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It seems that you can't swing a dead iPod in the financial media lately without hitting an article about Apple's (AAPL) hotly anticipated "iSlate" (and yes, I realize I am part of the problem right now). The Cupertino, Calif.-based company is unveiling its latest gadget in San Francisco next week, and just about everyone is predicting that it will be a touch-screen tablet computer.Since Apple is responsible for some of the most popular personal tech devices known to man, it nearly goes without saying that excitement is running high. In fact, Jesup & Lamont analyst Kevin Dede observed earlier this week that "The excitement surrounding this event might overshadow Apple's earnings report." (Fiscal first-quarter results are scheduled to be released on Monday, Jan. 25, in case you care.) Meanwhile, analyst Gene Munster of Piper Jaffray writes, "Hype leading up to the expected tablet unveiling on Jan. 27 should... be a positive catalyst for [the] shares."
If we were talking about any other stock here, my contrarian hackles would be up. Usually, lofty expectations and widespread hype in the financial media sets the stage for a sell-off -- when everyone's hopes are sky-high for an upcoming event, there's simply a greater chance that traders will be disappointed by the reality. Plus, even if the actual product lives up to the speculation, opportunistic market players will often take the opportunity to "sell on the news."
But seriously, folks, we're talking about Apple here. This is a company (and a stock) that has defied my jaded, skeptical expectations more than once. For the latest issue of SENTIMENT magazine, I delved into the finer points of using contrarian sentiment analysis to pinpoint potential trading ideas. I always like to reinforce the idea that contrarianism is not the same as being knee-jerk contrary -- you have to examine all of the data points in context.
As a cautionary tale, I couldn't think of a better example than Apple. The hype surrounding the iPhone prior to its launch in June 2007 was nothing short of mind-boggling. (I mean, the device was nicknamed the "Jesus Phone." High expectations, anyone?) But, in this case, the raging bullish sentiment did not translate to a post-event backlash. The iPhone lived up to expectations with solid sales right out of the gate, despite the relative unpopularity of AT&T's (T) wireless network. And AAPL shares kept soaring through the end of 2007, proving there's always a little more room on the bullish bandwagon when the fundamentals are strong.
And let's bear in mind that Apple, as a company, is not exactly launching its first widget here. Based on past experience, it would be wildly out of character for Apple to unveil a device that did not live up to Steve Jobs' own lofty expectations. Plus, the company is notoriously secretive, so it's also a safe bet that the rumored tablet device has a few features that will surprise even the savviest of Silicon Valley insiders.
As a matter of fact, one of my favorite tech columnists -- Farhad Manjoo of Slate -- seems skeptical that a touch-screen tablet can gain any real traction in the market. He's "not saying Apple won't succeed," but simply wonders, "What's the point of an $800 machine that lacks a keyboard?" -- echoing the same kind of skepticism that initially surrounded a little device called the iPod.
I'm not saying Apple won't succeed, either. I've learned my lesson about that one.
Elizabeth Harrow is a senior equities analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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Reader Comments (Page 1 of 1)
1-22-2010 @ 3:31PM
e.krabs said...
The iSlate is definitely over-hyped.
I definitely wouldn't short AAPL, but I'd consider taking some off the table when this thing debuts.
Why?
The same reason that netbooks, tablet PCs, UMPCs, and the Origami Project never took off: Portability.
Look, the rumor is that it's going to be a 10" screen slate. That's nice and all, but you can't pocket that like an iPhone or a even a small paperback book. No, like the Kindle: You need some kind of small purse-like mini luggage with handle.
And if you have to carry something like that, then why not an ultralight laptop or even a netbook? And speaking of netbooks, laptops in that form factor have existed for years (especially in Japan). Why did the netbook finally gain traction when similar UMPCs have failed in the past? Price.
While Apple is aware of the price point, hence the rumor to make it only sub-$1000, that's the same price point that made previous UMPCs fail. Well, maybe I'll be wrong because it's Apple, and they can charge more.
Anyways, if they are competing within the netbook arena, it begs the following question: What is it that the iSlate can do that no other netbooks can? What is the iSlate's killer app? Electronic newspaper and magazine content? Nope, netbooks can do that too.
And what good is a tablet PC if you can't type well on it? Especially if many netbooks out there have a fairly competent keyboard and costs half as much?
So, what is the iSlate's "wide moat" then? I don't know. Do you?
But instead of griping, I'll tell you what WILL work. A 7" screen iSlate. That's what I want to see. A 7" screen is just big enough to read like a small paperback book, and it's just small enough to still be pocketable. That's what I think the solution is, and if the iSlate does turn out to be about that size, I'm buying in.
Now don't get me wrong. I'm actually quite the admirer of Apple's technology. I was excited about the iMac when it first came out. I even bought one. I was excited about the iPod. Like many, I too have several generations of those. I completely backed the iPhone against detractors who thought Apple would never be able to break into the cellphone market. They were wrong because they didn't see the Apple Advantage in terms of hardware and software design. They also didn't realize the potential that can be had with the Apps store.
But right now, I don't see the same Apple Advantage with the iSlate concept. Trade on the speculations if you like, but I'm certainly not buying this as a fundamental story.
1-23-2010 @ 5:13PM
dchu220 said...
Dear Elizabeth,
You make a very good point here.
For any analyst, it's always safer to take the contrarian point of view. Furthermore, it's even harder to be bullish about a company that chooses to keep analysts in the dark.
Investing in Apple is different from investing in any other company and Apple has always ran itself differently from any other company. If a person isn't comfortable with the way Apple handles it's investors, then they shouldn't be invested in it from the start.
For the rest of us, isn't the question about whether the rewards are worth the risk?
1-23-2010 @ 4:18PM
Dan Lingman said...
I think you're close, but not quite on track. I'm picturing a dual display system that opens and can lock into several configurations. Open like a paperback, and read with gestures _above_ the screens to turn pages. Open like a netbook, and use one screen for a keyboard with haptic feedback to make it feel like a real keyboard. (Motorola did this quite well with their Rockr E8 phone - solid plastic, but it _feels_ like you're pushing buttons. Add a pressure sensitive stylus, and devote one screen to palettes and one to a drawable display, and you've got a portable Cintiq. Add a second mini cam to give you video conferencing on top of the main one for pictures. Top it off with wifi, and 3G/LTE. That's what I'm hoping they are going to deliver.
1-23-2010 @ 4:51PM
naols125 said...
The mistake people make with new products from Apple is over-hyping them before they even show up. Calling this product a 'Jesus Slate', is a classic example of things getting way too out of hand.
Granted, you are writing this on an investing site and speculation abounds, but hyping Apple's products in the past has been a recipe for disappointment, negativity, and stock values crashing right back to where they were before the hype began.
So... think of something reasonable from the PC side of things, like the Archos or JooJoo tablets. Then give it Apple's signature treatment. Lighter, thinner, longer battery life, more capabilities, better looking exterior, and 30% more MSRP. They'll sell 1 million units in the first year.
K?