‘ease the PC to Mac transition’ can really help Apple out. If this works incredibly well, this could even migrate more of the business consumer away from "Windows-only" PC environments. It is still too soon to make that prediction, but it will be interesting to see if this can start bumping those impressive numbers up even more.
Jon C. Ogg
August 6, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
Reports circulating on Wall St. indicate that Apple (AAPL) may introduce new versions of its iPhone. TheStreet.com reports that "RBC analyst Mike Abramsky issued a note Tuesday that attempted to draw a roadmap on where the popular iPhone is headed next." The analyst had conversations with an executive inside Apple.
The two models that may come out next would be a less expensive versions of the current phone and a model that works on 3G network.
The 3G version would be a big deal. A number of the criticisms of the handset center around the fact that it works on AT&T’s (T) slower network and that the product will not be popular in Europe and Asia where fast broadband networks are a critical part of the marketing of cell phones.
Without a 3G product, Apple is unlikely to get sales of the phone to 10 million a year. With it, sales could go well beyond that and the product would have a clear path to being a global success.
Douglas A. McIntyre
Unwired View is reporting that Apple (AAPL) has applied for patents that might allow the company to sell a cheaper version of the iPhone that can only be used to handle calls and play music.
While it is interesting speculation, it is almost certainly untrue.
It would be difficult to imagine Apple undercutting sales of a device that has a price of $599 and a gross margin of 55%. Jobs & Co. are not that slow witted.
Douglas A. McIntyre
The Wall Street Journal reports that hackers have made their way into the Apple (AAPL) iPhone and done some work to get certain features to work without an AT&T (T) activation. The most important hack seems to be one that allows the browser and iTune features to work on WiFi without the AT&T cellular features turned on.
But, a hacker’s work is never done. Soon enough, they will have the iPhone working on other networks, perhaps T-Mobile’s, and probably overseas systems like Vodafone (VOD). The tech monkeys will also likely get the phone to make VoIP calls through WiFi hot spots.
None of this is likely to hurt AT&T. Customers in the US are paying their money. They like the iPhone. And, there is not much of a tradition of rewiring electronic devices here. Only ripping CDs and DVDs.
But, Asia is a different story, especially China. Changing products made in the West so that they can operate more inexpensively is not so foreign a concept there. IP does not carry quite so high an honor. Companies like Microsoft (MSFT) and the movie studios have figured that out.
The Apple process for making money on its iPhone is to get consumers to pay for it. No discounts. No giveaways to get new cellular customers to sign up for expensive plans. That may work in the US and it may work in Europe. But, in some parts of Asia, the iPhone will end up doing things that will hurt its value to carriers. Free VoIP calls are hard to make money on.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.
Most media and analysts said that Apple (AAPL) sold over 500,000 iPhones and that the figure showed high than expected demand. TheStreet.com writes that Apple’s own goal was one million units and that the product launch was a bust.
Due to the "poor" launch, stocks in company’s like Sprint (S) rose late last week.
But, the theories about what early sales of the iPhone mean are wrong, and it will be several quarters until the effect of the handset is really known.
Sprint, for example, has problems of its own, well beyond the iPhone. It could loss a million customers to the iPhone this year, but if its could improve its integration with NexTel and upgrade customer service, it might not matter. If the company’s planned roll-out of a national WiMax network is an early success, the iPhone will hardly be an issue.
The early sales of the iPhone will also be limited because it does not work on AT&T’s (T) 3G network. Early adopters, a phrase coined by out-of-work marketing executives, may buy the new handset with the substandard network, But, most smart mainstream customers will wait. And, that will allow companies like Nokia (NOK) and Sony Ericsson to get new products to market to compete with the Apple product.
Come back at the end of Q1 2008, and maybe the market will have some useful data.
