Wednesday, September 5, 2007

Apple (AAPL) comments

Per the Utility Belt blog,

  • for the 2007 holiday buying season, Steve Jobs today refreshed Apple’s (AAPL) entire line of iPod music and video players, from the tiny $79 shuffle to a new wide-screen iPod Touch -- an Internet-ready device that is like an iPhone but without the phone
  • The new version of the iPod nano, Apple’s most popular model, sports a wider screen that can browse through album covers, play games and show movies and TV episodes downloaded from iTunes. A 4GB nano costs $149, the 8GB version is $199.
  • The new standard iPod – renamed the iPod Classic -- is thinner and packs twice as much memory for the price as its predecessors, enough to hold up to 40,000 songs. The 80 GB model costs $249, the 160 GB $349.
  • The iPod Touch, like the iPhone, has a 3.5 inch screen designed to be controlled with fingertips. Although it can’t make phone calls, it is equipped with Wi-Fi, which means users can wirelessly surf the Internet, download YouTube videos, send and receive e-mail or buy songs directly from Apple or at selected Starbucks coffee shops. There are two models: 8 GB for $299 and an 16 GB for $399 and they will ship later this month.
  • Jobs also announced a steep price cut on the 8 GB iPhone, to $399 from $599 and discontinued the less popular 4 GB model. The price cut seemed to be an attempt to boost sales, which Jobs said are still on track to hit 1 million units before the end of September.
If you want a full blog of the live event as it happened minute by minute, it can be found here

Takeaways? Some people are attributing negativity to the price drop in the iPhone. I think that misses the big picture. I think of Apple iPod/iPhone as the Gillette model or the computer printer model. Sell the hardware (who cares at what price) and milk the recurring revenue. With Gillette it sells the shaver for whatever, but make a boon on the razors; with the computer printer model it sells (or gives away) the darn printer, but make a boon on the ink cartridges. With iPod its the same idea with the iTunes, with the iPhone its the same idea with the phone service. From reports I have read, what can be told of the fee arrangement from AT&T subscribers of iPhone is a major victory for Apple. So if they get a few hundred less on each model, they are going to make that up in 6 months of subscription fees. How does Comcast make money? Selling set top cable boxes??

The $600 price point - you can get good desk top computers for that price - too pricey for the mainstream market (these expensive phones sell well in Europe but not here in the US where we are used to carriers giving away phones to sign up for 2 year contracts) So once the true Apple believers got in, your market is 'relatively' limited at that price point. So you drop the price. And you keep it relatively high to keep the Apple 'cache'.

This company just continues to give more advanced products (see Wi-Fi on next generation iPods) for lower costs and building upon a 'brand' - the halo effect is in full force. Again, each convert to iMacs through this halo effect is some serious dough for Apple as well.

Will be looking to add position on a pullback to $130 (50 day moving average)

Long Apple in fund; no personal position

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