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.
Research-in-Motion (NASDAQ: RIMM) is reporting a critical outage for its Blackberry users this afternoon. Some outages in the past have affected some users, while others were system-wide. This outage is system-wide for enterprise clients (large companies, government agencies, and the like) and for all network users in the Americas.
RIMM shares closed up over 5% at $94.47 today, although shares are down almost 1.5% at $93.17 in after-hours trading.
It sure looks like Steve Jobs just got a new opportunity to talk about the benefits of the iPhone, although we would caution that outages in the past have not created any major customer exodus in the past. This may give that recent survey in favor of the iPhone one more leg up.
Jon C. Ogg
February 11, 2008
Garmin Ltd. (NASDAQ: GRMN) has unveiled a new device today and this looks like many consumers will interpret it as a shot right across the bow of Apple Inc. (NASDAQ: AAPL). These are actually different markets on the surface, but analysts andconsumers may draw more lines into converging markets after the firstor second generation of the phones. You could make an anology that Apple was converging mobile computing and communications and iTunes into the iPhone, and Garmin is converging mobile computing and communications with GPS & PND.
Garmin is launching the nuvifone(TM) to combine a phone with a personal navigation device. This has many of the same features as the Apple iPhone with some differences and some relative pros and cons. The con is fairly easy to see and that is that it doesn’t look quite as cool on the surface, and this is not really looking like the next iTunes replacement hub. But the pros may greatly outweigh this. For starters, this is going to have much the same look as the personal navigation devices from Garmin today, plus it will have a mobile web browser in an all touchscreen platform on a 3.5-inch screen (same size as iPhone).
You can see the entire media pictures here outside of this one picture here with the web browser open to get a snapshot of what you are really looking at, and when you click on the images on the Garmin nuvifone site you will see their images are much more clear.
When the nuvifone is docked onto the vehicle mount, it automatically turns on the GPS, activates the navigation menu, and enables hands-free calling so that the user never misses a beat in the conversation and is able to begin routing to their destination with ease. This also comes preloaded with maps of North America, or Europe (or both), and you can still have that talking voice prompted direction guide.
This will also harness Google local search capability with 3.5G and will combine a personal messaging function for email, text, and instant messaging.
For those who can’t find their own (you know what), it even has a "Where am I?" feature to display the exact latitude and longitude coordinates, the nearest address and intersection, and the closest hospitals, police stations and gas stations. And if the enemy is over-running your defense lines you can call in the broken arrow air strike right on top of your position.
Besides navigation, the nuvifone includes access to Garmin Online(TM) for constant updated information in real-time traffic, fuel prices, stock prices, sport scores, news reports, local events and weather forecasts.
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.
Palm Inc. (NASDAQ:PALM) has fallen out of favor from many long-term investors, even if it has recovered off of lows. But after reviewing the numbers this is much better than it could been:
Shares closed down 1.6% at $16.00 today, and that is in the middle of the $13.41 to $19.50 52-week trading range. Its recent $100.00 Centro smart(er) phone is likely going to carry less profit per unit, but now the company is going for more volume in the lower-end phone sales were none of the smart phones participate. This new focus is a market where Research-in-Motion (NASDAQ:RIMM) has somewhat stayed out of, although sometimes certain contract signings and promotions allow competition there. The new iPhone from Apple (NASDAQ:AAPL) has been a threat as well.
The investment and recapitalization is all but finalized with Elevation Partners and it seems the market is somewhat waiting to see how the company performs after that. Shares are down 4% at $15.35 after-hours trading, but this is actually a pretty good reaction when you consider its position compared to BlackBerry and iPhone now. The news might not sound great, but it may be deemed as at least a partial win because it could have been far worse. Now the company will just have to prove it can get this back to its prominence over a long-term horizon.
Jon C. Ogg
October 1, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. Special Situation Investing Newsletter and he 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.
According to The New York Post, Apple (AAPL) "get 10 percent of the revenue from voice calls and data usage" in the new deal it has cut with T-Mobile to sell the handset in Germany.
For AAPL, that is a tremendous deal If T-Mobile’s operating margins are anything like AT&T (T) Wireless, it is giving up a lot. Last quarter, the AT&T division had operating income of $1.6 billion on revenue of $10.395 billion.
The contract may show just how anxious carriers outside the US are to get their hands on an exclusive deal to sell the AAPL product. The Post writes that "Apple is also reported to be close to similar agreements with wireless carriers O2 in the United Kingdom and Orange in France."
If these reports are correct, APPL may earn much more off each iPhone sold than most on Wall St. expected. If Apple hits its goal of selling 10 million handsets by the end of 2008, the contribution to the company’s P&L could be unexpectedly good.
Douglas A. McIntyre
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.
