A friend of mine who knows a lot about investing told me years ago to not confuse a great company with a great stock. Apple Inc. finished the day at $97 per share which is 42.79 times earnings and represents a market capitalization of $83.4 billion, roughly double the value of Motorola. So I am not so sure it is a great stock at $97 but it surely is doing great things — things that investors and consumers really like.
Sales growth for the iPod dropped off to a mere 75% rate for the fiscal year compared to 409% growth the year before. The iPod has achieved 62% market share and the launch of Microsoft’s Zune does not seem to have made a dent. Meanwhile Apple has sold two billion songs, 50 million television shows and 1.3 million movies through iTunes. Potentially even more significant is the new iPhone which Steve Jobs unveiled at Macworld in San Francisco on Tuesday.
There is a lot to like about the iPhone and it may potentially change the direction of mobile phones in a major way and give a lot of competition to Palm and Blackberry "smart phones". The iPhone features a 3.5 inch touch-screen display and it is really smart. Various sensors allow the iPhone to detect when you hold it up to your ear so it can turn off the display and to automatically change the orientation of the display depending on whether you are holding it horizontally or vertically. The iPhone has only one button. compared to more than forty on existing high-end phones. If it is as easy to use as an iPod, I think it will be a real winner, not only as a way to enjoy music, podcasts, TV shows, and movies but also surfing the web, looking up contacts and managing email and text messages.
There is one thing that I don’t like about the iPhone and that is the exclusive arrangement with Cingular. A Cingular phone works in many countries around the world — but it doesn’t work where I live because there is no signal. I also don’t like the fact that Apple has made an exclusive deal. Nice for them but it takes choice away from the users. The iPhone has a slot where you put the Cingular SIM (Subscriber Identigy Module) card — looks like the chip in a smartcard — that contains your Cingular account identity. People should have a choice to change from Cingular to T-Mobile or other GSM operators around the world. If you want to change to a different operator, you get another card and put it in the iPhone. (When I am in Norway I put a Ventelo card in my Palm 680). If a better iPhone comes along you take the card and put it in the new phone and your new phone then assumes your account identity from the card.
The iPhone also has a browser for surfing the web. This is something you can already do by using Opera Mini and you do not need a $500 high-end phone to do it. Most people don’t spend a lot of time surfing the web with their phone but that is changing. Opera Mini already has millions of users and the hype of the iPhone will probably boost mini users even more.
All in all, the iPhone sounds really good and I can’t wait to get one. Many of us are now accustomed to synching our music between our desktop or laptop and our iPod. Many of us also sync between a handheld device and our computer. In theory, the iPod will mean syncing with just one device. I would say Apple has just raised the bar in a major way.
Epilogue: The new Apple TV sounds pretty good also. More on that later.