Ed Sutherland - page 99

Apple’s fourth quarter results later this month may be one of the most widely-awaited events since the Vice Presidential debates.

After the stock whipsawed on analyst downgrades then health rumors surrounding CEO Steve Jobs, investment analysts now suggest Apple must either report strong sales or announce new products.

If Apple does not report healthy sales of Macs during the September quarter, “the importance of the new Mac increases substantially,” Piper Jaffray analyst Gene Munster told Cult of Mac Tuesday.

Nearly a third of iPhone users switched carriers in order to buy the Apple touch-screen phone, researchers said Monday. The news comes as the iPhone leads smartphone sales between July and August.

Some thirty percent of U.S. smartphone buyers switched carriers to AT&T in order to purchase an iPhone in that period, market research firm NPD Group announced.

That compares to the 24 percent industry average for smartphone buyers.

When Apple CEO Steve Jobs announces fiscal fourth quarter iPhone sales later this month, a few industry analysts could be red-faced. An effort by iPhone owners points to Apple selling more than the 5 million a consensus of experts had predicted for the three-month period that ended Sept. 30.

In addition, the data could lend support to Jobs’ claim 10 million iPhones would be sold in 2008.

Barclays Capital Friday cut its target price for Apple shares, citing the “obvious economic weakness.”

“We believe it is prudent to cut our estimates given checks indicate a more pronounced slowdown within the PC supply chain and increased pressure on consumer spending,” wrote analyst Ben Reitzes.

The analyst firm cut Apple’s stock price to $135 from $180 but retained an “Overweight” rating for the Cupertino, Calif. company.

The Android-based G1 handset now shares with the iPhone the status of a goal-setter for mobile phones, researcher Gartner said Thursday.

“You won’t beat Apple in the short term, but being worse than both Apple and Android is likely to end in disaster,” Gartner analysts Roberta Cozza and Carolina Milanesi write.

The two said the Android-based G1 will probably ship between 600,000 to 700,000 devices this year and comprise 10 percent of smartphone sales by 2011.

The iPhone’s entrance onto the handset scene was a “big favor” to the handset industry, pushing companies to change in the face of Cupertino, Nokia CEO Olli-Pekka Kallasvuo said Thursday.

The comments came as the handset giant launches its 5800 XpressMusic, a touch-screen handset with the Comes With Music service. Like the iPhone, the 5800 offers a 3G network interface, GPS and Wi-Fi.

Nokia’s comments appear to reflect the view of others. “I don’t think a handset maker out there doesn’t believe that,” Kevin Burden, ABI Research’s director of mobile devices, told Cult of Mac.

Apple’s share of the operating system market hit 8.2 percent in September, research firm Net Applications announced Wednesday. The numbers mark the first time the Apple OS has risen above 8 percent.

The new numbers reflect a 0.45-point advance from August’s 7.86 percent market share. In June, OS X approached the 8-percent mark, reaching 7.94 percent.

Mac OS X broke the 7 percent barrier in December 2007, moving to 7.31 percent from 6.8 percent a month earlier.

September’s increase is credited to the surge in Apple sales during the back-to-school period. In September 2007, the Mac OS X market share jumped 0.45 points, mirroring the same growth in September 2008.

Although Microsoft Windows remains above 90 percent of operating systems, that dominant lead slipped slightly in September, falling 0.4 points to 90.3 percent.

Apple Inc. announced Wednesday it will release its fiscal fourth quarter report Oct. 21, possibly ending speculation how the economic downturn hurt the Cupertino, Calif. company.

Earlier this week, Apple shares dived 18 percent following downgrades by several investment houses, including Morgan Stanley. The stock recovered a day later after Goldman Sachs and Citi retained “Buy” ratings for Apple, suggesting investors went overboard in their reactions.

Analysts said Apple likely did not repeat its third-quarter figures which saw a record $7.46 billion profit, outpacing Wall Street expectations. More than 11 million iPods and 717,000 iPhones were sold during the period.

Net Applications added another metric to the increasing evidence that Apple is closing the gap with Windows – this time online.

Macs online grew by more than 5 percent to 8.28 percent in September, compared to August, a survey of operating systems used to connect to Web sites found.

Windows, although comprising more than 90 percent of online connections, actually fell by 0.47 percent to 90.23 percent of online operating systems last month, according to Net Applications.

IPhones leapt from 0.30 in August to 0.32 percent in September, a 6.67 percent jump.

In related news, an iPhone Satisfaction Survey by the Technologizer Web site found 91 percent of participants adore their Apple device with the majority having owned the handset for 2-3 months. E-mail, the Web and SMS topped the list of most-used iPhone applications.

Graph from Technologizer

Did investors react too quickly to analyst comments which sent Apple shares tumbling 18 percent Monday? Add Piper Jaffray to the list of analyst firms now calling for calm.

“We recognize investors do not see light at the end of the tunnel as market fears appear to be outweighing fundamental analysis” Piper’s Apple analyst Gene Munster wrote Tuesday.

