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Gather Ye Apples While Ye May

By Richard Adhikari MacNewsWorld ECT News Network
Oct 13, 2010 5:00 AM PT

Despite a plethora of seemingly bad news, investors and analysts continue to have faith in Apple.

Gather Ye Apples While Ye May

To sum up the high points of the bad news: Tons of competition, especially from Android; publishers appear to be flocking to the new Samsung Galaxy tablet and looking at other alternatives to the iPad; and Microsoft has unveiled its WinPho 7 smartphone lineup to chirps of joy from those who've seen or handled the devices.

On the positive side (for Cupertino): The Google apps market may be fracturing; one-third of high school students plan to make the iPhone their next handset; Apple TVs are flying off the retail shelves; Apple's reportedly developing new iPhones; and supplies of the MacBook Air are apparently drying up.

Apple's still entangled in a number of lawsuits, and it recently lost one, but who's counting? Like all other large companies, it has a substantial legal department and will fight court decisions all the way to the top. Oh, and analysts are quite confident about Apple's future.

Apple shares closed at US$298.54 Tuesday, up 1.08 percent, after hitting an all-time high of $299.50 in the late afternoon.

Attack of the Killer Robots

Android continues to pose the biggest threat to Apple. Not only did Motorola unveil several new Android smartphones last week, but CEO Sanjay Jha said the vendor's on track to meet its stated goal of turning out 20 Android smartphones by the end of the year.

"I don't think 20 smartphones by the end of the year is a difficult goal to make," Ramon Llamas, a senior research analyst at IDC, told MacNewsWorld. "What I'm more curious about is, will they meet their target of selling 12 to 14 million smartphones by the end of the year?"

Motorola may unveil more Android smartphones in the weeks ahead.

"Black Friday's the big time to launch, and I would hope to see another two or three smartphones from Motorola by that time," Llamas said.

One of the Android smartphones Motorola announced last week was the Droid Pro, a global smartphone targeted at the enterprise user. That device could threaten the iPhone's penetration of the enterprise.

"All the businesses I've talked to are thinking of whether they would or should have Android in the enterprise," Maribel Lopez, principal analyst and founder of Lopez Research, told MacNewsWorld. "They're looking at Android because their employees are looking at Android," she added. Lopez expects Motorola to offer more Android smartphones for the enterprise.

Meanwhile, publishers are reportedly abuzz about the Samsung Galaxy Tab Android-based tablet. The New York Times, the Wall Street Journal and USA Today will offer software apps for the Galaxy Tab, the Wall Street Journal reported.

"I think Android has done a lot of good in the smartphone market," Vipin Jain, CEO of Retrevo, told MacNewsWorld. "For the first time in three years, people are talking about real competition for the iPhone."

Redmond Gets Energized

More competition may come from Microsoft, which has been losing ground steadily in the highly competitive smartphone market. The company this week unveiled Windows Phone 7 and announced a slew of handset manufacturers who will turn out devices based on its mobile OS. These include HTC and Dell.

Microsoft is pushing hard on marketing WinPho 7 devices. It is launching them globally.

"I am quite impressed by the international aspect of the launch -- it's much bigger than I expected," Al Hilwa, a program director at IDC, told MacNewsWorld. "That, the development environment and the new user interface are probably the greatest things about the platform at this time."

The WinPho 7 OS has won praise from many who have seen it or handled Microsoft's new stable of smartphones.

The company has done a good job on WinPho 7, Retrevo's Jain remarked.

In addition to revamping the software, Microsoft has dealt with another problem that plagued Windows Mobile phones: the lack of standardization. Taking a leaf out of Apple's book, Redmond has laid down specific guidelines as to what should and should not be included in the hardware.

Finally, Microsoft is touting the WinPho7 smartphone as a gaming device, again following the trail blazed by Apple.

That might win a lot of app devs over to Redmond's side, which may be crucial to its success, as apps are the lifeblood of mobile devices.

"The gaming angle and the ties to Xbox Live will allow a lot of .Net people to freelance building consumer, gaming and social networking apps where previously they were cut out of that market," IDC's Hilwa pointed out. "It has the potential to bring in a specific segment of users, and Microsoft is smart to play to them." Microsoft, Hilwa predicted, will have "several thousand apps six months from now."

Whether Microsoft make inroads into the overwhelming lead held by Apple and Google in the mobile apps market remains to be seen, but it certainly has the money and the muscle to be a real threat to Apple.

Joy to the Apple World

On the other hand, there's also lots of favorable news for Apple investors.

For one thing, cracks are appearing in the Android market. Amazon.com has just launched its own Android app store in competition with the mainstream Android Market.

Further, it's not as if Android presents a monolithic threat to mobile Apple devices.

"Android as a whole is a winner but I haven't seen a single handset running Android that stands out or sells better than the iPhone," Retrevo's Jain pointed out. "There has to be a lot around a device to compete with the iPhone, which has a whole ecosystem around it -- hardware, software, content, apps."

Meanwhile, Piper Jaffray's 20th bi-annual teen survey indicates that a record 33 percent of teenagers plan to buy an iPhone in the next six months. The percentage of teens that owns an iPhone currently sits at 14 percent, pretty much the same as last year, but that might change by early next year.

Other Apple devices are also selling well. Apple TVs are flying off retailers' shelves, according to JMP Research, and iPad sales exceed 8.5 million, Bernstein Research analyst Colin McGranahan said.

Separately, Apple is working on new iPhones. By early 2011, it may offer iPhones with larger and smaller screens than the current iPhone 4, Kaufman Bros. analyst Shaw Wu has predicted.

Meanwhile, rumors that Cupertino is building a CDMA iPhone keep circulating, although it's not clear where this device will be sold. Some believe it'll be available from Verizon Wireless by early next year; others say Apple's looking to offer the device in India.

Finally, retailers are running out of the MacBook Air, AppleInsider reported. This is the first time this has happened in more than two years, and it's believed that Apple's preparing to launch a new model of the device.

Barclays Capital analyst Ben Reitzes is confident that Apple's future is bright. It has "prospects for significant double-digit organic revenue growth for several more years," Reitzes wrote in a note to investors.

Apple will sell almost 63 million FaceTime-capable devices by the end of financial year 2011. Those devices would be the iPhone 4 and the latest version of the iPod touch. The installed base of FaceTime-capable devices will hit more than 150 million by financial year 2012, and that could be conservative if Apple includes FaceTime in iPads and Macs, Reitzes wrote.

One point to note: Some analysts predicted Apple shares will surpass $350 by the end of the year. Kaufman Bros.' Wu has raised his price target from $350 to $374 for the third quarter of Apple's fiscal year 2010, for example. Apple will hold its next earnings call October 18 -- and we'll be watching for Wall Street's reaction.


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