Apple Hopes That "Rock" Will Restore Its Roll

The summer of 2008 should have been an uninterrupted success for Apple (AAPL). On its first weekend, the company sold one million iPhones; its Mac line continues to gain market share; and it recently surpassed search giant Google's (GOOG) market capitalization. The company was on a roll. But a number of events have caused more than a few eyebrows to be raised -- public relations stumbles, service problems with the iPhone 3G, and persistent questions about chief executive Steve Jobs' health.

By its own standards, Apple has had something of a rough summer, which is why the company needs a strong showing at Tuesday's "Let's Rock" event in San Francisco. But does Jobs -- whose appearance will be closely scrutinized -- have enough tricks up his sleeve to restore Apple's shine?

Initially, the iPhone 3G was greeted with something near rapture, but customers have been frustrated by technical glitches, from being forced to spend hours in line as retailers were unable to activate their phones to a sloppy launch of MobileMe (prompting a mea culpa memo from Jobs, who called the launch "not our finest hour").

And now Apple is being sued -- once they got their phones activated, many iPhone users complained about service quality and dropped calls. Apple faces no less than two lawsuits over shoddy service, the latest accusing it and AT&T of selling more iPhones than the network can accommodate. In Britain, a government advertising regulator actually banned an iPhone television ad for misleading the public, after consumers complained that the phone's Web surfing performance didn't match what the company promised.

In isolation, any one of these issues would have been a minor speed bump for a company that is widely considered to be the gold standard for tech innovation, product design and performance. But taken together, they prompted some people to ask whether Apple had taken its eye off the ball and allowed its execution to slip. "It's time for Apple to stop screwing around and start paying attention to product quality," wrote uber tech blogger Michael Arrington.

Then there is Steve Jobs' health -- probably the last issue the image-conscious Apple wants to address. Ever since Jobs appeared gaunt at the June iPhone 3G launch, speculation over his condition has been a frequent topic of conversation among Apple watchers. Given Jobs' instrumental role in Apple's revival and success over the last decade, many observers clamored for the company to be more forthcoming about his health. But Apple remained mum. Just when the chatter appeared to have died down, Bloomberg News mistakenly sent Jobs' obituary out on its newswire, adding another round of fuel to the fire.

Jobs' condition is a very sensitive matter, considering the company and its founder are often identified as one and the same. It's hard to fault the company for wanting to keep it private, assuming the health fears are overblown. But combined with the botched iPhone and MobileMe launches, the health imbroglio has helped foster a feeling of unease about the company -- a kind of amorphous sense that all is not well in Cupertino.

On Tuesday, Apple has an excellent opportunity to change the subject from its summer travails and refocus attention on what it does best, which is create world-beating products. The company is widely expected to unveil updates to its iPod nano, Touch, and Shuffle lines, as well as a new version of iTunes. But will that be enough to restore Apple's lustre?

Many Apple watchers have been lowering expectations for the event. In a note to clients, Shaw Wu, an analyst at American Technology Research, urged people not to get their hopes up. "While there is always room for surprise, it seems this event may be somewhat underwhelming versus previous expectations and events," Wu wrote. Those reduced expectations have hit Apple's stock price, Wu said, which has fallen about 10 percent over the last month.

CNBC's Jim Goldman captured a vague sense of ennui regarding the event when he wrote, "This time around, it seems to me that Apple is laboring to manufacture the magic."

As a company, Apple is a master at playing the expectations game, and it has definitely trumpeted Tuesday's event. A healthy-looking Jobs will go a long way toward allaying fears about his condition, but many believe the Apple chief executive needs to pull a doozy out from his bag of tricks -- The Beatles on iTunes, anyone? -- in order to make a clean break from what was, in many ways, a summer the company would very much like to put behind it.

Comments

[Hayweed:]

I guess selling a million phones in 3 days is a botched launch.

2008 Sep 09 07:36 AM

[digivision:]

there's noting to restore but the brain of those who like to manipulate thestock

2008 Sep 09 08:43 AM

[mollytjm:]

Everyone is being sued. Microsoft is still fighting damages in the billions against them in Europe. oh, and that reminds me of a launch that was REALLY botched...and still is...Vista! i saw the new Seinfeld ad last night...two 'bloom is off the rose' guys in a shoe department talking shoe size...gee..very hip. sigh. compared to herd, Apple is wonderful.

2008 Sep 09 08:50 AM

[brewer:]

"no less than two" Oh my, this is such a large number, '2' it's making my brain hurt. Good thing I got my Mac here to help me. You failed to mention that these are frivolous lawsuits, BTW.

Shaw Wu isn't an Apple watcher, he's an Apple manipulator.

Do you think we were born yesterday, or what?

Look at MSFT. Terrible hole they are in, wasting money left and right, roundly criticized new marketing campaign, but it seems the stock can't go below $25. It should be around $15.

2008 Sep 09 09:10 AM

[winindthedust:]

This pull back is a great opportunity to buy before the springboard, that WILL happen. Apple just has too much momentum to be held back by rumor induced stock manipulation.

P.S. - Why is everything Apple is putting out, selling like hot cakes? And even in this recessionary climate? Hmmm... the real numbers don't lie. Apple is a solid company, producing great products, that will continue to outperform, come what may in the future.

P.P.S.- don't forget that iPhone revenue is deferred. If the company books look good now, they are actually much, much better then a casual look reveals, because of this deferred revenue. This company is WAY undervalued by the street.

While Dell sells off factories, and Microsoft continues to burn cash, Apple is actually producing a very solid profit through innovation that will carry it for the next ten years, even if they did NOTHING... and we all know that isn't going to happen.

My advise- all of you investors playing russian roulette with the casino- settle down, there is much, much more money to be made with Apple buying paper and going long.

2008 Sep 09 09:48 AM

[applesauce:]

Seinfeld is cashing in his $ 10 mill but not helping his career with lame commercials. Not cool Jerry, you are looking tired standing next to Bill with his flat ass walking away. Instead of looking new and exciting you look like an old Andy Griffith commercial with opey skipping a rock on a pond..


On Sep 09 08:50 AM mollytjm wrote:

> Everyone is being sued. Microsoft is still fighting damages in the
> billions against them in Europe. oh, and that reminds me of a launch
> that was REALLY botched...and still is...Vista! i saw the new Seinfeld
> ad last night...two 'bloom is off the rose' guys in a shoe department
> talking shoe size...gee..very hip. sigh. compared to herd, Apple
> is wonderful.

2008 Sep 09 10:42 AM

[msftxno:]

Practically no company on earth has the consistent growth and profitability that Apple has shown over the last 5 years.

That the stock is down when the rest of the market is soaring boils down to one thing: stock manipulation.

Apple is a great company but the stock manipulation kills it for the average investor.

2008 Sep 09 11:46 AM

[zato3:]

More ugly anti-Apple propaganda from Conde Nast /Vogue, the world-wide sellers of egotism and destroyers of the health and happiness of young women. A company built on the backs of Macintosh computers cranking out pages every month.

2008 Sep 09 06:41 PM