Those fears – not including the Dow plummeting 777 points – were spurred by a spate of downgrades of Apple stock as analysts said slowing consumer sales could derail the Cupertino, Calif. company.

Analysts went too far with their fears Apple could be caught in the downward spiral of consumer spending. Tuesday analysts say the 18 percent fear-driven drop in Apple shares may have been ‘overdone.’

Apple shares were up 3 percent to $108 early Tuesday after Monday losing $22.98 and closing at $105.26 on Nasdaq.

Goldman Sachs analyst David Bailey said Monday’s pullback “more than captures the concerns over Mac growth in a weakening spending environment.”

What should we expect to hear from Apple Tuesday when it releases its fiscal fourth quarter numbers? Analysts offered Cult of Mac a preview of sorts, providing what they think CEO Steve Jobs will say tomorrow.

The overriding theme will be how Apple confronts the economic downturn which seems to be striking at the heart of the company’s consumer-oriented buyers.

When it rains, it pours. Apple shares took a battering Monday as two more financial analysts downgraded the company amid mounting worries how spending cuts will hurt the Cupertino, Calif. company.

Morgan Stanley analyst Kathryn Hubert slashed her target price for Apple stock to $115 from $178, sending shares down 14 percent to $110 by noon.

Hubert also downgraded the company to “equal-weight from “overweight.”

Another analyst Monday joined the growing chorus voicing caution about how the economic downturn may finally be catching up with Apple.

RBC Capital Markets analyst Mie Abramsky downgraded Apple shares to “sector perform,” shaken by last week’s numbers indicating consumers were holding off purchasing Mac laptop and desktop computers.

Abramsky also trimmed his target price for Apple shares to $140 from $200 and cut his fourth quarter expectations. The analyst said Monday Apple is likely to report earning $32.8 billion, slightly off of $33 billion previously projected. The RBC analyst also lowered his prediction for 2009 to $40 billion from $42.5 billion once expected.

An apparent shift by iPhone 3G buyers to lower-priced 8GB models reportedly prompted Apple to trim by 4 million the number of handsets it will build for the rest of 2008. Cupertino will order 14 million to 15 million phones instead of 18 million analysts first projected.

Pacific Crest’s Apple analyst said Friday “supply-chain checks” found since mid-September Apple is not meaningfully resupplying AT&T stores that have sold down their inventory of 8GB iPhone 3Gs.

Just days before Apple is to present its fourth quarter numbers, another analyst is trimming its revenue estimates. BMO Capital’s Keith Bachman said Thursday “the weak economy has started to take a toll on Apple’s system’s business.”

Bachman lowered the target price for Apple shares to $180 from $190.

Read more about the target cut and how other analyst appear to agree after this jump.

Aside from Christmas, the back-to-school market is one of the most profitable times for computer makers. Apple’s MacBook has virtually disappeared from Amazon’s top-selling notebook list during the period, according to ThinkEquity analyst Vijay Rakesh.

Instead, ‘netbooks,’ those ultra-small PCs from Asus, Acer and Dell, now dominate the list. This is an abrupt change from the past, where Apple had been a mainstay.

“While Mac desktops and 3G phone sales have been doing well, the notebook market could be impacted in the peak back-to-school season,” Rakesh wrote in Wednesday.

Apple should not be concerned about Google’s new phone knocking its stellar iPhone sales projections off stride, Piper Jaffray’s industry analyst said Tuesday.

Using a baseball analogy, Gene Munster wrote in a research note that the T-Mobile G1 was only an incremental change in the mobile landscape.

“When Apple comes out with a product, they try to hit homeruns, but Google’s Android strategy is swinging for base hits,” Munster wrote.

As Apple fans digest T-Mobile’s announcement of its G1, analysts say the handset starts with an immediate deficit: brand awareness.

“I think the most important point is that although Google is a familiar name for many consumers the brand power is not the same as Apple,” Gartner research director Carolina Milanesi told Cult of Mac Tuesday.

Milanesi said most people don’t know what Android is or G1. “You sure cannot say that about Apple,” the analyst said.

American Technology Research analyst Shaw Wu says Apple’s Friday recall of iPhone 3G ultra-compact power adapters is a “minor speedbump” and affects “only a small number of users.”

In an advisory to clients, Shaw writes a check with supply chain sources finds “little disruption” in sales of the iPhone 3G 8GB. In fact, some AT&T stores are running out of supply, he said.

Shaw said Apple faces a “headline risk” from negative publicity surrounding the potential danger of defective USB power adapters. However, Apple retains its positive customer support image by offering free exchanges.

The reaction from the recall will further be lessened because many iPhone users opt for a USB cable to charge their device, much as they do to sync content with iTunes.

The analyst said he maintains a “buy” rating on Apple of $205.

In a related development, Piper Jaffray analyst Gene Munster increased to 5 million his estimate for iPhone sales during the quarter ending Sept. 30. Munster had previously expected Apple would sell 4.1 million handsets.

