Research firm Screen Digest says that Apple should move ahead of Time Warner Cable (NYSE: TMC),  and will be second only to Comcast (NASDAQ: CMCSA) by the end of this year.

The FT reports that iTunes will have overtaken the video-on-demand service operated by Comcast, the largest provider, by 2014.The news may be bad for the cable companies, but it is worse for companies like Netflix (NASDAQ: NFLX) and Walmart (NYSE: WMT) which have much smaller shares of the US VOD market. They are using their brands and large customer networks to increase their footholds. The same is true of AT&T (NYSE: T) and Verizon (NYSE: VZ), which have set up fiber-to-the home products FiOS and U-verse. Verizon has spent over $20 billion one the infrastructure for its initiative.

The news also shows that growing power of the Apple hardware/software/content ecosystem that has continued to grow with the launch of the iPad and iPhone 4. Apple has effectively built a network for content using its hundreds of millions of devices . The size of that network makes it impossible for content companies to gain access to many consumers.

Apple is, once again, the winner in a market that a decade ago no one would have believed that it would be in at all

Douglas A. McIntyre

The New York Times reports that “investigators were probing whether Apple has tried to persuade music labels to not give rival Amazon.com Inc. exclusive access to soon-to-be released music.”

The music industry may want to be careful what it asks for in the event that its complaints are successful.The Apple iTunes store passed 10 billion downloads in February. The company accounts for 70% of digital music downloads worldwide.

Several publishers have resisted Apple’s pricing. But, without Apple most of these companies would lose a larger part of their sales. The music industry is already in deep trouble due to falling sales of CDs.  Even though iTunes pricing may be less than they would like and their cut of sales is below what they have asked for, Apple is the company that keeps their revenues at levels that allow them to survive.

Apple performs another service to the music industry. Piracy takes as much as 80% of the potential digital revenue from the music firms. While Apple does not use electronic systems to prevent the sharing of music and the iTunes store sells songs and albums that are later stolen, it is still the largest provider of un-pirated music and premier video content in the world.

The music business can work to curtail the dominance of iTunes, or it can accept less of what it wants as a portion of Apple’s take. But without Apple, there would be almost no take at all. No other company has 300 million iPods and 50 million iPhones in the market.

Douglas A. McIntyre

The strength of the iPad does several good things for the company and may cripple competitors the way that the Amazon (NASDAQ: AMZN) Kindle did to the e-reader market.

The tablet computer is a relatively old concept which Apple decided to dust off and actually build. That it has done so well that it shuts up most naysayers who believe its functions and chip power make it a hard sell.

Apple’s revenue should begin to show an increase from iPad sales as early as this month. The average unit costs $600. The company could easily ship 2 million units in the 90 day period since its launch. iPad’s contribution will almost certainly grow as it become available overseas.

Apple is often a first mover and a muscular one as well. It took nearly the entire multimedia market with the iPod when it was launched in 2001. It has had a more muted effect on the smartphone market but the iPhone is so successful that it now drives about one-third of Apple’s revenue. The consumer electronics company’s rapidly expanding sales will make it harder for Windows 7 based table PCs to be successful. There are rumors that Hewlett-Packard (NYSE: HPQ) has backed off its plans to create a tablet. There are no signs that Dell (NASDAQ: DELL) plans a tablet of its own.

Apple has once again sucked most of the air out of the room with the iPad launch leaving almost no breathing room for its competition.

Douglas A. McIntyre

Apple’s market value has reached $218 billion and is rising. Due to investor appreciation of Apple’s innovation, rapidly rising revenue and net income, and powerful brand, the price of the firm’s stock is up 110% over the last year.

Apple’s market cap ranks No.3 among stocks traded on US exchanges. It trails only Microsoft (MSFT) at $257 billion and Exxon Mobil (XOM) at $322 billion. Several analysts recently increased their price targets for Apple to more than $300. Apple trades at an all-time high of over $238 a share. If the stock does rise by 26% to $300, the firm’s market cap would be $272  billion. Microsoft’s stock could gain 5% and Apple would still take the No.2 spot in market value.

The case for Apple passing Microsoft is not much of a stretch. Apple’s older products, the Mac and iPod, would have to hold their own in their respective markets. The Mac’s share of the US computer market is about 7%.  Its sales are rising fast enough that it should be able to keep that position. The iPod really has no direct competition and iTunes has such a large share of the online music market that its broad library of content will help the iPod keep its spot among multimedia players.

The iPhone will have to continue to have blistering sales for Apple to continue to do extremely well. The handset is now a third of Apple’s revenue. Most analysts expect over 7 million iPhones to be sold in the current corner and that is without the handset having a strong foothold in large markets such as China. The biggest threat to the iPhone’s success seems to be the emergence of Google (GOOG) Android-powered handsets which have grown rapidly and seem to be taking market share from established operations like RIM (RIMM). Apple will have to show Wall St. that Android is not a significant threat to its smartphone business. Jobs & Co. expect to launch a new version of the iPhone this summer, which should help sales.