Late word from The Inquirer is that AT&T (T) may cut the GPS function from the new RIMM (RIMM) Blackberry so that it will not steal from Apple (AAPL) iPhone sales.
AAPL’s iPhone is supposed to be the driver of AT&T’s efforts to get new wireless customers. The wireless company’s fears are that the new Blackberry 8820 will have both GPS and WiFi functions at a price well below the iPhone.
AT&T almost certainly makes more money from the $500 iPhone and its high-priced call plans that its does from the RIMM Blackberry.
RIMM’s shares are up over 160% over the last year, outpacing the AAPL rise of about 80%.
If the news about AT&T blocking the new Blackberry function are true, RIMM’s magnificent rise could be coming to an end.
Douglas A. McIntyre
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
Piper Jaffray has raised its price target for Apple (AAPL) from $160 to $205. up 28% which is stunning. Apple trades at $143 now. So, a stock that is up 130% over the last year would rise another 43% from the current price.
The new target price is based to a large extent on an estimate by the firm that Apple will sell 45 million iPhones in calendar year 2009, at an average price of $330.
The forecast is nutty for several reasons. First, Motorola (MOT) sold 35 million phone in that last quarter for an annual run rate of 140 million phones. The company has dozens of models and relationships with most of the major cellular carriers around the world. It took more than a couple of years to build those relationships. Motorola also has 2G phones, 2.5G phones, 3G phones, and maybe ever 1G phones. It designs phones priced for everywhere from India to England.
The idea that Apple will sell a third as many phones at Motorola sells now is not credible. Especially at a price point that would be much higher than the average price that Motorola and Nokia (NOK) get, which is under $100 per unit. The Apple estimate also assumes that the larger handset companies will not come out with competing phones.
No way, no how.
Douglas A. McIntyre
The market of Apple (AAPL) watchers grows larger by the day and looks for the smallest hint of new news from the inventor of the Mac and the iPod.
The most recent frenzy is centered around a report from an analyst at JP Morgan based on a patent filed at the U.S. Patent and Trademark Office. There may be and might be signs in that patent that Apple (AAPL) will launch a cheap version of its iPhone to hit younger consumers.
According to MarketWatch the research note from JP Morgan says: "We believe it’s a strong sign that Apple could potentially convert every iPod Nano into a Nano phone," The speculation goes further and give some actual numbers: "If Apple’s approach is successful, Chang predicted the company could potentially ship 30 million to 40 million units of the Nano phone in fiscal 2008."
After digging through Steve Jobs’s garbage, 24/7 can say the rumor is not true, There will be no cheaper iPhone launched.
You heard it here first.
Douglas A. McIntyre.
One of the biggest knocks against the new Apple (AAPL) iPhone is that it works on AT&T (T) 2.5G network and not a newer 3G network. Consumers want that faster connection speed.
So, it is natural that Apple and AT&T shareholders and iPhone customers would want to know when 3G is coming.
Apparently, not soon. Business 2.0 writes that the iPhone does not have a 3G radio, which it would need to access the faster network. This might explain why industry experts believe that Apple will launch the iPhone on a 2.5G network in Europe.
There is no telling how much the iPhone’s sales will be held back by a delay in functioning on 3G. Certainly competitors like Nokia (NOK) and Motorola (MOT) will be waiting.
If the market is looking for an Achille’s heel on the iPhone, this may be it.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com
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.
GigaOm is suggesting that AT&T (T) offer free WiFi access at 10,000 locations all of its home 3 megabit DSL customers. The technology news site suggests that, to get an edge of cable broadband subscribers, the WiFi offer be extended to all AT&T DSL subscribers as a way to retain and build its home broadband service business.
GigaOm goes further to suggest that Apple (AAPL) iPhone customers also get the free WiFi access since the handset now only works on AT&T substandard 2.5 G network.
The problem with the suggestion is that it is expensive. It may cost the company very little to give the WiFi product to DSL customers, but iPhone subscribers might use the product to set up free voice over IP calls.
But, AT&T may not have a choice. T-Mobile has just launched free WiFi calling for its customers along with standard cell service. If its works the balance of the cellular service providers may have to follow.
Douglas A. McIntyre
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.
According to BusinessWeek, Apple (AAPL) sells its iPhone for $499 to $599, but the handset only costs $200 to $220 to make. The figures are from research firm Portelligent.
While the figures may spell short-term good news for Apple, the very large profit that the company makes on the device could encourage both AT&T (T), the exclusive carrier for the phone, and consumers to wonder why they should not get a better deal.
Apple’s profit would certainly allow it to lower the price if it needs to stimulate sales. Bloomberg reports that estimates for initial sales of the phone are about 500,000 units, ahead of most industry estimates.
For now, Apple is getting two benefits–sales volume and gross margin. If it can hold both, the iPhone could be a bigger financial success than most analysts believed.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.
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