GM Kills $10 Million Facebook Ad Campaign Because It Didn't Work
JCPenney's Ron Johnson: 'Customers Don't Get Our Pricing Strategy'One of the things that investors often shy away from is a company that has large, well-financed competitors. Another is a company that has an extraordinarily high share in a market where competition is heating up.
Apple Computer, Inc. (NASDAQ:AAPL) is in both categories.
The company's run on the back of the iPod and iTunes has certainly been fantastic. The stock has gone from $50 in July to almost $89 recently. Rumors that the company will come out with an iPhone have also fueled some of the recent gain. Going back even further, Apple's stock was under $7 (!) in April 2003.
Apple bulls like to point out that the iPod has by far the largest share in the portable media player market and that consumers will not want to shift their music play lists to another platform. Well said and well reasoned. However, the press has begun to point out that Time Warner, Inc.'s (NYSE:TWX) NetScape, Corel Corp.'s (NASDAQ:CREL) WordPerfect, and Novell, Inc.'s (NASDAQ:NOVL) NetWare had similar share advantages.
At the same time, Microsoft Corp. (NASDAQ:MSFT) has vowed to spend hundreds of millions of dollars on its competing Zune player. Whether the software giant will be successful is open to question, but defending its turf will certainly cost Apple something.
Other firms like SanDisk Corp. (NASDAQ:SNDK) and RealNetworks, Inc. (NASDAQ:RNWK) would also like a piece of the iTunes/iPod market. While they are not as big as Microsoft, SanDisk does hold second place in the MP3 player market and Real has been distributing music over the Internet for more than a decade and has hundreds of millions of players on PCs.
The music industry, Apple's largest content provider, feels that the company has "screwed" it. The iPod is often used for illegal playing of ripped CDs, and the music companies would like variable pricing based on the popularity of content. Deals with Microsoft and SanDisk may give the music guys more of what they want.
Other than the iPod/Tunes business, the Mac has also done well recently. Apple now has 6.1% of the US market and could pass Gateway, Inc. (NYSE:GTW) in share soon. Of course, the Mac is back on the radar of PC companies like Sony (NYSE:SNE), Dell, Inc. (NASDAQ:DELL), Hewlett-Packard Co. (NYSE:HPQ) and Lenovo/IBM. Mac sales may continue to increase, but that may only be if Apple is willing to drop price to keep its share rising.
Wall St. can take nothing away from Jobs & Co. Few tech firms have been able to match them for innovations and product sales. Apple, however, is starting to draw flies.
Douglas McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 2 of 2)
11-24-2006 @ 12:10AM
Sambo said...
Hey Doug McIntyre, Boy! Have you read these posts?? If I were you consider putting your head in sand and hide. I think a different career is in store for you, definitely NOT WRITING articles as this one! I think I will go listen to the drunk I previously wrote about in the local bar. He is going to give me his ideas on election 2008. His analysis will probably be more RELEVANT than yours!!! Try comics!!!!!!!!!!!!!!!!!!!!!!
11-24-2006 @ 3:52AM
HG said...
nomadicalloy writes: "Come on people, please don't worship apple. Get a iLife or iTherapy. And please don't cry about it either.
How will you ever understand? Condescend all you like. It won't change anything. We choose not to blindly conform to a charade of an company and operating system which is what Microsoft and Windows are.
11-24-2006 @ 4:44AM
Carsten Legaard said...
This thread is for investors ain't it? Then why spill tears over tough Apple pricing?
The pricing gains bottomline, and as long as the price dos not scare the fans away, what's woring about that?
At least investors should not wine!
11-24-2006 @ 9:42AM
GeorgeS said...
To be fair, Zune will be fully functional with Vista. It's just the beta Vista now, and Ms doesn't want want Zune mixed up with Beta bugs. But 79 cents on a dollar for music?
11-24-2006 @ 7:57AM
Gene said...
At least half of AAPL's market cap is tied to continued, exponential growth in the iPod franchise. It's a certain bet that at some point soon, Jobs and Co. will issue a PR stating something to the effect that "...iPod sales, while still strong, have slowed to to the introduction of Zune etc...." And when that release is issued, AAPL will take a 10-12% haircut, instantaneously.
Gene from ZuneChannel.com
11-24-2006 @ 10:38PM
tora laohu said...
Poor Gene and GeorgeS, four of the top five selling electronic products are iPods. The fourth-ranked product is a camera. Eleven of the 25 best-selling electronic products are iPods. Where is Zune ranked in all this? 77!
Oh, by the way, all the top five selling desktop computers are iMac's and three of the top five notebooks are MacBooks. Wow!
11-25-2006 @ 1:35AM
nomadicalloy said...
Whats wrong with these apple freaks.
11-25-2006 @ 12:28PM
Ryan said...
my only reply is to the guy talking about google. saying if you invest in them its because of faith. google based on next years earnings is trading at a lower multiple then apple on next years projected earnings. you have to pay for google's incredible growth. they practically double each year. i do own and like apple myself but google is actually cheaper.
11-25-2006 @ 9:48PM
Peter said...
Microsoft's strength is really in corporate operating systems and server products like database servers, web servers and networking. MS may lose market share to Apple in student class computers.
MS is also strong in gaming with its xbox game console.
In the future, Apple needs to expand into the corporate world to generate a new line of earnings.
11-26-2006 @ 11:01AM
tora laohu said...
Poor nomadicalloy, you are reduced to calling people names? If you can find anything intelligent to say, you can find some facts.
11-26-2006 @ 8:31PM
Michael Schneider said...
Apple Computer is clicking on all cylinders right now which is why, along with speculation about its new products, the stock is up.
Douglas recommended selling Apple when it was considerably lower in price. Now we have the Christmas season under way and the tangible news is it looks like sales are off to a good start generally and electronics is among the hottest areas. Apple could be set to unveil its phone in January so it has a lot going for it at the moment. An analyst on Bulls & Bears just recommended the stock Saturday(All Fox business block stock picks are available for those interested in the [white label] Weekend Stock Review at www.Barrelomoney.com. One commentator said Apple will go to $100 and a respondent said it is worth $120.
11-29-2006 @ 7:57PM
Lamare said...
Try this. I'm an AOL and Windows user. And i'm ready for a macintosh system. Apple's innovation is something that continues to make the company shine. They have every right to charge customers what they wish. You are paying for the Apple name and product. Microsoft also overprices products, but because they have the computing world locked into their universe, there is no debate over their practice. I would love an Apple computer, to go with my Ipod, this year I plan to purchase a full sized Ipod with video , I love my Ipod, and I love Itunes. I believe that Apple is the one company that continues to evolve according to its mission.
It's not a perfect oompany, and no company is. The thing is , it has never tried to be something other than itself. And that is why Apple should be respected. Every company has hard time, DUH , this is the American market. Is the company, in a bind, I don't think so> If the stock is performing well WHY complain?!, you don't fix something that isn't broken!