The wild card in Apple’s growth is the new iPad. Investors expect it to be a success. Analyst estimates of its sales in the first year after its launch are for five million to ten million units to be shipped. Any number well short of that will cause Wall St. to believe that Apple has lost its amazing touch with consumers. That would almost certainly stop the firm’s stock from advancing.

Apple will announce earnings in about a month. Revenue is expected to above $8 billion. Investors will expect the company to top its own EPS forecasts, which it almost always does. An upside surprise on earnings will almost certainly send Apple’s shares higher.

Apple’s market cap could pass Microsoft’s by the middle of the year.

Douglas A. McIntyre

New research from IDC says that  ”27 percent of 18-34 year olds” are interested or extremely interested in purchasing the product.  Among current owners of Apple products thirty-seven percent said that “liking the Apple brand” was the main reason for their interest. Those numbers could translate into extraordinary sales of the iPad

Apple’s major hurdle to selling the iPad is probably price. The main consumers have rejected the Amazon (AMZM) Kindle has been its high price, according to several surveys. IDC found among potential iPad buyers “the prospect of spending $500 or more for a new device that doesn’t yet have a clear advantage over their other primary devices is unappetizing.”

Apple may have to quickly cut prices the way that it did with the iPhone to keep consumer interest in the iPad high. That will hurt Apple’s margins unless it can pass the costs of the price cuts on to its suppliers.

If Apple does have to lower the price of the iPad quickly,  it may lose some of its reputation as a premium product. That could lead to consumers viewing it as no better than table PC offerings from HP (HPQ) and Dell (DELL). One of the ironies about Apple products is that high prices seem to make them more attractive than their competition. This may be why the Mac has a larger share of the market for computers with prices above $1,000 that it does for the balance of the industry.

Features will  be the critical reason to the success of the iPad, but price may be just important. The question is whether it is critical for the new tablet PC to be cheap or expensive.

Douglas A. McIntyre

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.

In its last fiscal year, Microsoft made a little more than $400 million on revenue of $8.1 billion in the part of the company that makes and markets hardware. Those numbers seem OK, but in the two previous years the unit lost $2.5 billion. Wall St. hates the business almost as much as it hates Microsoft’s MSN online operation. Investors want the company out of areas where it looses money and has few prospects for improvement.

The Xbox 360 price cut is a sensible risk. If dropping the cost of the product picks up market share from Sony and Nintendo, the move has the benefit of moving Microsoft further along in an area where it is doing well.

The Zune is another matter. Apple’s lead is too large. The Zune is not a product which is terribly different from its competition.

Microsoft can simply say it does not want to take a bath on the Zune while it is taking a more intelligent risk with Xbox profitability.

Kill the Zune. Save some money.

Douglas A. McIntyre

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.

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.

Reuters writes that Virgin Media (VMED) is seeking a buyer, and Carlyle Group is considering a $20 billion offer.

Reuters writes that some Apple (AAPL) iPhone buyers have had activation problems getting onto the AT&T (T) network.

The Wall Street Journal writes that Bear Stearns (BSC) may take until July 16 to add up all of the loses from its hedge funds because some of the securities they own are so thinly traded.

The Wall Street Journal says Universal Music may not renew its deal with Apple (AAPL) for a long contract term. It may opt for s shorter deal. Music publishers have been upset about their royalties from the music store.

The Wall Street Journal writes that surveys show the teenagers are more likely to accept ads on social networks if the come in the form of widgets, small interactive software downloads.

The Wall Street Journal writes that Altria (MO) is creating cigarettes aimed at Indonesia, the world’s firth largest cigarette market.

The Wall Street Journal writes that Gap (GPS) is launching a credit card that can earn point for Gap products even if the card is used for charges outside the company’s stores.

The Wall Street Journal writes that music publisher EMI and tech company Snocap have reached a deal so that music artists can sell their albums directly from their own websites.

The New York Times writes that Asia consumer electronics markets are trying to keep from being hurt by the Apple iPhone the way that they were the iPod.

The New York Times writes that Yahoo! (YHOO) is introducing ads targeted by behavior in an attempt to offer a product that its rivals do not have.

The New York Times reports that the Microsoft (MSFT) Xbox Live is being used to market movie and TV show downloads.

FT reports that Kraft (KFT) is in talks with Danone about buying its biscuit unit.

Barron’s writes that Earthlink (ELNK) will probably go through a restructuring to make the company more attractive to investors.

Douglas A. McIntyre