Stocks:  (AAPL)(MSFT)(SNDK)(RNWK)

One of the things that investors often shy away from in a company is when it has large, well-financed competitors. Another is a company that has an extraordinarily high share in a market where competitions is heating up.

Apple is in both categories.

The company’s run on the back of the iPod and iTunes has certainly be fantastic. The stock has gone from $50 in July to almost $89 recently. Rumors that the company will come out with an iPhone have fueled some of the recent gain. Going back even further, Apple’s stock was under $7 in April 2003.

Apple bulls like to point out that the iPod has by far the largest share in the portable media player market and that consumers will not want to shift their music play lists to another platform. Well said and well reasoned. But, the press has begun to point out that NetScape, WordPerfect, and Novell NetWare had similar share advantages. Microsoft has vowed to spend hundreds of millions of dollars on its competing Zune player. Whether they will be successful is open to question, but defending its turf will certainly cost Apple something.  Other firms like Sandisk and RealNetworks would also like a piece of the iTunes/iPod market. While they are not as big as Microsoft, Sandisk does hold second place in the MP3 player market and Real has been distributing music over the internet for more than a decade and has hundreds of millions of players on PCs.

The music industry, Apple’s largest content provider, feels that the company has “screwed” it. The iPod is often used for illegal playing of ripped CDs, and the music companies would like varialble pricing based on the popularity of content. Deals with Microsoft and Sandisk may give the music guys more of what they want.

The Mac has also done well recently. Apple now has 6.1% of the US market and could pass Gateway in share soon. Of course, the Mac is back on the radar of PC companies like Sony, Dell, HP and Lenovo/IBM. Mac sales may continue to increase, but that may only come if Apple is willing to drop price to keep its share rising.

Wall St. can take nothing away from Jobs & Co. Few tech firms have been able to match them for innovations and product sales. But, Apple is starting to draw flies.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

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