Douglas A. McIntyre
The New York Times writes that T-Mobile, a unit of Deutsch Telekom (DT) which ranks fourth in subscriber in the US cell market, is launching a line of phones that work on its cell system and with WiFi. Calls from WiFi hotspots work on voice over IP and are free.
The moves seems a bit desperate, but like many actions of this sort, it can do real damage to both the company taking the action and its competitors. Fourth place is an ugly place to be when the first two places belong to Verizon Wireless and AT&T (T) with its new Apple (AAPL) iPhone.
But, free is free, and that is hard to bet. T-Mobile has to gamble that it can pick up enough subscribers to help offset the time that new customers spend taking over WiFi. The phones will almost certainly be used on the regular cell network some of the time, so perhaps those net incremental minutes for which T-Mobile gets paid have a high margin. They run on a network that has already been built.
By coming to market with a product that could save cellular consumers a very large amount of money, it breaks the customer base down the middle. On the one side are people who want the most cost efficient service and on the other are people who want the most beautiful phone.
Beauty only lasts so long.
Douglas A. McIntyre
Too much has already been written about the costs of the components of the Apple (AAPL) iPhone. Several research firms have spent their $599 per unit simply to tear the thing into little pieces and count up the value of the parts. iSupply says that all of the hardware taken together costs Apple $266, giving them a 55% gross margin.
But, all of this work is as misleading as it is incomplete. There has been no analysis of what it cost Apple to develop the project both in terms of engineering man hours and on-going work to keep the product current. Also, no cost analysis for development of new versions. And, there are the delays in the new Mac operating system, Leopard, which became a victim of the iPhone time table. That cost Apple something in terms of deferred or lost revenue.
Gross margins don’t tell much.
The other supposition is that the margins were ever going to be below those for the iPod. Jobs & Co. would not bother to go to effort. He has admitted that Apple’s TV product is an experiment as much as a product. Industry analsysts say that its gross margins for that product are not high. But, it is not the product that takes the stock to $200.
The iPhone is. The margin on the handset was always going to be as good or better than the iPod.
Why is anyone surprised?
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.
Wachovia says that it believes shares in Echostar (DISH) will go higher.
Bloomberg writes that Apple (AAPL) sold 500,000 iPhones, more than most estimates.
Stifel says that concerns about Q3 numbers make Broadom (BRCM) a near-term buy.
Stifel says Cisco (CSCO) is having strong orders in current month and is short-term buy.
Blockbuster (BBI) says James W. Keyes, former 7/11 chief is named CEO of movie rental firm.
Douglas A. McIntyre
Now that the Apple (AAPL) iPhone has been out 24 hours and the reviews have been fairly good, the question is whether it will sell the ten million units in 2008.
It may well not make it.
Why?
1. Customers will wait for the 3G model. Tech lovers want the most advanced products and service. A phone running on a 2.5G system may be a great handset, but it is pulled down by the network.
2. People will wait for the next version. This is the "don’t buy the first model of a new car" syndrome. But, ti’s true. A lot of consumers won’t buy the first version of anything.
3. It’s too expensive for people 16 to 22 years old. Young adults usually don’t have the money it would take to buy a $500 phone plus a service plan. Teenagers have to rely on their parents. A 45-year old adult with a $49 Nokia is not going to spring for an ultra-expensive phone.
4. Nokia (NOK), Motorola (MOT), Samsung, and Sony-Ericsson will defend their turf. None of these companies will come up with an "iPhone killer", but the largest handset companies in aggregate will come out with some impressive handsets of their own.
5. Customer service is more important for $500. Reports of complaints about activation problems with the iPhone are already surfacing. AT&T (T) is not in a position to give concierge service for these customers.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.
| Today’s top tickerspy Indexes | |
| Home Furnishing R... | +14.1% |
| Ethanol and Biofu... | +5.1% |
| Electronics Retai... | +2.1% |
| Diabetes Stocks | +2.0% |
| Memory Chip Stock... | +2.0% |
 | |
| |
RSS Updates
Email Updates
