NYT loves Apple's iPhone
The New York Times ran a long review of Apple’s newest product this am, with descriptions such as:
– “so sleek and thin, it makes Treos and BlackBerrys look obese”
– “fast, beautiful, menu-free, and dead simple to operate”
– “unlimited Internet service adds only $20 a month to AT&T’s voice-plan prices, about half what BlackBerry and Treo owners pay”
You can read the entire story here. Or get an idea of what the Washington Post editorial cartoonist thinks, here.
A few months ago, when Steve Jobs did a soft release of the phone, we featured a note from Chris Umiastowski. Chris is TD Newcrest’s hardware analyst (covers Research in Motion, RIM:TSX) and he dismissed the idea that the iPhone would have much of an impact on RIM, other than stunt sales in the consumer marketplace.
Fair enough, but the Blackberry Pearl seemed so much fresher back in January.
And although RIM’s shares have rallied $25 (17%) since TD’s analysis was released in January, the $8 selloff over the past few days can partly be attributed to the pending iPhone launch. Momentum investors (read: hedge funds) don’t like headline risk. And reading in their newspaper this am that people are starting to line up for a cellphone that won’t be available for another 2 full days will scare them a bit.
And so it should.
While the Canadian consumers that I know who’ve bought the new RIM Curve are happy with it, they didn’t have the chance to buy an iPhone. And likely won’t for many months to come. Whether or not RIM’s growth in the consumer vertical slows, the stock will certainly respond to the brewing excitement surrounding Apple’s successful product execution.
Which may provide another entry point to RIM’s stock for those of us that mistakenly sold it many years ago. (To finance a kitchen reno, mind you, not ’cause I didn’t like my handset or the company’s prospects. Turned out to be a very expensive kitchen as RIM is up many fold since circa 2003.)
Judging by today’s selloff, I think potential customers are starting to realize how expensive the iPhone will be. If you sign the mid-range $99.99/mo service plan after purchasing the 8GB iPhone model, that alone will set you back $3000 during the two-year contract (without any accessories)!
Here’s a few other potential hurdles that could prevent the iPhone from exceeding its already lofty expectations:
* You must be an AT&T customer to use the iPhone. With a market share of 20%, that means 80% of wireless customers must cancel their current contracts to sign with AT&T. Being a Sprint customer, I would have to pay a $175 cancellation on top of the $3000 price tag for the iPhone. AT&T’s exclusive contract runs through 2009.
* Only 4 & 8GB of hard drive space? My tiny video iPod holds 30 GB for less than $200.
* Recent surveys have shown that the majority of IT departments will not even consider the iPhone due to its PC incompatibilities & exclusive AT&T contract. That will dampen business spending & all but eliminate demand for the higher-tier contracts.
This is the ultimate “sell the news” scenario. On Jan 9th 2007, Steve Jobs announced the iPhone at the Macworld Conference & Expo. The stock has since been on fire rising 50% to $125, adding $30 billion to the company’s market capitalization. Will the iPhone really hold that much value for Apple? This huge runup comes after a fantastic finish to 2006 after Apple’s stock bottomed out at $50 in October. Thus, nearly everyone holding Apple is sitting on huge gains.
Expect an Apple selloff on Friday when the iPhone is finally released. 3 similar mini-selloffs have occurred during this recent runup:
* June 26th: Apple announces 6 AT&T service plans for the iPhone. The stock drops 3% on investor concerns over the high prices.
* June 11th: Steve Jobs shows off the iPhone at Apple’s World Wide Developer’s Conference. The stock falls 5% after investors saw no “surprises”.
* March 20th: Apple beats 4th quarter analyst earnings & revenue estimates. The stock falls on profit taking.
Apple’s recent success has created impossible expectations. With all the mega-hype already priced into the stock, just meeting expectations will create a selloff. I plan to sell tomorrow and buy back in a couple months. Longer-term investors need not worry because the future looks bright with Macs gaining market share & the iPods continuing their dominant foothold on the music industry.
i found one interesting rumor about future apple-i-phone in rumorwire.com.
This video diary on the Iphone by New York Times is hilarious.