Thursday, September 10, 2009

Event Madness: Apple's Fancy Footwork

Apple shares plumped up on Tuesday on anticipation of new announcements expected from Cupertino on Wednesday. But is the day before a big Apple event always the best time to buy? Sometimes a huge announcement will send shares into the stratosphere. However, not every Apple announcement is a technological epoch. A slight post-event deflation could present a prime buying opportunity.
Mac fans are waiting breathlessly for Wednesday's Apple event, when new products may be introduced.
The excitement has sent Apple's share prices soaring -- at Tuesday's close, they were up US$2.29 or 1.34 percent, to $172.60. That could very well change Wednesday morning once people know exactly what Apple's next move is.
Over the long term, though, Apple is likely to remain strong.
Make Mo' Money After Wednesday?
The lift in Apple's shares underscored the excitement surrounding an announcement planned for Wednesday. Apple often updates its iPod lineup in the fall, but the company is known to pull off its share of surprises during these sorts of events.
Speculation this year has ranged from the unveiling of an iTablet to a new version of iTunes to a camera-equipped iPod touch to the return of Steve Jobs as the main speaker at the event.
All that excitement might be priming the market for a fall, warned Piper Jaffray analyst Gene Munster. He issued a report on Tuesday warning that Wednesday would be a non-event and that shares would dip slightly after that, as they always have done, according to the Seeking Alpha blog.
With that dip could come a buying opportunity.
In the longer view, Apple is likely to continue going strong despite the influx of Android phones and other smartphones on the market. HTC announced one Android smartphone, the Tattoo, for Europe on Tuesday, and Motorola will likely announce two more on Thursday. These past few weeks have also seen a slew of announcements from other smartphone vendors.
That's no big deal, In-Stat principal analyst Allen Nogee told MacNewsWorld. "There seems to be at least one phone that comes out every week, and with each, the question is 'Can this new phone compete with the iPhone?'" he said.
"That phrasing alone happens to be the process that customers use to select a phone," he added.
Hot and Sour Soup
Apple (Nasdaq: AAPL) may not quite have obtained all of what it wanted out of its deal with China Telecom, but it's taking steps to ensure its future in China, potentially one of the world's largest markets for its products.
It may be resuming talks with China Mobile, the world's biggest wireless carrier, as part of a larger move away from its typical MO of siding with just one carrier for each country in which it sells the iPhone.
The three-year deal with Unicom will see iPhones available for sale in China in the fourth quarter, and China Unicom has reportedly agreed to sell 4 million iPhones a year. The carrier's chairman, Chang Xiaobing, announced that it would offer two versions of the iPhone 3G.
However, there won't be any revenue sharing with Apple. China Unicom will buy iPhones wholesale from Apple and resell them. Also, China Unicom and the other major wireless carriers in China -- China Mobile and China Telecom -- either have or are developing their own app stores.
Meanwhile, Android is poised to invade China soon. China Mobile has developed the O-Phone, which runs an operating system based on Android. Also, several major companies in the U.S. and elsewhere have apparently agreed to introduce designs based on O-Phone. They include Dell, Motorola, Lenovo, Phillips, Dopod (which is owned by Taiwan's HTC), Samsung and LG.
Change Your Partners, Doh-See-Doh
On the other hand, Apple may itself be engaged in talks with China Mobile, which has well over 480 million subscribers compared to China Unicom's 130 million plus.
The short-term benefit of that would be that Apple could gain a position that has it covering China like gangbusters -- partnering with the two biggest carriers in the world's largest nation. However, the long-term implications of this move are also important.
"Apple is now changing its business model from exclusive carrier deals to multiple carrier deals within each country where the iPhone is available," said Julien Blin, principal analyst and CEO of JBB Research. "This will be a game-changing factor and will help Apple increase market share."
Apple has about 1 percent of the global handset market, so its potential for growth is huge. Further, Blin told MacNewsWorld, Cupertino plans to continue pushing the iPhone in more countries.
The repercussions of such a policy could also be felt here in the United States, where customers have long been agitating for Apple to move away from AT&T (NYSE: T) because of complaints about the carrier's service. For AT&T, the iPhone has been both blessing and curse: It's drawn millions of new customers to the carrier, but those customers tend to use the iPhone's Internet features much more than users of other phones, thus putting a larger burden on the carrier's cellular network.
There are rumors that Apple is in talks with Verizon , and if Apple does add a second carrier in the U.S., Verizon would be a logical choice, as it is the nation's largest wireless carrier. "Sprint is still losing customers, although not as fast as it used to, and T-Mobile is a very poor fourth," Ramon T. Llamas, a senior research analyst at IDC, told MacNewsWorld.
America's Best Dance Crew?
Verizon, however, may not want Apple on its dance card. It was reportedly Apple's first choice as partner, but it turned Cupertino down because it didn't like the terms. If it does change its mind this time, it may find itself facing the same network strain problems AT&T has.
AT&T has apparently published a YouTube response to the complaints about its network. It says demand for data transmission has skyrocketed over the past two years, and that AT&T has been pouring money into upgrading its network to cope.
If Verizon should agree to sign on with Apple, it, too, might find its network overloaded.
Investing in the companies that supply wireless carriers network equipment might be a good idea.
Still, JBB's Blin is pretty certain Apple will go with another wireless carrier here in the U.S. soon. "The iPhone will probably be available on Verizon and other carriers by next year," he said.

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