Apple will sell 5 million iPhones by the end of the fiscal fourth quarter, Sept. 30. That’s the word from Piper Jaffray analyst Gene Munster Monday. The new estimate is higher than the 4.1 million handsets Munster had previously projected.

The analyst told clients he is “incrementally more confident” in Apple sales after market researchers at NPD Group said earlier this month Apple had a 32 percent jump in growth. Wall Street had predicted growth of around 25 percent.

However, Apple CEO Steve Jobs may not get his wish of 10 million iPhone sales by the end of the calendar year. Adding the 5 million Munster expects for the fourth quarter with the 2.4 million iPhones sold earlier in the year, Apple would reach 7.4 million handset sales, according to Fortune.

Along with boosting his outlook for iPhone sales during the fourth quarter, Munster also raised his estimates for other Apple products. Some 2.8 million Macs will be sold during the period, an increase from 2.5 million projected earlier. IPod sales will also top out at 11 million, a raise from 10.8 million in sales the analyst had predicted.

In a sign of the growing importance of the iPhone to Apple’s bottom line, Munster said the phone will account for 21 percent of Apple revenue, a jump from just 4 percent during the third quarter.

For years, Microsoft and others have attempted without much success to shake Apple’s tight grip on the digital music scene. From subscription services to the Zune, companies have searched for the winning alternative to the iTunes, iPod bundle. Analysts now believe Finland’s Nokia may have a good shot of chipping away at Apple’s dominance.

More than 80 percent of people would pay for Nokia’s ‘Comes with Music’ service – particularly when it feels like they are getting tunes for free. Nokia says it will launch the handsets Oct. 17 in Britain.

Strategy Analytics said cost and selection trump brand – even ones so tightly woven as Apple, iPod and iTunes.

“Nokia Comes With Music effectively bundles a year’s subscription of music downloads (PC and mobile) into the price of a handset,” analyst Pitesh Patel told Cult of Mac.

Patel said Nokia – the largest handset maker – could overwhelm Apple’s iPhone.

“Nokia’s strong distribution and handset marketshare means that it currently sells more music playing devices than Apple,” the Strategy Analytics wireless analyst said.

However, we are not likely to see a head-to-head battle between the two companies in the United States. Nokia instead will challenge the iPhone in Europe and Asia – areas where Apple’s name awareness gives way to the handset maker.

The key point in this dust-up is that digital music fans care little about the name on their music player.

“It turns out that brand is irrelevant,” said Patel.

Much is made of the Apple ‘halo’ which helps sell products based just on brand. However, brand consultants Interbrand Thursday put a value on the halo: $13.7 billion.

Although Microsoft again beat Apple in most valuable brand ($59 billion), the Cupertino, Calif. company had a 24 percent jump in brand value — second only to Internet giant Google.

Apple’s position rose to 24th place compared to 33rd in 2007, according to the ranking of global brands.

“The latest iPods, iPhone and MacBook Air strike the perfect balance between coolness and mass appeal,” Interbrand said in its report.

The consultancy cites Steve Jobs coming aboard as CEO as another reason for the brand’s rise in value.

Software giant Microsoft may have reasons to look over its shoulder. Although its brand value is steady, its ratings are falling.

The Redmond, Wash. company ranked in third place this year, down from its second-place showing in 2007. Rival Google, on the other hand, turned in the largest gain in brand value, leaping from to 10th position from 20th last year.

If you enjoy running a Windows game alongside your usual Mac applications, you aren’t alone. New numbers indicate U.S. sales of virtualization software is up 50 percent this year.

The sales increase would be even greater than the 41 percent jump in Mac hardware sales Apple recently reported.

Between $15 million and $20 million of Mac virtualization software has been sold so far in 2008, according to NPD Group analyst Michael Redmond.

Redmond, talking to Computerworld, credited Apple’s move to Intel processors for “encouraging more users to experiment with virtualization.”

Differing from Apple’s Boot Camp, which lets Mac users reboot into a Windows environment, virtualization software permits Intel Apple’s to run Windows applications within OSX. The most frequent uses of Mac virtualization is to play a Windows game that has yet to be released for the Apple platform or for developers to test software designed for Windows users.

Parallels Desktop and VMWare Fusion are the two leading virtualization software packages for the Mac. Parallels, introduced in 2006, has sold a million copies while Fusion (now Fusion 2) sold a quarter million copies since coming on the Mac VM scene in 2007.

(Photo: Jimmy Joe)

Apple increased its share of notebook computers sold in North America during the second quarter to 10.6 percent, moving it into fourth spot and posting the largest jump among top computer makers, researchers said Wednesday.

The numbers compare to the 6.6 percent market share registered during the same three-month period in 2007, according to DisplaySearch. The four-point jump is the largest of the top five PC makers. Dell led the market with 21.9 percent of North American notebook sales.

After the jump, read how the Apple ‘halo’ effect is boosting business interest in Mac notebooks.