Apple: When the iPhone Hype Wears Off, There Are Still Real World Issues

Apple (AAPL) has had so much hype the only thing left is the cigarette. You know the iPhone will take over the world. It will make competitors shake in their boots. It will make otherwise sensible people run out and spend all their money. It will change the way we live (lots of things think they can do that). It will do unimagined things that only Apple designers....

Ok, it's probably going to be a neat product. Apple will not embarrass itself. But think about it. The whole uber alles thing is very overdone. Apple just snuck out an email announcement that says you need to sign on at iTunes for your iPhone to work. This message is coming out in the veritable last minute before product availability. I feel a little bit manipulated into a cross selling marketing platform.

The iPhone is a big bet on touch screen technology. Most other touch screen technologies have problematic experiences. Apple is really rolling the dice here. They need for these problems to disappear right now. If the problems disappear for Apple, than it also goes away for the competition.

Has the iStockoption issue been fully resolved? When the hype wears off, there are still real world issues. Jonathan Hoopes of Thinkequity is also concerned about the valuation in relation to the hype. When everyone or almost everyone believes big time, who is left to buy?

Comments

[Jon T:]

The Apple hype is not just the iPhone.

- Apple is on the cusp owning media at home.

- Macs are selling stupendously well

- OS X Tiger is already way ahead of Vista, and Leopard will make Winodws look like the 90's

- The iPod has yet to have it's upgrades but still sells at 10m a quarter

- iTunes is used by 500m people

Forget the hype about iPhone, the story is about Apple moving way out on its own with great support from some great partners such as Google and Intel.

And anyway, it is hard not to be able to see that iPhone is already totally unique.

2007 Jun 14 07:29 AM

[Macbth:]

"Apple is really rolling the dice here"
I wish I could roll dice like Apple!!

2007 Jun 14 07:30 AM

[David Lentz:]

"When everyone or almost everyone believes big time, who is left to buy?"

Quite Right -- it is entirely possible that Apple will succeed magnificently, even exceed all the expectations (unlikely though that is), and still have the stock price stagnate or decline, because everyone who is going to buy into the stock is "all in".

We might see a small bump up from these levels over the rest of this calendar year, assuming the iPhone succeeds in spades (something that is most definitely NOT guaranteed!), but for significant gains to be made, the company will have to deliver on the promise of substantial sales and earnings growth over the next several quarters.

Not only will the iPhone have to not be a flop, but Apple must recharge the iPod product lines, figure out how to make the AppleTV more successful, and continue to carve out larger market shares in the computer business. The pattern of delays and missed expectations in on the OS X front (ref: WWDC disappointments) does not provide a lot of encouragement that OS X will be driving growth in computer market share. And of course there will need to be the next great Apple innovation somewhere down the road. Apple has some major challenges ahead of it. The level of risk in buying into the stock at these levels is not small.

I think that all the iTunes-linked-to-iPhon... hysteria is nonsense, as how did people think Apple was going to provide music and movies to the iPhone, and how were they going to deliver software updates to it? This should never have even been news, just a clarification of what everyone expected to begin with. If one checks the iPod, it uses iTunes to deliver music, video, address book info, photos, yada yada yada. The iPhone is just an iPod with a cellular phone and a wifi connection.

Full disclosure: I own AAPL -- mostly via deep-in-the-money LEAPs purchased some time ago -- and plan to continue with it for the foreseeable future. I also have a house full of their products.

2007 Jun 14 09:09 AM

[akindman:]

The issue is not using the iTunes software but having to open an iTunes Store account.

2007 Jun 14 09:32 AM

[Tom B:]

"The pattern of delays and missed expectations in on the OS X front (ref: WWDC disappointments) does not provide a lot of encouragement that OS X will be driving growth in computer market share."

One hopes they can deliver a solid 10.5 in October, but if they do it SHOULD drive major sales. Why? Apple is traditionally weak in servers. Companies have now had a few years with the Xserve and are thinking about Apple in the sever space. 10.5 is 64 bit. MSFT does NOT have a credible 64 bit OS at this time, to my knowledge.

"figure out how to make the AppleTV more successful, "

Mostly a matter of getting more HD content, probably. The Hardware is said to be good. I think as we transition from TV to internet/IP TV, Apple will pull ahead of TiVO, because TiVO is the only potential credible competitor I amseeing right now.

2007 Jun 14 10:14 AM

[mike hough:]

"only Apple designers...." Just a minute, are you telling us that Apple's designers are simply , well, designers?

Jonathan Ive is without peers. That is not my opinion but that of the design profession across the world. Voted number one out of 25000 must mean something. He has collected countless awards for 'industrial design. The design of Apple Stores is being frantically copied across the retail profession. It was built as a mock up in a warefouse and tesed, ripped down and rebuilt until they had what they were looking for. The concept of design runs right throuh the Apple ethos. Take another example:

"Calling it the most successful marketing campaign of 2007, Apple's “Get a Mac” campaign, created by Media Arts Lab/TBWA was awarded the Grand Effie at the 39th Annual Effie Awards gala last night at the Metropolitan Pavilion in New York. The Effie Awards honor the most significant achievement in the business of marketing communications: ideas that work. Results from the “Get a Mac” campaign included market share growth of 42 percent, record sales and cultural influence." and “After much spirited discussion, the jury unanimously awarded Apple the Grand Effie for its portrayal of the Mac/PC rivalry. They managed to do it with humor, class, and honesty without falling into the trap of overtly negative competitive advertising,”

Apple is a massive 'case study' for anyone seriously involved in putting the custome before the technology. Pull up a chair and learn.

2007 Jun 14 09:11 AM

[wayne thompson:]

Maybe the Iphone will not change the cell phone but the interface will. (ease of use)

2007 Jun 14 09:14 AM

[Lucmee:]

Jobs says the iphone is the best ipod yet... Don't you think the 100 or so folks who don't know about ipods and itunes should be made aware that they're gonna need itunes to run the phone? Besides... If you've gone and spent $500+ on the thing plus the service... Do you honestly think that signing up fpr an itunes account is going to be some kind of a deal breaker? If you found signing up fpr itunes to be a "manipulation" surprise... Then you are to be counted amongst the 100 mentioned earlier... Let me put you fevered mind to rest on itunes... I know plenty of people with itunes accounts who have never spent a dime on it. Most podcasts are free as is radio and a song every Tuesday. All software updates are free also.

Also... It seems a bit dense to imply that Apple is betting the farm on the iphone... Even if the thing completely tanks as a phone... With very minor modification to price and capacity... It still will rank as the must have gadget in mp3 players.

"iTV is just a hobby" says Jobs... That should be reason enough for savvy market players to prick up their ears and start looking around... The first Apple was a hobby too. Tivo has already whetted the appetite for what aTV has potential for.

Will Leopard help sell a few more macs?... Please.

iStockoptions? .. Dead... But let's hope not... I'd like to see the price drop a bit so I can jump on more!

2007 Jun 14 12:21 PM

[Lucmee:]

How many patents did Jobs mention on touch screen tech?

2007 Jun 14 12:36 PM